Kuwait Airways’ Long Road To Privatization

Just over a month after Kuwait Airways’ fiscal year began, when the airline was expected to be privatized, however Kuwait’s National Assembly is once again stumbling to finalize moving Kuwait Airways into the private sector.

 

Back on the 9th of January 2008 Kuwait’s National Assembly approved the privatization of Kuwait Airways. Originally the airline was to be privatized by 2010, however various issues have arisen with the airline’s assets being transferred to the Kuwait Investment Authority for privatization.  With the airline’s privatization clearly off schedule, the Kuwaiti Government sought out Seabury, Ernst & Young and Citigroup to handle the privatization in August of 2010, however the firms brought into assist with the transition could not tackle the major issues at hand, that were out of their control,  and the privatization was pushed back to March 2011.

 

The biggest obstacle the airline faces is the transition of the company’s nearly 6,000 employees, many of whom do not want remain with the company once it is transformed from a government owned entity to a private company, as the transition from a government owned airline to a private airline impacts employee “financial privileges” and health insurance.

 

Presently, Kuwait’s National Assembly has announced that despite three years of planning for the transition of government employees to become private sector employees, neither the airline nor the Kuwait Investment Authority has conduced a study of private insurance providers that provides necessary information to invite bids to provide health insurance.

 

As the Kuwaiti Government negotiates with the airline’s employees on health insurance and financial benefits, the government itself is interjecting its own complications into spinning the airline off into its own independent company. The plans to privatize Kuwait Airways call for the company to be split up into three types of owners, 40% to be sold to the public, 35% sold to a small numb of long term investors and the government will retain the remaining 25% through the Kuwait Investment Authority.

 

Now as the government seems to be pressed to sell off the airline to distance itself from the airline’s significant losses, the National Assembly’s Financial Affairs Committee has set up a special session, to be held next week, to discuss legislation that addresses  75% of the airline being sold off while allowing the Kuwaiti Government to retain rights to the airline to protect its image and national symbol integrity.

 

Given that Kuwait Airways’ estimated revenue from March 31 2010 to March 31 2011 was US$853-million and the airline’s expenses totaled US$1.033-billion, in addition to the other internal issues the airline is facing as it moves towards privatization … can the airline expect to find a long term investor for the 35% stake in the company? Can the Kuwait Investment Authority expect private investors to purchase 40% of the airline?

 

It will be interesting to see how the Kuwaiti Government moves forward in privatizing the airline and attracting investors given the current state of the airline.

 

Happy Flying!

 

Pingbacks

  1. […] Kuwait Airways is in the long drawn out process of privatization, as the airline moves towards privatization labour has been unhappy with the new terms, pay, benefits and potential loss of job security they are likely to face.  To protest employees rights the Kuwait Airways Corporation Employees Union went on strike two days ago … the strike was planned to begin promptly at 8:00am and ended at 1:00pm. […]

  2. […] Kuwait has struggled to privatize its airline; faces labour issues, an aging fleet, poor in flight services and a passenger product that is at least a decade behind. Kuwait’s second airline, Jazeera Airways is growing with its fleet of seven Airbus A320s, serving the region from Egypt to India, but it is massively outsized by even the smallest regional competitors … which leads to Kuwait beginning to launch its US$6,000,000,000 airport blunder. […]

Comments

  1. The issue of privatising Kuwait Airways is not an employee issue only. The airline is being investigated fro corruption and as you mentioned earlier. Considering that both Air Arabia and Royal Jordanian privatisation did not take place until both made profits for a couple of years running. Neither The Government or the Investment Authority made the effort to restructure and stabilise the airline to reverse the losses at least.

    I fail to see how anyone would want to invest in an entity that is losing money. Are the investors expected to turn around the airline. I doubt very much with the way the ownership is structured anyone can turnaround the airline. In the cases of Air Arabia and Royal Jordanian the management was tasked with restructuring and resolving employee issues. It seems Kuwait Airways management has not done anything of the sort nor were they requested to do so.

    At the pace this effort is going and the way it is handled, it seems everyone involved is hoping for a miracle, I doubt that we will see a successful conclusion

  2. Oussama,

    I am aware that the National Assembly’s Audit Bureau and Budget Committee,have both made a number of accusations of corruption. The corruption issues seems to have increased once the shift to privatization officially began, which seems like an odd time for the corruption to begin.

    The spiraling losses can’t be attractive to any investors, especially with an aging fleet and the airline promising it would serve 80 destinations by 2012 … in fact Kuwait Airways seems to still think it can achieve 80 destinations by 2012, while presently serving 36 destinations now, five months into 2011.

    I concur that at the moment everyone is hoping for a miracle for privatization to occur.

    Happy Flying!

    -Fish

  3. Steven,

    Where did you get your information, I assume you did not do all of the research yourself.

  4. John,

    I have been compiling info for quite sometime. If you follow my Twitter feed (@flyingwithfish) I have been discussing Kuwait Airways on and off for nearly a year.

    My info comes in large part from releases and statements from the airline, the government, financial reports and other journalists who are covering the airline.

    Happy Flying!

    -Fish

  5. John,

    No, I am not copying the work if others. The airline and Gov’t issue statements and releases. Conversing with others through various channels to verify information is not copying their work.

    If you want to do the leg work researching stories…you’re welcome to do so.

    Happy Flying!

    -Fish

  6. Steven,

    As all students know, using information without citation is plagiarism.

    That is unless you have done original research in which case you need to cite back to your research. This is so we can evaluate the information supporting your conclusions.

    Basic Journalism my friend.

    Cheers!

  7. John,

    Again…I am not copying my content and I do my own research and checking. I make my calls and get my quotes.

    How else do you think I have published multiple TSA SSI security directives before they’d been announced, at times even internally, wrote about an airline pulling it’s A380 out of JFK and sending it to Canada months before the airline announced it and have beat newspapers to multiple stories on airlines.

    Just something to chew on.

    Happy Flying!

    -Fish

  8. As long as you’re ok with plagiarizing, I am. You’re the one in social media business not me. I am just trying to insure people take you seriously.

  9. John,

    Again,refer back to my multiple posts regarding TSA SSI directives and policy that were published before the TSA announced them, event their front line ; my posts on air cargo security risks months before the confirmed air cargo bombs were found; my post on Emirates pulling it’s A380 from JFK months before the airline announced this and other stories that beat everyone else to the punch.

    It’s not possible to copy others when you’re there first. You get there first by developing contacts and consistent research that is cumulative.

    People want to know how my coverage is ? I think these posts, among others, stand on their own.

    Happy Flying!

    -Fish

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