PIA bidding likely to conclude in a month

Potential buyer cannot resell airline for 3 years, will induct 20 planes

KARACHI:

The government has imposed conditions for the potential buyer of state-owned Pakistan International Airlines (PIA), barring the investor from reselling the company in the first three years after its acquisition and requiring it to induct 20 aircraft into the fleet.

Talking to The Express Tribune, Arif Habib, Chairman of Arif Habib Corporation, one of the pre-qualified bidders for the airline, said the government's business plan after the privatisation of PIA showed that the buyer could not resell it for at least three years.

Earlier, while discussing the business plan with a group of journalists, Habib said the new buyer would expand PIA's fleet by adding at least 20 aircraft.

At present, the air carrier is managing a fleet of 34 long- and short-haul airplanes. PIA owns 20 aircraft while the remaining have been acquired on dry lease. Besides, the airline has a workforce of 10,323 employees, meaning an average of 304 workers for each airplane.

He projected that the potential buyer would prefer to purchase 75% of PIA stake to gain majority control over the airline.

Habib, who heads the group of companies that spans different sectors including fertiliser, cement and steel manufacturing, expressed hope that the PIA bidding process would be concluded in less than a month by October 1, 2024.

He highlighted that PIA's major issue in the past had been its debt and interest payments. Of the total debt of Rs800 billion, about Rs600 billion has been put on the balance sheet of a newly created holding company while the buyer will be responsible for repaying the remaining Rs200 billion.

Habib pointed out that most of PIA's debt was owed to the Federal Board of Revenue (FBR) and the Civil Aviation Authority (CAA). "It is crucial that the buyer is given a reasonable time frame to repay the debt. Demand for immediate repayment could adversely affect the price."

He said the government had yet to suggest the terms for the repayment of debt worth Rs200 billion to the potential bidders.

He noted that the unresolved debt issue might make potential buyers wary over fears that the switch could be turned off any moment. When the airline was under government control, institutions always provided some leeway.

While PIA was operationally viable, Habib said, if the debt and employees-related issues were resolved after takeover, the airline could quickly turn around and start making profit.

He floated an idea recently, asking the government to invest the privatisation proceeds in the national flag carrier instead of using them for other purposes. "This will fix the airline's issues soon and help make profit in future."

While sharing the financial performance of the airline, the Ministry of Aviation apprised the National Assembly Standing Committee on Aviation in July that PIA had posted an operational profit of Rs3.187 billion for January-December 2023, adding, however, that the net loss for the period was Rs103.90 billion.

Apart from PIA's losses and liabilities, of which Rs628.5 billion had already been transferred to PIA Holding Company to facilitate the privatisation process, the committee deliberated on the functioning of the Aviation Division and its attached departments.