National carrier: Selling 26% shares is not privatisation, says secretary

Bids for eight aircraft submitted today likely to be disqualified.


Our Correspondent March 14, 2014
The national flag carrier will phase out old Airbus 310s as it inducts newer planes like the B-777s so there are planes for longer routes. PIA will also need at least 20 narrow-bodied planes. PHOTO: FILE

KARACHI:


Pakistan International Airlines (PIA) is not being privatised, but only a small stake will be sold to a strategic investor, insisted Aviation Secretary Muhammad Ali Gardezi on Friday. 


“We have nothing to do with it (privatisation),” said Gardezi, who is also the chairman, on the sidelines of an event held to open bids for new planes before newsmen. “Yes, the management will also be given to the investor, but the government will still hold 74% shares in the airline.”

Repeated insistence by the aviation ministry and PIA’s management that the government is not privatising the national flag carrier is in stark contrast with what senior government officials have been saying all along.

Pakistan Telecommunication Company Limited (PTCL) was also ‘privatised’ in a similar manner when government sold 26% stake in landline telephone monopoly.

Tender requirement not met

PIA is most likely to reject the bids it received on Friday for lease of four twin-aisle and as many ATR aircraft because it was offered much older planes than what the tender asked for, airline officials said on Friday.

Five bids received in response to the February 12 tender were opened in front of Gardezi, senior PIA officials and newsmen.

Bids came from Standard Chartered Bank, DV Bank, Bank of China, Aircraft Leasing and Dubai Aerospace but none of the planes met the tender requirement of being manufactured in year 2010 or later.

“PIA director technical will now review the bids in detail and then decide what to do,” PIA Managing Director Junaid Yunus said. “But apparently the bids will be disqualified.”

In case that happens, PIA will issue another tender.

Some of the planes offered for lease have been built in 1999. PIA wants to induct newer planes into its fleet to bring down fuel cost, which eats up more than 50% of its revenue.

Gardezi said that the national flag carrier will phase out old Airbus 310s as it inducts new planes. “We are trying to get the B-777s so we have planes for longer routes.” PIA will also need at least 20 narrow-bodied planes, he said.

PIA is slowly increasing sales to meet the deficit, he said. “Monthly expense of the airline is around Rs13 billion. We have been able to increase the revenue to between Rs9.1 billion and Rs9.5 billion a month. Our aim is to reach the break-even point at any cost,” said Gardezi.

Fuel expense, which eats up 56% of airline’s revenue, is being brought down, he said. “Ultimately, we would want to take it down to 35%.”

In response to a question, he said there is need of building second and third hubs for PIA in Lahore and Islamabad. “Ultimately, we will need multiple hubs. Financing for that remains an issue,” Gardezi said.

Leasing more aircraft will add to PIA’s already huge long-term liabilities of over Rs70 billion. Yunus said the debt has to be restructured to help PIA come out of the red. “This does not mean we are seeking equity injection from government. We can do that on our own.”

Published in The Express Tribune, March 15th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

COMMENTS (8)

Ammar | 10 years ago | Reply

@ASIM: Haven't you followed the news in recent past? Govt. is working on it and Purchaser agreed to pay once property is transferred. For that Federal Govt. is working with Provincial Govt.

SHB | 10 years ago | Reply

Mr Gardezi should attend the classes for definition of Privatization .

VIEW MORE COMMENTS
Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ