June 9, 2004
Demand for shares in the initial public offering of Kuwait's first private airline, no-frills carrier al-Jazeera Airways, was more than 12 times the capital on offer, one of its key founders said on Wednesday.
"I think this is the largest amount of oversubscription in Kuwait's history," Jassem al-Boodai of Boodai Group said in an interview.
Al-Jazeera offered 7 million Kuwaiti dinars (USD$23.74 million) of its 10 million dinar capital to the public and received expressions of interest of more than 84 million dinars, he said.
"Al-Jazeera's shares will now be distributed pro rata," said Boodai, adding that despite the huge demand for the shares, the original capital base would not be increased. This means that an investor who has applied for 10,000 shares will be allocated fewer than 1,000 shares.
Kuwait-based Boodai Group and other investors will provide the remaining 30 percent of capital, or 3 million dinars, he said. Boodai Group also owns local daily newspaper Al-Rai al-Aam and Hilal Cement, among other locally based ventures.
In November, the government of oil-rich Kuwait moved to open up its airline sector to competition by approving the establishment of private passenger and no-frills carriers, as well as air freight companies.
TALKS WITH BOEING, AIRBUS
A source with al-Jazeera's founding committee said the airline should be operational by early next year. He said company officials were already in talks with Boeing and Airbus for the purchase of al-Jazeera's initial fleet of four jets.
Al-Jazeera will be offering low-cost tickets that will be about 55 percent cheaper than rates provided by loss-making state-run Kuwait Airways on some routes in the Middle East such as Kuwait City to Beirut.
Kuwait Airways, currently the only Kuwait-based airline, has been suffering financial woes for several years due to management disputes and heavy losses incurred during the 1990-91 Gulf crisis.
"I definitely think there is a market for al-Jazeera," the source said in response to whether tiny Kuwait, which has a population of about 2.5 million people, can support two local carriers.
Al-Jazeera's flight routes would initially include Lebanon, Syria, Jordan, Egypt, Iran, and the other five countries of the Gulf Arab region, the source said.
Al-Jazeera is the Arabic word for "island", but it is also used to mean the Arabian peninsula, which includes Kuwait.