By Staff Reporter
ISLAMABAD: Pakistan formally handed over management control of its loss-making national carrier to a private consortium on Monday, marking the most significant privatisation in the country’s history and ending years of attempts to offload the debt-laden airline.
The Privatisation Commission said the consortium led by Arif Habib Corporation had completed the first financial closing of the deal for Pakistan International Airlines Corporation Limited (PIACL), with all 40 conditions required under the Share Purchase and Subscription Agreement now satisfied.
The transaction, valued at roughly Rs180 billion, caps a sale process that has eluded successive Pakistani governments for more than a decade as they sought to extricate the state from an airline that has accumulated more than $2.8 billion in losses.
Under the terms finalised at the board meeting that approved the handover, the consortium paid Rs10 billion to the government as initial sale proceeds and injected Rs80 billion into the airline as fresh equity. The cash is earmarked for fleet expansion, route network growth and modernisation of an airline whose ageing aircraft and patchy service have long undercut its commercial prospects.
The board named Lt Gen (retd) Anwar Ali Haider, managing director of the military-run Fauji Foundation, as the first chairman of the privatised entity.
“As the new ownership officially takes over today, we deeply understand that the trust of a nation isn’t simply transferred on a document,” Haider said. “Trust is earned – mile by mile, smile by smile, year by year.”
DECADE-LONG PURSUIT OF A SALE
Pakistan first moved to privatise PIA in 2015, only to abandon the attempt after employee protests turned violent. A second attempt collapsed in 2024 when a single bidder offered a fraction of the airline’s asking price, forcing the government back to the drawing board.
The latest effort gathered pace after the airline was carved out of its previous corporate structure and freed of a portion of its legacy debt, making it more palatable to potential investors. Bidding was held on December 23, with the Arif Habib-led group emerging as the winning consortium for a 75% stake.
The consortium has committed to a further Rs45 billion investment when a second closing takes place within 12 months, and has signalled its intent to exercise a call option to acquire the remaining 25% stake for an additional Rs45 billion payment to the government.
Under the revised shareholding structure, Fatima Fertiliser, an Arif Habib group company, holds the largest stake at 34.1%, followed by Fauji Fertiliser at 33.9%. Lake City, City Schools and AKD Group each hold 16%.
REGULATORY HURDLES AND OVERSEAS APPROVALS
Government officials described the run-up to Monday’s closing as a logistical undertaking that spanned multiple regulatory jurisdictions and commercial counterparties. The Privatisation Commission said it had secured 22 separate contractual consents from aircraft lessors, maintenance providers, fuel suppliers and other operational partners to ensure the change in ownership did not trigger defaults or disrupt service.
Approvals were also required from the Pakistan Civil Aviation Authority and the Competition Commission of Pakistan, along with international merger clearances in Saudi Arabia and Kuwait, where the airline maintains operations.
The government separately extended infrastructure rental arrangements with the Pakistan Aviation Authority for properties used by the airline across several cities for a further three years, and agreed a mechanism to address PIA’s outstanding legacy liabilities to the aviation regulator.
Policy changes accompanying the sale included amendments to the National Aviation Policy covering airfare regulation, wet leasing arrangements and aircraft retirement age, according to the commission.
GOVERNMENT TOUTS BROADER REFORM PUSH
Prime Minister Shehbaz Sharif, who has pressed privatisation as a centrepiece of his economic agenda, welcomed the closing in a post on social media platform X, calling it “a moment of real satisfaction for my government and for the people of Pakistan.” He singled out Deputy Prime Minister and Foreign Minister Ishaq Dar for praise, along with Field Marshal Asim Munir.
Muhammad Ali, the prime minister’s adviser on privatisation, said the deal showed Pakistan’s capacity to execute complex transactions “through a transparent, fair, competitive and professionally managed process,” and that it would bolster confidence among domestic and international investors.
The financial advisory consortium for the transaction was led by EY Consulting LLC Dubai.
Pakistan has pursued a wider privatisation drive as it works to meet conditions tied to a $7 billion International Monetary Fund programme, with officials eyeing additional state assets including power distribution companies for sale in the coming year.
A spokesperson for PIA Equity Ltd, the special purpose vehicle established by the winning consortium, said the deal consolidated full private ownership of the airline for the first time. “The strategic alliance represents an unprecedented alignment of industrial, financial and institutional strength,” the spokesperson said.
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