IMF agrees to tax exemptions and other demands for PIA privatisation

The International Monetary Fund (IMF) has agreed to grant sales tax exemptions and remove equity losses as part of the privatisation process for Pakistan International Airlines (PIA).

According to sources, the buyer of PIA will be granted sales tax exemptions for purchasing or leasing aircraft for both national and international routes. With these tax breaks and the removal of PIA's losses, the bidding value for the airline could increase from Rs250 billion to Rs350 billion.

PIA currently has a debt of around Rs660 billion, which the government has assumed responsibility for and stockpiled under a holding company. Additionally, the proceeds from the privatisation of PIA and the sale of the Roosevelt Hotel will be used to settle the airline’s obligations.

Sources also revealed that the IMF has approved the settlement of PIA’s holding company debt.

For the Roosevelt Hotel sale, a joint venture is expected to be established within six months, with an estimated sale value of up to $one billion. The Prime Minister has also been briefed about the tax exemptions for PIA, the removal of losses, and the joint venture for the Roosevelt Hotel sale.

Initially, the IMF had only approved sales tax exemptions for the purchase or lease of aircraft for international routes. However, after further negotiations, the exemption has also been extended to aircraft purchases or leases for domestic routes.

With the new exemptions, PIA’s leased aircraft could benefit from sales tax relief of up to approximately PKR 8.1 million per month.

Previously PIA continuesd to struggle with operational efficiency as several of its aircraft remain grounded due to a shortage of critical spare parts.

Out of the 34 aircraft in PIA's fleet, 17 are still temporarily out of service.

The situation is particularly dire for the airline's Boeing 777 fleet, where 7 out of 12 planes are grounded. Additionally, 7 out of 17 Airbus A320 planes are also non-operational.

The airline's smaller ATR aircraft have not been spared, with only 2 of the 5 aircraft currently active.

PIA cuts fares for international flights

Pakistan International Airlines (PIA) has reportedly announced a reduction in international ticket prices following the approval of a waiver on the Federal Excise Duty (FED) by the International Monetary Fund (IMF), state-run news agency APP reported, citing sources in PIA.

The waiver, granted at the request of the Pakistani government, applies exclusively to international flights and is expected to result in significant fare reductions for travelers.

The report, quoting sources within PIA, confirmed that passengers flying to destinations such as the USA could save up to Rs350,000, while those traveling to Africa and the Middle East could see ticket prices drop by as much as Rs105,000.

Passengers flying to Europe, Australia, New Zealand, and the Far East may benefit from savings of up to Rs210,000.

However, the waiver does not apply to domestic air travel, which will remain subject to the FED.