Govt plans to split PIA into two companies

Privitisation minister says no decision taken on buyer but names Emirates, Etihad and Qatar Airways as possibilities


Reuters September 25, 2014

NEW DELHI: Pakistan plans to split ailing national flag carrier Pakistan International Airlines (PIA) into two companies and sell control of the core business to a global airline over the next 18 months, but political opposition to the sell-off will be intense, the country's privatisation czar said.

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."

COMMENTS (10)

S.R.H. Hashmi | 9 years ago | Reply

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

S.R.H. Hashmi | 9 years ago | Reply

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

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