PIA privatisation — complexities abound

Given PIA’s balance sheet, no prospective bidder would show an ounce of interest if govt does not wipe the slate clean

Intricate details of PIA’s privatisation have not yet been finalised, but initial recommendations suggest that non-core businesses of the airline could be carved out of the holding company before it is offered to prospective bidders. This essentially means that the business of real estate, all hotels and the Precision Engineering Complex that operates under the direct supervision of the Ministry of Defence would not be offered to bidders. However, flight operations, cargo, charter services and mail services will most definitely be up for grabs as the government continues to pursue a privatisation process that has caused it plenty of headaches in the past few months. Proponents of PIA’s privatisation feel that its accumulated losses and debt burden have taken it to the point of no return, where only an established business can turn things around.

But given PIA’s balance sheet, which shows total liabilities attributable to shareholders to be around Rs190 billion as of September 30, 2015, no prospective bidder would show an ounce of interest if the government does not wipe the slate clean. How it intends on owning up to billions on its books is yet to be finalised. How it intends to tackle the employee unions also remains a question mark. If liabilities are transferred to the new owner, the PIA business won’t prove to be an attractive one. If they aren’t, the government — already under a mountain of debt — will incur a massive burden. These questions are not easy to answer. Therefore, it makes sense that financial advisers want to segregate PIA into two and find a middle ground, easing the pressure on the government as well as the buyer. The government’s progress on its privatisation policy has so far been unimpressive. It has only managed to sell stakes in profit-making entities and hit a dead-end in the case of loss-making companies. Given this history, PIA’s privatisation serves as a cruel reminder that the issue is not just of the PML-N’s failure to get everyone on board. It is a mirror for all governments to look at and reflect — they all had a part in ruining what was once a profitable entity and turning it into a mountain no one wants to climb.

Published in The Express Tribune, February 19^th,  2016.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.