Privatisation
Commission approves financial advisor to outsource Karachi and Lahore airports
Pakistan
has taken another significant step towards handing the operations of two of its
busiest international airports to private-sector operators, with the Privatisation
Commission Board approving an EY-Parthenon-led
consortium as the top-ranked candidate to serve as financial adviser for the
outsourcing of Karachi and Lahore airports.
The
decision, taken at the commission's 257th board meeting on Tuesday, covers Jinnah
International Airport (JIAP), Karachi, and Allama Iqbal International Airport
(AIIAP), Lahore. The board has also constituted a negotiation committee to
finalise the Financial Advisory Services Agreement (FASA) with the successful
consortium.
The
appointment of a financial adviser is an important step, but it does not itself
mean that the airports have been sold or handed over to a private operator.
Rather, the adviser will help structure and guide the proposed
outsourcing/concession transactions, including the financial and commercial
aspects of the process.
From plan to transaction
The
government has been pursuing airport outsourcing as part of a broader programme
to bring private-sector expertise into the management of major aviation
facilities.
The
Privatisation Commission's request for proposals specifically envisaged the
appointment of one financial adviser for both Karachi and Lahore airports, with
the adviser expected to provide transaction advice under a single FASA. The
selection was to be conducted through a Quality and Cost Based Selection (QCBS)
process under the Privatisation Commission's financial-adviser regulations.
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The
latest decision therefore moves the two airports beyond the preliminary
planning stage and towards the detailed transaction phase.
The
commission's board will now negotiate the advisory agreement with the
EY-Parthenon-led consortium before the transaction structure and subsequent
steps can move forward.
Islamabad airport on a
separate track
The
Karachi and Lahore transactions are being pursued alongside a separate process
for New Islamabad International Airport.
The
commission appointed the Asian Development Bank (ADB) last month as financial
and transaction adviser for the proposed outsourcing of Islamabad airport. This
means all three major international gateways are now moving through separate
but related outsourcing processes, with advisers playing a central role in
determining how the transactions will be structured.
The
government's stated rationale for airport outsourcing has previously included
improving passenger services, operational quality and revenue generation, with
the aim of allowing major airports to realise their commercial potential.
What outsourcing could
mean
Airport
outsourcing generally involves transferring responsibility for specified
airport operations and commercial activities to a private operator under a
defined contractual arrangement, rather than necessarily transferring ownership
of the underlying public asset.
For
passengers, the success of such a model would ultimately be judged by practical
outcomes: better terminal services, more efficient passenger processing,
improved commercial facilities, stronger maintenance standards and potentially
greater investment in airport infrastructure.
For
the government, the attraction is broader. A well-structured concession could
bring private capital and management expertise while creating a predictable
financial return for the state. The challenge, however, will be ensuring that
the eventual agreements protect public interests, maintain service and safety
standards and provide value for money.
Privatisation drive
expands beyond airports
The
airport decisions came as the Privatisation Commission also advanced plans
involving two major electricity distribution companies — Lahore Electric Supply
Company (LESCO) and Multan Electric Power Company (MEPCO).
The
board classified both companies as major transactions, triggering the process
for appointing financial advisers under the applicable privatisation
regulations. LESCO and MEPCO are part of the fourth batch of distribution
companies (DISCOs) selected for privatisation, while transactions involving
earlier batches are already at different stages.
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to outsource operations of three key airports to cut costs
The
move highlights the breadth of the government's current privatisation programme,
which is progressing simultaneously across aviation and the power sector.
The
commission has said its objective is to conduct these transactions through
transparent and competitive processes while ensuring professional management,
accountability and maximum value for the government and the people of Pakistan.
A potentially important
test for Pakistan's airport strategy
The
outsourcing of Karachi and Lahore airports could become a major test of
Pakistan's strategy for bringing private-sector participation into strategic
public infrastructure.
Both
airports are important gateways for international and domestic traffic, making
the eventual transaction structures particularly significant. With financial
advisers now being brought into the process, attention will shift to the terms
of the concessions, investment commitments, revenue-sharing arrangements,
performance standards and safeguards for the state.
For
now, however, the government has crossed an important procedural milestone: the
financial adviser has been selected, negotiations are next, and the proposed
outsourcing of Pakistan's two major airports has entered a more concrete phase.
Source:
Dawn