By Staff Reporter
KARACHI: The government is poised to kick off the long-awaited privatization of the national carrier, Pakistan International Airlines Corp., on Tuesday, with just three bidders in the running after Fauji Fertilizer Co. bowed out over the weekend.
The auction for a controlling 75% stake in the PIA comes amid efforts to revive the loss-making flag carrier and bolster the economy. Bids are due between 10:45 a.m. and 11:15 a.m. local time, with the opening set for 3:30 p.m. in a process that will be broadcast live on television, as per the commission’s schedule.
The remaining contenders include a consortium led by Lucky Cement Ltd. that also comprises Hub Power Holdings Ltd., Kohat Cement Co. Ltd. and Metro Ventures Pvt. Ltd.; another group headed by Arif Habib Corp. Ltd. alongside Fatima Fertiliser Co. Ltd., City Schools Pvt. Ltd., Lake City Holdings Pvt. Ltd. and AKD Group Holdings Pvt. Ltd.; and standalone bidder Air Blue Pvt. Ltd.
Fauji Fertilizer, previously seen as a frontrunner, formally notified the commission of its withdrawal on Saturday, the deadline for earnest money deposits. The company skipped the payment, clearing the way for it to potentially join a winning consortium later—something bidding rules would have barred had it participated.
Once bids are in, they’ll be sealed in a transparent box before the Privatisation Commission board convenes to set a reference price. The Cabinet Committee on Privatisation will then approve it, paving the way for the public opening. If offers top the benchmark, an open auction follows; otherwise, the highest bidder gets first dibs to match it.
The federal cabinet is expected to greenlight the deal within days, followed by document signing and a 90-day window to wrap up transfers of properties, liabilities and leased aircraft. Under the terms, 92.5% of the proceeds from the 75% stake will flow directly to PIA, with just 7.5% heading to the national treasury. The government retains the remaining 25%—deemed a “valuable asset”—but the winner has the option to snap it up within 12 months at a 12% premium, with a decision due inside 90 days.
Officials said the bidders pushed for staggered payments over a year for the initial stake, but the government pushed back. “If the performance of PIA declines within a year, the bidder would decide against the purchase, and if performance improves, the bidder would decide in favor, which would be unfair to the government,” Muhammad Ali, chairman of the Privatisation Commission said in a YouTube interview. Instead, the victor must pony up two-thirds within 90 days, with the balance due in a year.
PIA, which boasts air service pacts with 97 countries, rights to 78 destinations and over 170 landing slots worldwide, has been hobbled by inefficiency. Of its 34-plane fleet, only 18 are flying, yet it posted a net profit of Rs11 billion and holds equity of Rs30 billion. Lingering liabilities of Rs26 billion will stay with the airline, to be cleared over five years by the new owners. The deal safeguards jobs, with no layoffs permitted for a year and pensions, medical benefits and discounted tickets for retirees shifted to a holding company. Current salaries and perks remain intact under the buyers. Staff numbers have already slimmed from 11,500 in 2011 to 6,500 today.
Ali touted PIA’s turnaround potential as a boon for growth. Aviation contributes just 1.3% to Pakistan’s gross domestic product, far below the UAE’s 18% or Saudi Arabia’s 8.5%. “The revival of PIA would have an impact on GDP growth and the economy as a whole,” he said. With a population of 250 million, ample customers, routes and slots, what’s needed is “investment, the addition of aircraft and efficient management, which the government cannot provide.” “The type of decision-making required at PIA can only be undertaken by the private sector,” Ali said. “If the airline is properly managed, PIA could return to its glory days.” If mishandled, though, “colossal sums of money will be lost.”
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