Kuwait agrees Iraqi settlement and paves way for privatisation ... again

The dispute between Kuwait and Iraq over reparation for the theft and destruction of the Kuwait Airways fleet during the first Gulf War appears to have finally ended after Kuwait's government gave the final approval for settlement today.

The move should end the standoff and lift restrictions on Iraqi Airways flying to destinations in the West, Iraq's government said this morning.

The dispute appeared to have been resolved earlier this year when the two countries agreed a $300 million cash settlement plus $200 million investment in a new joint-venture airline.

However, according to sources close to the Kuwait airline, the funds had been withheld and the two sides were back in court. This has been the longest-lasting court case in legal history.

But yesterday Kuwait’s ruler issued a decree that created Kuwait Airways Corp into a share-holding company named "Kuwait Airways Co." This move opened the way towards the long-drawn out privatisation of the airline as part of the decree exempted the airline from the “judicial rules” affecting any dispute with Iraq.

This also meant Kuwait’s ministry of finance would underwrite the airlines debts and opened the way for the privatisation.

Industry analyst Saj Ahmad said that Iraq would be the real beneficiary from the deal.

"Settling the dispute with Kuwait and Kuwait Airways now paves the way for Iraqi Airways to start pushing forward with its international flight plans. With 30 Boeing 737s and ten 787-8s on order, the airline is desperate to corner its own domestic market that has seen a slew of new operators come into the country - predominantly from expanding GCC rival airlines - as well as launch overseas services to cater for the expatriate Iraqi communities - most notably in Europe and the United States, Ahmad said.

“The landscape will of course be somewhat opaque with the establishment of a joint Kuwaiti-Iraqi airline too, but this deal finally allows Iraqi Airways to leverage its start up position to access various airports across the country such as Najaf, Erbil and Basra and start flights beyond the GCC and Persian Gulf peninsula. It'll be a difficult path forward but the Kuwaiti Government approval of a long sought settlement deal gives the Iraqi carrier the boost it needs to get international operations off the ground."

Iraq’s foreign ministry issued a statement saying "According to the decision all restrictions and difficulties rebuilding Iraqi airlines and on its freedom to buy new planes and establish its fleet will be lifted,"