Alafco seeks $70m in damages

Aviation Lease and Finance Company (Alafco) is seeking US$70 million (Dh257m) in damages after Wataniya Airways of Kuwait shut down its commercial operations last month.

Alafco, one of the oldest and largest aircraft leasing companies in the Middle East, has three Airbus A320 aircraft on lease to Wataniya on a contract running from 2009 to 2017. It claimed Wataniya's March 16 announcement it was ceasing all operations was a violation of its deal and requested compensation for loss of revenue.

"Wataniya Airways ceasing its operations is regarded as a breach to the deal", Alafco said in a statement to the Kuwait Stock Exchange yesterday.

Alafco is willing to negotiate with Wataniya for "fair" compensation, according to the statement. The company is owned by Kuwait Finance House and Kuwait Airways.

Wataniya's commercial flights ended on March 15, with the airline citing its precarious financial situation and regional instability. When it launched in early 2009, it became the third carrier based in Kuwait, joining Kuwait Airways and Jazeera Airways.

George Cooper, the chief executive of Wataniya, said the company was heading towards a general assembly of shareholders. "They will decide the future of the company," Mr Cooper said. He added "all options are open", including the possibility of restarting commercial operations.

Wataniya operated seven aircraft, with a route network of about two dozen regional and European cities at the height of its service. But in November the carrier said it would lay up several aircraft and cut routes to stem losses.

It did not disclose its financial results for last year, but it lost $37.8m in 2009 and $5.4m in 2008.

Despite shutting down its flights, the airline has so far resisted making any redundancies among its 400 staff. "All of our staff are currently employed by the company," Mr Cooper said. Wataniya's largest shareholders include Kuwait Projects Company.

In January, Alafco announced an almost tenfold increase in first-quarter net profits, after earning a one-time revenue of 20m Kuwaiti dinars (Dh265.17m). The company plans to have a fleet of 100 aircraft by 2015.

Alafco said it was able to secure about $185m of financing from local and international lenders in the first quarter, which would be used for growth and expansion in the next period.

igale@thenational.ae

* with additional reporting by agencies