Sell-off: Government plans to split ailing PIA into two
Control of core business to be sold to a global airline.
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 the state entity, which has some 17,000 employees but just 36 aircraft – 10 of which are grounded due to dearth of spare parts.
Privatisation Commission Chairman 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.”
Politically sensitive
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. 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.”
Published in The Express Tribune, September 26th, 2014.
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 the state entity, which has some 17,000 employees but just 36 aircraft – 10 of which are grounded due to dearth of spare parts.
Privatisation Commission Chairman 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.”
Politically sensitive
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. 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.”
Published in The Express Tribune, September 26th, 2014.