Kuwait Airlines fleet plans dealt a blow

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Kuwaiti aircraft leasing outfit ALAFCO announced 28-Aug-07 that Kuwait Airlines had cancelled its Letter of Intent for 19 aircraft.

The agreement, which was to comprise 12 B787s (ordered Mar-07) and seven A320s (ordered Nov-06), was meant to provide a badly needed revamp to the Kuwaiti flag carrier’s fleet. Kuwait Airline’s disappointing financial performance in recent years has been exacerbated by the advanced age of its aircraft, a factor that has added considerable fuel and maintenance expense to the cost line.

The deal fell apart as Kuwait Airways, which is entirely government owned, had apparently been unable to secure final approval from the state body that oversees its operations.

The non-conclusion of the transaction hurts both parties. The leasing company saw its share price drop by 7% - the largest daily drop allowed by the Kuwaiti bourse - and the airline has a critical element of its reform plan taken out of play. Of the two, it is the airline that will likely suffer the longer-term effects, as the market for both of the relevant aircraft types remains extremely buoyant.

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