August 1, 2011 / 2:06 PM / in 9 years

UPDATE 1-Kuwait Air stake sale plan may see muted interest

* Kuwait Airways seeking investor for $280 mln stake sale

* Airline offering 35 pct of its share capital

* Limited interest seen-analysts (Recasts, adds details, analyst quotes)

KUWAIT, Aug 1 (Reuters) - State-owned Kuwait Airways , which is seeking investors for a $280 million stake sale to privatise the carrier, is unlikely to attract much interest from international or regional investors, analysts said.

The struggling airline will have to offer an attractive deal for investors and offer more control of operations to generate any interest.

“It (Kuwait Airways) does not bring much attractiveness to any partner unless it gives a good deal and more control in its functioning,” said John Strickland, director of UK-based JLS Consulting.

“The airline has been struggling for some time now .... it’s unlikely to gather any interest from the other big players in the region.”

UAE’s Etihad airways said on Monday that media reports that it would be interested in Kuwait Airways are “speculative”. Qatar Airways also stayed clear of claims that they may be potential suitors.

“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,” said Peter Morris, chief economist at Ascend Aviation, a UK-based consultancy.

Kuwait Airways said it is offering 35 percent of its share capital of 220 million dinars ($805.3 million) to potential long-term investors, amounting to around $280 million.

Joint-stock companies listed on the Kuwaiti bourse and “specialised” international firms are allowed to subscribe, the statement added.

The deadline for submissions is Aug. 25.

A potential stake sale would be the first privatisation of a Gulf-owned carrier.

“From the airline’s aspect, this may be seen as an opportunity to raise capital for aircraft replacement,” said Morris.

Kuwait Airways, which currently has 17 planes, last year, appointed Citigroup Inc. , auditors Ernst & Young and aviation consulting firm Seabury to handle the privatisation.

Kuwait’s parliament approved a plan in 2008 under which the government will sell 40 percent of the airline to the public and 35 percent to a long-term investor.

“I don’t see this as a good fit for any of the regional airlines Like Emirates, Etihad or Qatar Airways as they are international players,” said a Dubai-based banker.

“There will be a process of due diligence and I think the airline will still be seen as more of a problem. Costs will be looked at and I don’t see it being much value to investment firms.”

Kuwait, the world’s fourth largest oil exporter, is on a drive to boost its private sector and become a regional financial centre.

Its economy is largely dependant on oil revenues and driven by government spending. ($1 = 0.273 Kuwaiti dinars) (Reporting by Praveen Menon and Eman Goma, Editing by Dinesh Nair)

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