27-May-2010 2:04 PM

Iraqi Airways declared bankrupt in Kuwait dispute

Iraqi Airways announced it has been declared bankrupt by the Iraqi Government (AP, 27-May-2010). The Iraqi Transportation Ministry announced plans to dissolve the carrier due to a decades-long dispute with Kuwait. The Government plans to continue the operation of the airline until it is liquidated fully, for which a timeline has not been disclosed. However, Iraqi law stipulates a liquidation process may only take up to three years. The airline serves Lebanon, Iran, Dubai, Egypt, Syria, Turkey, Greece and Jordan. Earlier this week, Iraqi Airways suspended plans to launch services from Baghdad to London Heathrow via Malmoe and suspended services to Sweden and the UK "due to difficult circumstances as a result of Kuwaiti escalation”.

Iraq and Kuwait have been in a dispute over war reparations, including claims that Iraq owes Kuwait up to USD1.2 billion in aircraft and parts seized in 1990-91. Kuwait Airways Corporation (KAC) reportedly stated it would still hold the Iraqi Government accountable for the debt, even if the airline is dissolved. Iraqi Airways CEO, Kifah Hassan Jabbar, was detained in London on 25-Apr-2010 and required to comply with a court order to provide KAC with an affidavit of Iraqi Airways' assets in Britain. KAC lodged an ex-parte order in the British High Court to seize one of Iraqi Airways' aircraft in London. The court order included freezing the assets of Iraqi Airways worldwide. International courts had earlier ruled in favour of KAC, including the right to claim USD1.2 billion in compensation for stolen aircraft and spare parts during the 1990 invasion. The decision coincided with the completion on 25-Apr-2010 of Iraqi Airways’ first commercial flight between Baghdad and London in 20 years, which was to operate twice weekly. However, the aircraft was not able to be seized due to its ownership by a Swedish company. Iraqi Airways charters its fleet and does not own any aircraft.

Iraqi Airways:The Council of Ministers decided yesterday to dissolve the company and liquidate its assets. The decision was taken because Kuwait has raised legal action against the company, and continues in this process. Iraqi Airways is not offered for sale, and no employee will be laid off. Employees will continue to be paid their salaries until the government finds an alternative solution,” Ali Al-Dabbagh, Spokesperson. Source: Bloomberg, 26-May-2010.

Transportation Ministry: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. We hope in the future to replace it by two or three companies to resume its operations,” Karim al-Tamimi, Spokesperson. Source: AP, 27-May-2010.

Kuwait Government:We will not concede our debt whether it is dissolved or not. If it is closed, we will pursue Iraqi officials responsible for the action. We will continue to press with our demands and legal and judicial measures to secure our rights approved by international courts,” Mohammad al-Baseeri, Communications Minister. Source: AFP, 27-May-2010.

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