Proposals to float off a major part of Kuwait Airways are unlikely to attract many buyers because they offer investors too little control, and not enough return, say aviation analysts.
Kuwait's cabinet approved an amended draft law on Sunday paving the way for the partial privatisation of Kuwait Airways within three years.
Under the new draft law, which still needs to be approved by the National Assembly, the government will offer a 35 per cent portion of its share capital of 220 million Kuwaiti dinars (Dh2.9 billion) to potential long-term investors, amounting to around US$280m.
The offering will be to companies listed on Kuwait's stock exchange as well as to international investors, with the stake going to the highest bidder. The auction should happen within the next three years, the national news agency Kuna quoted the communications minister Salem Al Athaina as saying.
The Kuwait Investment Authority, the country's sovereign wealth fund, would retain a 20 per cent stake, while 5 per cent would be distributed to airline employees. The deadline for submissions is August 25.
Kuwait Airways, which operates 17 aircraft, last year appointed Citi, the auditors Ernst & Young and aviation consulting firm Seabury to handle the privatisation.
The country is the world's fourth largest oil exporter, but is on a drive to build its private sector and reduce dependency on oil revenue.
"Any sale of the company must realign the airline towards a successful future entity that builds on the aspirations of the Kuwaiti people and the past successes of this national institution," the government's privatisation committee said.
However, analysts say the airline is unlikely to prove a good fit for any of the major regional airlines like Emirates, Etihad or Qatar Airways.
"The airline has been struggling for some time now," said John Strickland, the director of the airline analysts JLS Consulting. "It's unlikely to gather any interest from the other big players in the region unless it gives a good deal and more control in its functioning."
"From the airline's aspect, this may be seen as an opportunity to raise capital for aircraft replacement," said Peter Morris, the chief economist at the consultancy Ascend Aviation. "But I don't see how buying into a part ownership of a very specific national airline with issues will be of any interest to investors," he added.
"We never comment on speculation of this nature, except to say that we talk regularly and frequently to many airlines and a range of other businesses from all over the world about issues and opportunities", said an Etihad Airways spokesman.
Emirates Airline and Qatar Airways did not respond to questions over any potential interest.
Any sale of a stake in Kuwait Airways, which mainly flies to Europe, the Middle East and Asia, would be the first privatisation of a Gulf-owned carrier but the airline is burdened with high labour costs and has struggled financially for years.
Kuwait's parliament previously approved privatising the company in 2008, but the move has been repeatedly delayed. Last month, the airline was hit by a strike over pay.