Speaking exclusively to MEED in Baghdad, Bangen Rekani, Iraq's acting Transport Minister, says the government is planning an extensive expansion of the company in 2008, and needs the input of business expertise and funding that privatisation will provide.

He adds that the ministry would also like to establish a new carrier operating under the Iraqi Airways parent group.
“We want to bring in new expertise from the private sector to run these parts of the business more efficiently,” he says.

“We want to open the company up to the market early next year. We will reinvest in new equipment. Our vision is to establish another airline working with the private sector and encourage competition between the two under the same umbrella.”

Iraqi Airways is negotiating the purchase of up to 10 aircraft. The airline currently owns only two planes, with a further four held on lease. However, Michael McCormick, transport attache at the US embassy in Baghdad and policy adviser to the ministry, says Iraq's slow bureaucratic processes are hampering the ministry's procurement of aircraft.

“They are looking to upgrade to modern Boeing 737s but there is a tremendous backlog of orders and therefore high demand for good, used aircraft,” he says.

“The country still operates under a command economy. It does not have the speed and flexibility to take advantage of opportunities when they present themselves.

“In the past three months, there have been several opportunities to purchase these planes, but by the time they get approval it is too late. The Iraqis are learning a hard lesson on competition in the aviation industry.”

The carrier is also likely to buy a number of turboprop aircraft, as any Boeings purchased will not be delivered until 2012 at the earliest. Aircraft purchases will be kept within a limited model range to save on maintenance costs. At present, Iraqi Airways has to send its aircraft out of the country if they require anything more than light repairs.

Baghdad has also expressed plans to launch flights to Europe in 2008. However, McCormick says the airline should limit its ambitions to a network around the Middle East, while working with the UN Development Programme to bring the company into line with International Civil Aviation Organisation (ICAO) standards.

“Being flagship carrier for the government of Iraq is a very powerful statement if they can get new planes out there bearing the Iraqi flag,” says McCormick. “A regional network is realistic. That is where they need to look and where they need to stay. Getting the company up to ICAO standards to provide a long-haul service will take extraordinary effort over many years, and the business has no aircraft that could realistically service Western Europe.”

In the next year, the country's main airports will be rapidly overhauled. In December, Mosul airport reopened for the first time in 14 years, for a flight of Hajj pilgrims. The ministry will make this move permanent in the coming months, with a $110m redevelopment of the site's facilities.

Work will also get under way at Najaf International Airport to boost tourist traffic to the nearby holy sites. The US has provided the transport ministry with a shortlist of consultants to appoint to the $100m project, with a contract award due early in 2008.

In all, Rekani and McCormick expect to have six international airports fully functional by the end of 2008: in Baghdad, Basra, Mosul, Irbil, Najaf and Sulaymaniyah.

“This will be more than sufficient to meet demand in the short term,” says McCormick. “We will make sure these airports meet international standards, and by the end of 2008 we should have all six up and running.”

Rekani adds that the ministry will open a new round of negotiations with Kuwait early in the new year, seeking the abandonment of a $1.15bn lawsuit launched against Iraqi Airways in 2003. Kuwait is claiming compensation for aviation equipment stolen from Kuwait Airways by Iraqi forces during the first Gulf War and expropriated to Baghdad.

“We are asking forgiveness for the faults of the old regime, and to allow us to use that money to establish Iraqi Airways,” he says. “The Kuwaiti government is finding excuses, saying it is out of its hands and the case has passed on to the parliament. Iraq has been punished for a long time. Neighbouring countries need to help it rebuild.”