Pakistan looking to launch another attempt to sell PIA
The Pakistani government is
preparing for another attempt to privatize Pakistan International Airlines
(PIA), with Privatization Minister Abdul Aleem Khan confirming plans to auction
the struggling state-owned carrier. To enhance its appeal to prospective
buyers, the government has requested the International Monetary Fund (IMF)
approve a PKR26 billion (USD94 million) tax exemption for PIA.
The airline's significant debts, tax
liabilities, and the Federal Board of Revenue’s (FBR) refusal to waive an 18%
General Sales Tax (GST) on new aircraft purchases were cited as key factors
behind the failure of October's auction. At that time, a sole bidder offered
PKR10 billion (USD36 million), far below the reserve price of PKR85 billion
(USD306 million).
Streamlining the Auction Process
Speaking before the Senate Standing Committee on Privatization on November 18,
Khan revealed that this time, the government aims to expedite the bidding
process. Prime Minister Shehbaz Sharif is reportedly keen to see the airline
privatized.
Read More PIA’s
privatization: Single bid of Rs. 10b ($36 million) received from a real estate
firm
"I urged the FBR to waive GST
on new aircraft, but they remain inflexible," said Khan. "This tax
has significantly increased the costs of acquiring new planes."
The minister emphasized the
importance of clearing PIA’s balance sheet before any successful sale. The
airline's liabilities, including PKR45 billion (USD162 million) owed to the
FBR, were a major deterrent for potential buyers in the previous auction.
Massive Losses and Debt
PIA has been operating under severe financial strain, reporting a loss
exceeding PKR75 billion (USD270 million) in 2023 and accumulating debts over
PKR825 billion (USD3 billion). While most of the debt was transferred to a
separate holding company before the October auction, lingering liabilities
remained a concern.
Read More PIA’s
privatization bid falls short due to investor uncertainty, says spokesperson
Efforts to Attract Buyers
The government has sought IMF approval for tax relief and restructuring as part
of its broader USD7 billion extended fund facility. Talks are also underway
with potential buyers, including Abu Dhabi Ports and other Gulf-based entities,
which have expressed preliminary interest.
"We’ve learned our lesson,"
Khan said. "PIA cannot be sold unless its balance sheet is fully cleaned
of liabilities. Until then, no private company or foreign government will
invest in it."
Despite the challenges, Khan
maintains that PIA operates on lucrative routes and has the potential to become
profitable under proper management. However, specific details about these
profitable routes were not disclosed.
Source: https://www.ch-aviation.com/