Bidders want complete ownership as PIA privatization nears
As the long-anticipated privatization of Pakistan International Airlines
(PIA) nears, the process has encountered significant challenges. The six
pre-qualified bidders, initially attracted by a 60% stake offer, are now
insisting on full ownership of the airline.
Concerns regarding the fleet's age, financial liabilities, and operational
difficulties have cast doubt on the sale's viability—and the future of the
airline itself.
During a recent parliamentary meeting, the Privatisation Commission revealed
plans to sell 76% of PIA's shares. However, bidders claim the government has
not officially communicated this change. One bidder expressed to The News
on Monday that without 100% ownership, the risks far outweigh the rewards.
Read More Bidders
for Pakistan International Airlines (PIA) want majority of workforce removed
The bidders highlight the financial burden of revamping PIA’s aging fleet,
which includes the retirement of 18 wide-body aircraft over the next two years.
Complicating matters further, PIA's smaller aircraft are leased, leaving any
new investor facing the daunting task of nearly rebuilding the airline’s
operations from the ground up.
The $500 million investment requirement from the government for replacing
the retiring aircraft has also caused hesitation among bidders. They argue that
such a commitment is untenable without complete control of the airline.
"Without full management and profit-loss oversight, we cannot justify
these investments," they stated.
Additionally, bidders are concerned about financing and insurance risks
associated with PIA’s substantial debt, estimated at around Rs200 billion. They
assert that securing bank loans to finance their stake would be unfeasible
without total ownership.
Another significant issue raised by bidders is the suspension of PIA’s
international routes, especially to lucrative markets in Europe and the US.
Without the restoration of these flights, the prospects for profitability
appear dim. Bidders have urged the government to expedite the resumption of
these routes to make the sale more appealing.
Read More Pakistan
to sell 75% stake in Pakistan International Airlines (PIA)
The divestment plan, developed by financial advisor Ernst & Young, is
also facing scrutiny. Appointed last November, Ernst & Young has been
tasked with preparing PIA for sale, but bidders question the plan’s feasibility
given the numerous challenges the airline faces.
The open skies policy in Pakistan, which permits foreign carriers to operate
freely within the country, poses an additional hurdle for prospective buyers.
Bidders worry that without protections against foreign competition, PIA's
recovery potential is limited.
Concerns regarding workforce retention and tax obligations have emerged as
well. Bidders are cautious about inheriting PIA’s large workforce, especially
since the government is insisting that employees, along with their pensions, be
retained for at least three years. Last week, Secretary of the Privatisation
Commission Usman Bajwa confirmed that bidders are seeking clarity on these
issues, particularly regarding pensions and ongoing legal matters.
Read More Privatization
of PIA approved by Prime Minister
Originally set for October 1, the financial bidding process has now been
postponed to October 31. With so many uncertainties still unresolved, the
future of PIA’s privatization remains precarious.
The Senate Standing Committee on Privatisation has warned that delays in the
airline's sale could impact other privatization initiatives, including the
divestment of Pakistan's electricity distribution companies.
For now, the fate of Pakistan’s national carrier hangs in the balance as the government and bidders navigate a complex deal that could either transform the country’s aviation industry or leave PIA grounded indefinitely.
Source: The News