Govt plans to split PIA into two companies
Financial advisers are now in talks with several airlines about taking over cash-strapped PIA, which has some 17,000 employees but just 36 aircraft - and 10 of them are grounded due to a lack of spare parts.
Minister of State for Privitisation Mohammad Zubair told Reuters in an interview during a visit to New Delhi on Wednesday that no decision had been taken on the buyer, but he mentioned Emirates Airline, Etihad and Qatar Airways - the Gulf giants that dominate the regional sector - as possibilities.
"It's going to be the most difficult sale," said Zubair, who is aiming to raise around $4 billion this fiscal year from the sale of stakes in several companies, anticipating demands that the government hold onto PIA and nurse it back to health itself.
"If we are saying that for 25 years PIA has been going from bad to worse, we can't claim that we are business-savvy and we can turn it around," he said. "Anyone who thinks that the government can fund it is living in a fool's paradise."
Zubair, a former IBM chief financial officer for the Middle East and Africa, was tapped by Prime Minister Nawaz Sharif to take charge of a central plank of economic reforms promised by Islamabad in return for an International Monetary Fund bailout.
Pakistan announced this week it will seek to raise about $815 million through a sale of shares in Oil & Gas Development Co (OGDC), its largest offering in eight years.
Zubair said investors are returning to the country after weeks of anti-government protests in Islamabad that have now fizzled out, and the OGDC deal representing 7.5 percent of the company's share capital would be a test of their confidence.
The OGDC sale is part of a sell-off drive to raise capital for an economy that has been crippled for years by power shortages, corruption and militant violence, and to staunch huge losses from dysfunctional companies. Zubair said the losses of power distribution companies alone are equivalent to one-sixth of the government's fiscal revenues.
Next on the block will be the government's 40 per cent stake in Habib Bank Ltd (HBL), which will be sold in two stages between November and next March, for around $1.2 billion.
Also ahead is the sale, targeted at domestic investors, of the state's 7.5 percent stake in Allied Bank Ltd, for around $150 million, Zubair said.
Politically sensitive
Once a source of pride for the country, PIA's decay has made it the butt of jokes, one of which goes that its initials actually stand for 'Perhaps I'll Arrive'. Flights are regularly cancelled and engineers say they have to cannibalise some planes to keep others flying.
Last year a PIA pilot was jailed in the United Kingdom for being three times over the alcohol limit before he was due to fly. Pakistani media reported that another pilot delayed a New York-bound flight for more than two hours as he waited for a sandwich delivery.
Over the years, critics say, governments have manipulated state corporations like PIA for political and financial gain, giving jobs to so many supporters that the size of the workforce has become unsustainable in the face of mounting losses.
Zubair said that PIA's employee-to-aircraft ratio, at around 600, is one of the worst in the world and keeps going up as more planes are grounded.
Under his plan, the airline will be spun off as a separate entity and PIA's other interests - such as ground-handling, catering, hotels and even a poultry business - would go into a holding company that would be retained by the state.
To avoid mass layoffs that would run into political opposition the holding company would absorb all the employees, keep a share in the airline to earn dividend income and then sell off each of its interests individually over time.
Zubair said he could not proceed with the sale of PIA as quickly as other companies, partly because parliament may have to approve legislation allowing it to pass into private hands.
"It's more politically sensitive," he said. "PIA is not going to be sold just like that."
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Privatisation Minister Mohammad Zubair says "If we are saying that for 25 years PIA has been going from bad to worse, we can’t claim that we are business-savvy and we can turn it around," he said. "Anyone who thinks that the government can fund it is living in a fool’s paradise." Now, PIA's aircraft to staff ratio has been quoted in the report as about one to 600, which is nearly four times that of airlines of comparable size. Surely, this astronomical increase in PIA staff did not occur overnight and could have been checked and could still be reversed by absorbing the surplus staff in the Holding company as per the stated plan. And this story about the PIA pilot jailed in United Kingdom for being three times over he alcohol limit before preparing to take off and another one delaying New York bound flight for more than two hours as he waited for a sandwich delivery display complete absence of control and are faults that could be rectified without employing rocket science. The report narrates a joke about PIA, saying the initials stand for 'Perhaps I'll Arrive'. My niece in London told me that over there it is known as 'Pagal (mad) International Airlines'. It is a sad story that PIA which once had a slogan 'Great People to Fly With' and justified every word of it, has been brought to this stage by our greedy rulers another set of whom is now trying to make hefty personal gain by planning to sell it off perhaps to airlines in the Middle East where PIA senior staff had helped establish the aviation industry in the past. Karachi
Privatisation Minister Mohammad Zubair says "If we are saying that for 25 years PIA has been going from bad to worse, we can’t claim that we are business-savvy and we can turn it around," he said. "Anyone who thinks that the government can fund it is living in a fool’s paradise."
Now, PIA's aircraft to staff ratio has been quoted in the report as about one to 600, which is nearly four times that of airlines of comparable size. Surely, this astronomical increase in PIA staff did not occur overnight and could have been checked and could still be reversed by absorbing the surplus staff in the Holding company as per the stated plan.
And this story about the PIA pilot jailed in United Kingdom for being three times over he alcohol limit before preparing to take off and another one delaying New York bound flight for more than two hours as he waited for a sandwich delivery display complete absence of control and are faults that could be rectified without employing rocket science.
The report narrates a joke about PIA, saying the initials stand for 'Perhaps I'll Arrive'. My niece in London told me that over there it is known as 'Pagal (mad) International Airlines'. It is a sad story that PIA which once had a slogan 'Great People to Fly With' and justified every word of it, has been brought to this stage by our greedy rulers another set of whom is now trying to make hefty personal gain by planning to sell it off perhaps to airlines in the Middle East where PIA senior staff had helped establish the aviation industry in the past.
Karachi
@Mike, @A2Z: It's not based in India, you guys. This story is a re-publication of Reuters' original, which happens to be based in New Delhi, because apparently journalists are killed or jailed by our so called "democratic" government. There used to be plenty of journalist outlets back during the "dictatorship", however.
It is being reported from New Delhi because Mr Zubair, privatization Czar , is visiting India. It says on the second paragraph. Good idea to get rid of PIA at this time. The airline is being used by Army Generals, bureaucrats and politicians as their private airline for way too long. Its also being used to peddle drugs out of the country and bring smuggles goods into the country. Two news items on the above mentioned events are available online for views. We cant fix this rotten department which only caters to the moneyed class for too long. Lets invest in railways which is truly a middle and lower middle class preference of transport.
Just plucking names out of a hat, who says any of these airlines are a possibility?
what an irony, while one brother (Asad Omar) is threatening the Government from the top of a container, the other brother (Muhammad Zubair) is a state minister. Their father ( A retired general) must be so happy.
@Mike; Yes it is. Haven't you seen the comments section of tribune? They post the harshest comments of Indian trolls but don't even bother to post comments of Pakistanis which are rationale and logical.
Why is the new post being reported from New Delhi? Is ET based in New Delhi?
Why not sell it to a Pakistani investor, with a predetermined valuation plus an equity kicker built in if the agreed terms of sale are met within a stated period. The Investor should have the rights to run and manage the airline as a private company without Government intervention, like delaying planes for VIPs etc., I have an investor group that can turn this company around within 5 years with some curtailment of Open Skies Policy initiated by Nawaz Sharif in the 1990s. Little did he understand about it then and little does he understand now. Sale to any Gulf airline will mean the end of aviation expertise and experience for Pakistanis as employees that developed over the years when Gulf carriers did not even exist. Failure of PIA is directly attributed to GOP and its interventionist policies, most of them illegal.
18 months from now you will be reading another article talking about how the govt plans on selling PIA. The harsh reality is that nobody wants to buy a tiny airline which is unprofitable, has lousy reputation, loaded with political cronies, and is the subject of political turmoil. Just not worth the headache.