Under the new proposal, approved by Transport Minister Issa Al-Kandari, 20% of the airline's shares will be offered to Kuwaiti citizens, 5% to current and retired employees, and the government will retain the rest, a statement on Kuwait's News Agency (KUNA) website said.
Parliament's Financial and Economic Committee will meet to vote on the approved proposal before it is finalized.
Previous proposals put government's stake at 20 to 40% and allowed strategic investors to own up to 35%.
Kuwait's Parliament first approved a plan to privatize the loss-making Kuwait Airways Corp. (KAC) in 2008, but the process has been repeatedly held up. Privatization was initially delayed as the company planned to first restructure the airline.
Kuwait Airways agreed during 2014 to purchase 10 widebody Boeing 777-300ER and 25 new Airbus aircraft including the A320-neos and A350s, in an attempt to launch new routes.
The acquisitions raised the asset value to 2 billion dinars ($6.61 billion), the statement said.
Kuwait's low-cost carrier Jazeera Airways on May 31 said it filed an interest to acquire 35% stake in the state-owned carrier.
The new proposal would exclude domestic carrier competitors, such as Jazeera Airways as potential bidders.
Source: Reuters; KUNA