By Staff Reporter
ISLAMABAD: The caretaker government approved a plan to restructure the loss-making national airline, Pakistan International Airlines Corp., paving the way for its privatization after the Feb. 8 election.
The cabinet, led by interim Prime Minister Anwaar ul Haq Kakar, endorsed the proposal by the Privatisation Division to split PIA into two entities, according to a statement from the prime minister’s office.
The core operations of PIA, such as engineering, ground handling, cargo, flight kitchen and training, will be transferred to a new company, called Top-Co, while the non-core assets, such as properties and subsidiaries, will remain in a holding company, called Hold-Co.
The plan, prepared by transaction adviser Ernst & Young, aims to make PIA more attractive to potential investors by shedding its legacy debt, which includes negative equity of Rs825 billion in loans, creditors’ money, and losses. The clean entity, Top-Co, will be offered for sale, while the government will retain the ownership of Hold-Co. “These steps will help attract the investors toward PIA,” the statement said.
The move comes days after the Election Commission of Pakistan asked the caretaker government to “refrain” from finalizing any deal involving state-owned enterprises, including PIA, until a new elected government takes charge.
Pakistan, which is facing a deep economic crisis, agreed last June to overhaul its state-owned enterprises under a deal with the International Monetary Fund for a $3 billion bailout. The outgoing government decided to privatize PIA just weeks after signing the IMF agreement.
The caretaker administration, which took office in August to oversee the election, was empowered by the outgoing parliament to take any steps needed to meet the budgetary targets agreed with the IMF.
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