PIA privatisation stalled as bidders demand full ownership

The government remains firm on not offering 100% shares to investors amidst the current challenges.

The privatisation of Pakistan International Airlines (PIA) has once again hit snags after the six bidding companies demanded 100% share ownership instead of the previously discussed 60%.

Concerns have also been raised regarding employee contracts, which propose a three-year tenure without pension benefits.

PIA sources indicate that the Privatisation Commission is struggling to address these concerns, causing delays in the bidding process.

Initially scheduled for October 1, the bidding date was moved to October 30. However, further issues have since arisen, leaving the privatisation initiative in jeopardy.

The government is resolute in not granting 100% shares to the bidding companies.

Initially, the discussions focused on offering 60% shares, which has now shifted to 75%. The intention is to secure agreement from the companies on the 75% share offer.

If they do not comply, the PIA privatisation will be postponed. The effectiveness of the Privatisation Commission in resolving the raised objections remains to be seen.

On the other hand, officials from the Privatisation Commission stated that no new concerns have been presented by the bidding companies. Should any new issues arise, they will be addressed accordingly.

As of now, the final bidding for PIA has not occurred, and no conclusions can be drawn until the process is complete.

PIA employees and officers also face significant challenges related to the airline's privatisation. Concerns loom over the future of employees if the acquiring company does not provide contracts longer than three years and fails to offer pension and other benefits.

Furthermore, the bidding companies assert that they would need to invest between $500 million and $600 million, contingent on receiving 100% ownership. Most of PIA's aircraft are currently leased and outdated, resulting in high operational costs. To reduce these costs, acquiring new aircraft is essential, which can only occur if the process is transparent and efficient.

Previously, government disclosed that out of six selected parties, only two appear serious about acquiring PIA. The entity may not fetch as good a price as was possible during the last attempt to privatise it eight years ago.

Out of the six shortlisted parties, "two parties were seriously active" during the due diligence process of PIA, said Secretary of the Privatisation Commission, Usman Bajwa. The committee meeting was chaired by Pakistan Muslim League-Nawaz (PML-N) Senator Talal Chaudhry.

The secretary further informed the committee that the parties have raised objections regarding the applicability of Pakistani law in case of an investment dispute and have requested the option for international arbitration.

The government has shortlisted Fly Jinnah, Air Blue, Arif Habib Corporation, Blue World City, Pak Ethanol (Pvt) Consortium, and YB Holdings Consortium for the privatisation of the airline, which has incurred Rs500 billion in losses over the past eight years.

The secretary did not disclose the names of the two serious parties.

The government initially planned to privatise the airline by June-July but later extended the deadline to October 1st.