Privatization of PIA reaches a critical milestone
With a major reshuffle among prospective buyers,
Pakistan’s aviation future now hinges on the decisions to be taken as the
long-awaited bidding process for Pakistan
International Airlines (PIA) enters its decisive stage.
The privatization of the national carrier
reaches a critical milestone on December 23, 2025, when bids for a 75 percent
stake in PIA are submitted and opened. After years of delays, political
resistance, and failed attempts, the outcome of this process is set to
determine the airline’s future and could mark a turning point for Pakistan’s
aviation sector.
The race has narrowed to three contenders
following the last-minute withdrawal of the Fauji Fertilizer, a development
confirmed by Privatisation Commission
Chairman and Adviser to the Prime Minister on Privatisation, Muhammad Ali. With
Fauji’s exit, three bidders remain in contention: a consortium led by Lucky
Group, another led by Arif Habib Limited, and the private airline Air Blue,
which is bidding independently.
Read More Privatizations
of flag carriers in subcontinent: Challenges and Opportunities
Privatizing PIA has been a policy objective
for more than a decade, as successive governments have struggled to rein in the
airline’s persistent losses and operational inefficiencies. Despite multiple
restructuring efforts — including the transfer of bad assets and debt into a
separate holding company — the government has been unable to either restore
profitability or complete a sale until now. This latest attempt is widely seen
as the most serious and viable effort to date.
PIA’s financial difficulties are extensive.
Years of negative cash flow, mounting liabilities, and an aging, underutilized
fleet have weighed heavily on the airline. At present, PIA operates only 18
aircraft out of a total fleet of 34. Nevertheless, it retains significant
strategic value through air service agreements with 97 countries and landing
rights in more than 170 destinations, making it an attractive acquisition for
the right investor.
The bidders
The first consortium is led by Lucky Cement
Limited and includes Hub Power Holdings Limited, Kohat Cement Company Limited,
and Metro Ventures (Private) Limited. The second consortium is headed by Arif
Habib Corporation Limited, with Fatima Fertiliser Company Limited, City Schools
(Private) Limited, and Lake City Holdings (Private) Limited as partners. The
third bidder, Air Blue (Private) Limited, is competing on its own.
How the bidding will work
Under the approved procedure, sealed bids will
be placed in a designated box and opened at 3:30 pm on December 23. At the time
of opening, the Privatisation Commission will announce the reference price. If
bids exceed this benchmark, an open auction will follow. If they fall below it,
the commission will evaluate the highest offer. The process has been designed
to ensure transparency and fairness, given the scale and sensitivity of the
transaction.
Read More Privatization
Commission suggests tightening of criteria for PIA bidders
What the winner gets
The successful bidder will acquire a 75
percent stake in PIA, while the government will retain the remaining 25
percent. Of the sale proceeds, 92.5 percent will go to PIA and 7.5 percent to
the national exchequer. The buyer will also have the option to acquire the
remaining government stake within 90 days of completing the transaction.
Payment terms require two-thirds of the bid amount to be deposited within 90 days,
with the balance payable within one year.
Importantly, the deal excludes non-core assets
such as PIA’s real estate holdings, allowing the privatised entity to focus
solely on aviation operations.
Fauji Foundation’s exit
The Fauji Foundation’s withdrawal surprised
some observers, given its stature and initial interest in PIA. However,
officials have indicated that the move should not be interpreted as a loss of
interest. Muhammad Ali suggested that Fauji could still play a role in PIA’s
future through a post-bidding partnership or merger with the successful bidder.
While the competing groups publicly declined
joint ventures among themselves, Fauji Foundation was widely viewed as a
desirable partner by all bidders, raising the possibility of its indirect
involvement after the privatisation concludes.
Debt and restructuring challenges
PIA’s liabilities remain a central concern for
potential buyers. As of June 2023, the airline’s total liabilities exceeded Rs
825 billion, with negative equity of Rs 649 billion. To make the transaction
viable, the government established PIA Holding Company to absorb most of the
bad debt. Approximately Rs 26 billion in liabilities will remain with PIA, to
be repaid over five years. Banks also retain the right to revisit the
restructuring if privatisation does not occur within three years.
Read More Government
to ensure job preservation of PIA employees after privatization
What lies ahead
For the winning bidder, the opportunity lies
in reviving a national brand with an extensive route network and long-standing
market presence. Debt restructuring has made PIA a more manageable investment,
but significant challenges remain. The new owner will need to address
operational inefficiencies, restore public confidence, and manage labor issues.
Although the workforce has been reduced from over 11,000 to around 6,500
employees, the privatisation agreement includes safeguards to prevent layoffs
for one year and to protect pensions and benefits.
The
outcome of today’s bidding will not only decide the fate of PIA but could also
set the tone for broader reforms of state-owned enterprises in Pakistan. With
three strong bidders still in the race, the final offers are expected to shape
the country’s aviation landscape for years to come, ushering in what may be a
defining new chapter in Pakistan’s aviation history.
Source:
Profit Pakistan