Six consortiums pre-qualify for PIA bid

Marks second extension to privatisation process; bidding process now expected in August

Shahbaz Rana June 04, 2024


The privatisation process of Pakistan International Airlines (PIA) has taken another turn with the government pre-qualifying six consortiums for bidding, while disqualifying two others due to concerns about their financial standing. This marks the second extension to the original deadline, with the bidding process now expected to take place in August.

The decision comes amidst a continued ban imposed by the European Union (EU) on PIA flights within its airspace due to “safety concerns.”

The three consortiums deemed strongest due to their financial strength and experience in the aviation sector include, 
Fly-Jinnah-Air-Arabia Consortium: 

This consortium combines the expertise of Fly-Jinnah, a new Pakistani airline, with the established Middle Eastern carrier, Air Arabia.

Pak Ethanol-AirSial Limited- Serene Airlines Private Limited- Liberty Daharki Power Limited Consortium: 
This group brings together several companies with diverse backgrounds, including Pak Ethanol, a leading ethanol producer, AirSial Limited, a Pakistani domestic airline, Serene Airlines, a private airline, and Liberty Daharki Power Limited, an energy company.

Younus Brother Holdings (Private) Limited-Pioneer Cement Limited Consortium:
This consortium involves Younus Brother Holdings, a Pakistani holding company, alongside Pioneer Cement Limited, a major cement manufacturer, Artistic Milliners Limited, a textile company, ANS Capital Private Limited, an investment firm, and Metro Ventures Private Limited, a real estate company.

In addition to these three, the Privatisation Commission also pre-qualified the following, Airblue Limited; a Pakistani low-cost airline, Arif Habib Corporation Limited; a leading financial services firm, and Blue World City; a real estate developer, with its consortium including Blue World Aviation and IRIS Communication Limited.

However, the consortium of Sardar Ashraf D Baluch Construction Company-Shanxi Construction Engineering Group Co Ltd (China) and Gerry’s International were disqualified from bidding. Gerry’s International was rejected due to a weak financial position, while Sardar Ashraf D Baluch Construction company was barred due to a lack of independent verification of its Chinese partner.

The privatisation ministry had initially informed the Special Investment Facilitation Council (SIFC) that it would complete the privatisation process in February this year, but the deadline was extended to June and subsequently to August. The ministry remains committed to the strategic sale of PIA by August 14th.

The pre-qualification process involved a thorough review of Statement of Qualifications (SOQs) submitted by eight interested parties. The Privatisation Commission Board, under the chairmanship of Minister for Privatisation Abdul Allem Khan, evaluated the technical, financial, and documentary requirements outlined in the RSOQ before making its final decision.

The pre-qualified parties will now move on to the next stage of the bidding process, where they will be invited to conduct due diligence. This process is expected to take between six to eight weeks.

Despite the government’s efforts, the lack of foreign interest in acquiring a leading stake in PIA raises concerns about the success of the privatisation process. No foreign company or international airline emerged as a lead consortium, indicating limited interest in taking over the loss-making airline.

This scenario has effectively closed the door to a potential government-to-government deal.

The government aims to sell between 51% to 100% of PIA’s stake to the private sector, hoping to alleviate the airline’s financial burden. However, foreign investors are limited to acquiring a maximum of 49% stake, and any larger investment would require the formation of a consortium with local investors.

The government has already restructured PIA’s balance sheet and transferred its debt to a holding company, assuming responsibility for debt taken from commercial banks. However, PIA’s equity remains negative, and any new investor would need to invest hundreds of millions of dollars to ensure the airline’s operational viability and sustainability.

The ongoing ban imposed by the EU on PIA flights adds another layer of complexity to the privatisation process. In its latest meeting, the EU determined that there were insufficient grounds to amend the current list of air carriers prohibited from operating within the EU. The EU Air Safety Committee has stated that continuous monitoring of the safety situation and developments in Pakistan is crucial, requiring regular technical meetings in Brussels and progress reports from the Pakistan Civil Aviation Authority (PCAA).

Published in The Express Tribune, June 4th, 2024.

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