PIA Privatisation Faces Major Hurdles as Bidders Demand Full Control
ISLAMABAD: Pakistan’s long-awaited attempt to privatise its struggling national airline, Pakistan International Airlines (PIA), has hit a new roadblock, with concerns over its future intensifying. Initially, the government aimed to sell a 60 percent stake in the airline to six pre-qualified bidders. However, these potential buyers are now pushing for full control, citing significant operational and financial risks.
The Privatisation Commission recently informed a parliamentary panel that it plans to offer 76 percent of PIA’s shares. Despite this, bidders have expressed frustration, claiming they have not been officially notified of the new terms.
Rising Concerns Among Bidders
The bidders argue that partial ownership is too risky, especially given the airline’s aging fleet and financial troubles. PIA is expected to retire 18 wide-body aircraft over the next two years, and many of its smaller planes are currently leased. This means any new investor would have to essentially rebuild the airline’s operations and fleet from the ground up.
A key issue is the government’s $500 million investment requirement for replacing the retiring aircraft. The bidders have made it clear that such an investment is impossible without full management control of the airline. “We cannot justify these investments without full control over the airline’s profits and losses,” they stated.
Adding to their concerns, PIA is burdened with approximately Rs200 billion in liabilities. Securing bank loans for this level of debt is another major challenge, which the bidders say is only feasible if they own 100 percent of the airline.
Suspension of International Routes
Another sticking point is the suspension of PIA’s international routes, including profitable destinations in Europe and the US. The bidders argue that without the restoration of these routes, turning the airline into a profitable business will be extremely difficult. They have urged the government to expedite the resumption of these routes to make the deal more attractive.
Scrutiny of Divestment Plan
The divestment plan, developed by financial advisor Ernst & Young, has also come under criticism from bidders. Appointed in November of last year, Ernst & Young was tasked with preparing PIA for privatisation, but the bidders have expressed doubts about the plan’s feasibility given the airline’s numerous challenges.
Open Skies Policy and Workforce Concerns
Another concern for potential buyers is Pakistan’s open skies policy, which allows international airlines to operate freely within the country. The bidders fear that without protections from foreign competition, it will be nearly impossible for PIA to recover and thrive.
The issue of workforce retention is also troubling bidders. PIA has a large workforce, and the government has demanded that employees, along with their pensions, be retained for at least three years. This requirement, along with concerns over tax obligations and potential legal issues, has led to increased hesitation among the bidders.
Delay in Financial Bidding
Initially scheduled for October 1, the financial bidding process has been delayed to October 31. The Senate Standing Committee on Privatisation has warned that delays in PIA’s privatisation could have a ripple effect on other planned privatisation efforts, including the sale of Pakistan’s electricity distribution companies.
For now, the future of Pakistan’s national carrier remains uncertain, as both the government and potential investors grapple with complex challenges that could reshape the country’s aviation industry—or potentially ground PIA for good.
