PIA sell-off fails to attract foreign investors
If the government fails to privatise PIA within three years, commercial banks will have the right to reopen the deal and demand an interest rate equal to prevailing government borrowing rates. PHOTO: FILE
As the privatization process of the restructured Pakistan International Airlines (PIA) has kicked off, foreign companies are apparently not interested in acquiring the majority stakes in the national carrier, sources told The Express Tribune on Wednesday.
According to the sources, only two companies from the Gulf countries received documents for investment by depositing $5,000.
These two firms have not even submitted their applications for tenders yet.
The last date for the submission of requests for tenders related to the privatisation of the PIA is May 3.
The date for the submission of applications for the PIA stake tenders is likely to be extended by a month, according to sources within the Privatisation Commission.
Privatization officials, including the PIA’s financial adviser on the national carrier for this process, are unfamiliar with bringing in investment from abroad.
The lack of enthusiasm of the foreign investors in the PIA’s privatization is a matter of regret as the Pakistani authorities have not even received their messages about the process yet.
The Privatisation Commission and the PIA administration also conducted various roadshows advertising the national carrier’s sell-off but failed to achieve much success.
In March this year, the board of directors of the PIA approved the government’s plan to privatize the national flag carrier ahead of the country securing a new International Monetary Fund (IMF) loan programme, estimating to fetch $250-300 million through the sell-off likely to a Middle Eastern country.
Last month, Pakistan placed on the block a stake ranging from 51% to 100% of the loss-making PIA, opening a new tab as part of reforms recommended by the IMF.
In a newspaper advertisement, the privatization panel set a deadline of May 3 to receive statements of interest in the PIA, which has piled up arrears of hundreds of billions of rupees, and it appointed EY Consulting as the financial adviser for the deal.
"The restructured PIA is being offered to potential investors in its 'debt-lite' new structure for a 51%-plus stake," the Privatisation Commission wrote in a website presentation.
The panel aimed to sign a share price deal by June 24, after completing all steps in the transaction.
"The restructured PIA provides an opportunity to invest in a full-service airline."
The PIA's 23% share of Pakistan's aviation market is the biggest, and the airline could grow further to exceed historic levels of 30%, the panel said.
With a fleet of 34 aircraft comprising 17 Airbus A320s, 12 Boeing B777s, and five ATRs, the airline loses traffic to Middle Eastern carriers, who have a market share of 60%, because of an absence of direct flights to destinations.