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Iraq Will Dissolve Iraqi Airways on Kuwait Dispute

May 26 (Bloomberg) -- Iraq will dissolve state-owned Iraqi Airways because of a legal dispute with Kuwait, government spokesman Ali Al-Dabbagh said.

“The Council of Ministers decided yesterday to dissolve the company and liquidate its assets,” Al-Dabbagh said in a telephone interview from Baghdad today. “The decision was taken because Kuwait has raised legal action against the company, and continues in this process.”

Kuwait Airways Corp. is seeking $1.2 billion in compensation for 10 planes taken by Iraq, under the rule of Saddam Hussein when his forces invaded Kuwait in August 1990.

“Iraqi Airways is not offered for sale, and no employee will be laid off,” Dabbagh said. “Employees will continue to be paid their salaries until the government finds an alternative solution.”

Kuwait Airways won a U.K. court order to freeze the Baghdad-based airline’s global assets on April 25, the same day as an Iraqi Airways flight landed in London for the first time in 20 years.

Iraqi Airways, which flies to more than a dozen airports in Arab countries and Europe, has a fleet of mainly Boeing Co. 737 airplanes, according to its website.

The carrier had received four planes from an order of 10 aircraft from Canada’s Bombardier Inc. and was expecting to start receiving the first batch of 40 Boeing planes ordered in 2008 by the Iraqi government, Commercial Director Gulseren Abdul Kadir said April 27.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Inal Ersan at iersan@bloomberg.net

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