Government conducts first successful major privatization in two decades
The government on Tuesday completed the privatization
of Pakistan International Airlines (PIA), selling a 75% stake to a consortium
led by prominent businessman Arif Habib, ending decades of state control over
the loss-making national carrier.
The Arif Habib–led group, which also includes
Fawad Ahmed Mukhtar, Gohar Ejaz and Aqeel Karim Dhedhi, submitted the highest
bid of Rs135 billion during the 13th round of open auction. It outbid a rival
consortium led by Muhammad Ali Tabba. Another bidder, Air Blue, was
disqualified after offering Rs26.5 billion—far below the government’s minimum
price of Rs100 billion.
Of the total bid amount, the government will
receive Rs10.1 billion in cash, while the remaining funds will be injected into
PIA by the successful bidder, according to Muhammad Ali, adviser to the prime
minister on privatization.
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This marks the first successful major privatization
in nearly two decades, following the sale of K-Electric in 2005. It was also
the government’s second attempt to privatize PIA in just over a year, after an
earlier effort failed. Prime Minister Shehbaz Sharif had earlier expressed hope
that the airline could fetch up to Rs200 billion.
To facilitate the sale, the government assumed
around Rs670 billion of PIA’s liabilities, which will now be borne by
taxpayers. For the current fiscal year alone, debt servicing costs are
estimated at Rs35 billion and are expected to continue for at least six years.
The bidding process saw the Arif Habib Group
take an aggressive approach, while the rival consortium raised its offer in
small increments before conceding after the price reached Rs135 billion.
Ahead of the auction, the government offered
several incentives to attract investors, including waiving 18% sales tax on
aircraft leasing, providing Rs36 billion in tax credits, and extending
deadlines to clear over Rs33 billion in dues owed to the Federal Board of
Revenue and the Civil Aviation Authority.
The bidders valued PIA at Rs180 billion ($640
million) for 100% equity. Two-thirds of the bid amount must be paid within
three months, with the remainder due within a year. The government will retain
shares equivalent to one-third of the price until all payments are completed.
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The winning consortium will also have the
option, within three months, to acquire the remaining 25% stake at a 12%
premium. It may induct up to two additional partners, potentially including an
international airline. Officials indicated that Fauji Fertilizer could join the
group as a fifth partner.
The new owners plan to expand PIA’s fleet and
operations. Arif Habib said the consortium intends to add 18 aircraft initially
and eventually increase the fleet to 64, depending on passenger demand.
Currently, only 18 of PIA’s 34 aircraft are operational.
Employee concerns were also addressed. The
government has barred the new owners from laying off staff for one year, while
employee medical liabilities have been shifted to a holding company funded by
the state. Habib assured that capable employees would be retained and fairly
compensated.
PIA currently employs about 6,900 permanent
staff and 2,900 contractual workers. Despite its financial troubles, the
airline retains valuable assets, including prime landing slots at major
international airports such as Heathrow, and 170 slot pairs across the Gulf,
Europe and North America.
Prime Minister Shehbaz Sharif welcomed the
development, calling it a vote of confidence in Pakistan’s economy. “Regardless
of which consortium emerged successful, Pakistan is the ultimate winner,” he
said, adding that the participation of leading business groups reflected
renewed investor confidence.
Read More Bidding
process for 75% stake in PIA to be held on December 23, 2025
The
successful sale of PIA is expected to pave the way for privatization of other
state-owned entities and help restore investor trust in the country’s business
environment.
Source: Express Tribune