Kuwait Airways' privatisation identified as an investment opportunity

In August 2010, PrivComm appointed an advisory team to lead the preparation and execution of the privatisation process of Kuwait Airways Corporation (KAC), including Citigroup Global Markets Limited, Seabury and Ernst and Young: as bankers, independent expert aviation consultants and accountants respectively.

They have jointly undertaken detailed analysis of the historical and existing financial and operational performance of KAC. In addition, extensive financial and market analysis has been completed on the Kuwait aviation sector and the market opportunity open to a restructured KAC.
 
Despite the difficulties of KAC's current operating business structure, as well as its operational and financial performance, the findings of the analyses undertaken to date identify a clear investment opportunity for a restructured national operator. The need for a change is supported by a number of underlying positive factors relating both to the sector and the wider dynamics of the Kuwaiti economy.
 
KAC - the national flag carrier of Kuwait and the country's oldest airline - is the leading carrier in Kuwait with a 2010 market share of 31 percent by passengers transported. As the international aviation industry recovers from the residual effects of the global economic downturn, the growth of the Middle East aviation sector continues to outperform and is forecast to be the world's fastest growing aviation sector over the course of the next three years.
 
Kuwait is located in the centre of the Middle Eastern region and is expected to be among the fastest growing markets in the world, growing at a CAGR of 9.1 percent between 2010 and 2014 according to IATA. The Kuwait aviation market also has one of the highest expenditure levels on business travel in the region with $1.3bn spent in 2010, underpinned by the country's high level of GDP per capita.
 
In addition to these strong sector growth fundamentals, Kuwait benefits from an advanced political environment with an institutional system and democratic tradition ensuring political stability. Furthermore, Kuwait has the second fastest growing population in the GCC region, one of the highest GDP per capital in the GCC and enjoys one of the highest sovereign credit ratings.
 
PrivComm is encouraged by the findings of the analysis that has been undertaken to date. Kuwait Airways has a historical legacy to be proud of. It has spent nearly 60 years connecting Kuwait with the region and the rest of the world and remains the only Kuwaiti airline providing long-haul services to its many trading partners in the global economy. Despite these achievements, there is a need to liberate the national aviation sector to ensure fair competition and to offer attractive investment opportunities for local and foreign investors.
 
PrivComm's responsibility is to deliver the best deal for the people of Kuwait. Any sale of the business must ensure the best financial return for the Government, reduce the airline's dependence on public subsidies and ultimately help to create a national airline that effectively serves the people and economy of Kuwait. These objectives will determine how the restructuring of the airline moves forward.