Analysts predict that efforts by Kuwait Airways to go private will be followed by a wave of governments trying to end decades of state support for their carriers.
Public offerings expected for Gulf airlines
Efforts by Kuwait Airways to go private are expected to be followed by a wave of public offerings among Gulf-based airlines in the next few years, as governments try to end decades of state-support for their carriers. Others planning share sales include Saudi Arabian Airlines, Gulf Air and Qatar Airways, all aiming for between next year and 2014, according to recent statements from airline officials.
On Wednesday, the loss-making Kuwait airline appointed Citigroup, Ernst & Young and the aviation management consultancy Seabury to assist in the sale, according to KUNA, the Kuwaiti state news agency. Under the announced plans, the government will sell 40 per cent of the flag carrier to the public, 35 per cent to a long-term investor and retain the remainder. "The whole point is that you are trying to introduce efficiencies and capital into the business," said Scott Darling, a transportation analyst for Nomura Middle East in Dubai.
While the Middle East is home to two of the world's most profitable airlines, Emirates and Air Arabia, it is also home to a number of flag carriers that have been propped up with state support worth billions of dollars. Governments have provided this support because the carriers contribute to the wider economy by creating jobs for locals and stimulating trade and investment. Several governments in the region are seeking to end this support through public sales. Saudi Arabian Airlines began a privatisation programme in 2006 by dividing the company into six units: catering; cargo; maintenance; airlines; a flight academy; and ground handling.
The loss-making airline hopes to list Saudi Arabian Catering publicly by March, and its ground handling unit would merge with two other firms next summer, top executives said last month. The economic development board of Bahrain said Gulf Air, the country's unprofitable carrier, could swing into the black within a year because of its restructuring programme and that this could pave the way for privatisation.
In Qatar, the government hopes this year to buy out other shareholders in Qatar Airways. firstname.lastname@example.org