KAC plans regional airline for costly, short-hop routes


Kuwait Airways (KAC) is studying a plan to form a regional airline with private investors to serve costly short-range destinations, a move designed to help cut repeated losses since the devastation of the 1991 Gulf War.

Chairman of the national flag carrier, Ahmad Al Zibn, said that the move was among KAC measures to cut costs in an effort to return to profitability.

The net loss over the last nine-month fiscal period (July 2000-March 2001) was around KD31 million ($101 million) and KAC is projecting a similar shortfall in the new fiscal year which started April 1 2001.

KAC suffers from heavy debt payments for a new fleet after it lost 84 per cent of its assets during the 1990-91 Gulf crisis.

'We are discussing with the concerned (Kuwaiti) authorities (handing over) some of the economically difficult (KAC) destinations due to high cost, like for example Kuwait-Abu Dhabi-Kuwait to a regional airline,' he said.

To justify the routes, KAC's large aircraft are used with additional stops but they are still costly.

KAC is considering the 'separate entity' in a joint venture with the private sector, with limited liabilities and lower costs by operating medium size aircraft with 50-100 seats.

The proposed airline would hop between Gulf Arab states, some Iranian destinations on the Gulf waterway, Arab airports on the Red Sea and possibly also Cyprus.

KAC has not yet approached potential international partners about the proposed regional airline but officials expect major operators to show an interest in becoming a strategic partner in KAC once the long privatisation process is finalised.

The chairman said KAC, which has one of the youngest fleets in the region, plans to replace its Airbus A310s and A300s aircraft but the firm will have to first settle debt payments before embarking on a new shopping spree.

The fleet now consists of five A300s, three A310s, three A320s, four A340s and two Boeing 777s. Occupancy in recent years has been around an annual 65 per cent with some 2.21 million passengers using the airline in 2000.

KAC bought the new aircraft after the 1991 Gulf War ended a seven-month Iraqi occupation. Since 1992, KAC's debts peaked at KD400 million but they now stand at around KD165 million.

Debt servicing has dropped to KD12 million a year from a peak of close to KD20 million, payments which wipe out any possibility of showing a profit, officials say.

KAC has already been awarded some $557 million for damages during the seven-month Iraqi occupation but it still has a case for additional payments before a British court and a claim against Iraq yet to be reviewed by a United Nations body.