Iraqi Airways suspended but Kuwait continues fight for cash

Iraq's government has dissolved state-owned Iraqi Airways over a 20-old financial dispute dating back to Saddam Hussein's invasion of Kuwait.

Iraqi Transportation Ministry spokesman Aqeel Hadi Kawthar told the Associated Press news agency that the company will operate until it is fully dismantled, but did not give any timeframe.

AP reported another ministry spokesman, Karim al-Tamimi, as saying the government made the decision to dismantle the airline on Tuesday.

"Iraq’s Cabinet decided to close Iraqi Airways and announced its bankruptcy because the company doesn’t own any airplanes and because of the Kuwaiti government’s cases raised against the company," al-Tamimi reportedly told the AP. "We hope in the future to replace it by two or three companies to resume its operations."

The move has been met with outrage in Kuwait.

Kuwait’s national airline, Kuwait Airways, has long demanded $1.2 billion in reparations from the airline for alleged theft of 10 airplanes and millions of dollars worth of spare parts during the 1990 invasion. It had sought to freeze the company’s assets worldwide.

Christopher Gooding of the law firm of Fasken Martineau which acts for Kuwait Airways Corporation (KAC) told Arabian Aerospace , “The details of what is proposed by Iraq are vague at present but the Transport Minister Amer Abdul-Jabbar has been reported by the BBC as stating that ‘If IAC were to be declared bankrupt Kuwait would have to drop its claims. We can establish another airline company and put an end to this case’. To this suggestion I have two comments:

“First, it appears to me to be a sorry reflection of Iraq's attitude to its international commitments that liquidating its own national airline is seen as preferable to addressing those commitments. Threatening to start a new airline merely demonstrates what a cynical tactic this is.”

Gooding added that he felt the conclusion is entirely false. “Any such move will not lead to the dropping of claims. In a statement given recently the same Minister of Transport was asked “Why does the government not declare IAC insolvent and dissolve it?” “He answered that: “This action will not protect a government company, because when a government company is declared bankrupt, its assets are transferred to the Ministry of Finance, and therefore the Ministry will be prosecuted.”

‘This response echoes that given by US advisers in the past. It will be of no surprise that KAC's legal advisers agree entirely with this earlier conclusion that it renders the State of Iraq liable directly for all the debts of IAC.’ Gooding said.

KAC's legal team said it has been “faced with this suicide threat of ‘come any closer and I jump’ for years and has full contingency plans in place.”

The airline flies to Lebanon, Iran, Dubai, Egypt, Syria, Turkey, Greece and Jordan. On Tuesday, Iraqi Airways said it had canceled routes to Britain and Sweden after Kuwait tried last month to confiscate the airline’s first plane to fly to London in 20 years.

At the time, Iraqi Airways chief Kifah Jabar Hassan had his passport seized in Britain and was forced to stay there for more than a week in connection with the Kuwaiti claims. The aircraft was allowed to leave Gatwick as it was Swedish owned.

Hassan issued a statement Tuesday on the cancellation of routes in which he criticized Iraq’s government for failing to resolve the prolonged dispute with Kuwait.

Iraq said it has repeatedly called for talks to resolve the dispute in a "friendly way," but the Kuwaitis did not respond.