Restructuring and investment of PIA gets approval
In a significant move towards privatization, Pakistan
International Airlines' (PIA) shareholders have greenlit the airline's
restructuring, expected to take place by July-August 2024. This development
reflects an anticipation of minimal political resistance to the divestment of
core operations, potentially to foreign investors, in response to the
imperative for foreign exchange, as advised by the International Monetary Fund
(IMF).
During an Extraordinary General Meeting (EOGM) convened on
Saturday, the national carrier's management heralded a milestone achievement:
the attainment of an 'operating profit' for the first time in 13 years.
Management also outlined plans for the resumption of flights on two major
European routes, including Paris, and to a UK city by June, with the aim of
bolstering earnings from these lucrative routes.
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A spokesperson for PIA said that
shareholders overwhelmingly supported the transformation of PIA Corporation
Limited into PIA Holding Limited, through the bifurcation into two segments:
Corporate Undertaking and Non-Core Undertaking.
Addressing shareholders, the PIA chairman and CEO underscored the
government's imposition of stringent measures for the airline's turnaround. The
robust participation of government officials in the meeting underscores the
government's earnestness and dedication to rectifying the entity's financial
woes.
Key attendees at the meeting included representatives from the
federal secretary of the Privatisation Commission, secretary aviation, legal
experts from the financial advisor, and PIA's board of directors.
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They highlighted the national carrier's commendable performance in
the calendar year 2023, culminating in the reporting of an 'operating profit'
after 13 years. PIA's share price has experienced a significant surge,
increasing its value by 700-fold. Plans are underway to initiate operations in
Europe and the United Kingdom from June 2024 following clearance from the
European Union Aviation Safety Agency (EASA) audit.
Amreen Soorani, Head of Research at JS Global, commented post-PIA
EOGM that the management assured shareholders of the on-track progress of the
restructuring process for completion by July-August 2024, barring unforeseen
circumstances. Soorani expressed confidence that political opposition would not
hinder progress, citing the preparedness of relevant authorities to address
such challenges.
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Privatization of PIA aligns with IMF recommendations as Pakistan
negotiates a new loan package from the global creditor. The anticipated revenue
recovery from the resumption of flights on the two European routes is expected
to significantly alleviate annual revenue losses, estimated at around Rs70
billion. The addition of new destinations, Paris and a UK city, is projected to
offer approximately 20-25 flights per week collectively.
Separating PIA's debt has unlocked operating cash for crucial
investments in enhancing aviation infrastructure and services. The Finance
Division has approved PIA debt re-profiling with commercial banks at an
estimated interest rate of 12%. The government aims to divest a majority stake
(51% or more) from its existing holding of 96% in the restructured PIA to a
private investor.
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of PIA approved by Prime Minister
The response to the recent Expression of Interest (EOI) from
potential investors will influence the final timeline. Seven international
investors, including entities from Germany, France, the Netherlands, Qatar, the
United Arab Emirates, Malaysia, and Turkey, along with a local group, have
expressed interest in acquiring Pakistan's national flag carrier and airports,
which are up for sale. Additionally, Pakistan's Privatisation Commission has
formally invited EOI to sell 51-100% of the share capital and management
control of PIA, with interested parties given until May 3, 2024, to submit
their electronic EOI along with a non-refundable processing fee of $5,000. Reports
suggest ongoing discussions with Qatar, Saudi Arabia, and the United Arab
Emirates regarding potential stakes in PIA, with interest also expressed by
entities from other countries.
Source: Express Tribune