New owners likely to take control of PIA in April next year: PM's Adviser

Prime Minister's Adviser on Privatization Muhammad Ali has said that the selling of Pakistan International Airlines (PIA) did not undermine national pride but aimed to restore the carrier’s lost strength and efficiency, and the new owners are likely to take control of the airline in April next year, reported 24NewsHD TV channel.

A consortium headed by the Arif Habib Corporation had emerged as the top bidder in a live-televised auction for a 75 percent stake in PIA on Tuesday, marking a breakthrough for the government’s long-delayed privatization of the carrier.
The Arif Habib consortium offered Rs135 billion, surpassing a government reserve price of Rs100 billion, in a sharp turnaround from last year’s failed sale attempt.

Addressing a joint press conference with Federal Information Minister Attaullah Tarar in Islamabad on Wednesday, Muhammad Ali said that claims circulating on social media suggesting that the airline was sold for less than the value of its aircraft were incorrect and misleading, adding that such assertions do not reflect the facts of the privatization process.

He said that PIA once operated a fleet of around 50 aircraft, but currently only 17 to 19 planes are operational, while 12 aircraft are on lease. 

The adviser also addressed the claims that the government would only get Rs10 billion from the PIA’s privatization, stating that the government would get 7.5% in cash and 25% in equity’s value amounting to Rs10 billion and Rs45 billion, respectively.

He said the government would receive a total of Rs55 billion from the bidding proceeds, while Rs125 billion would be reinvested in the PIA. "PIA privatization has been successfully completed and the entire nation witnessed the transparent process," he said.

On the airline’s financial decline, the adviser said PIA's performance deteriorated significantly after 2009. He revealed that the national carrier incurred losses of Rs500 billion over the past 10 years.

The adviser said it is actually a transaction worth Rs180 billion. “PIA’s assets are not included in this sale. The airline has overall assets of Rs191 billion and liabilities of more than Rs182 billion,” he added.

He emphasized that the private sector is the best to run such businesses. He was confident that private sector will invest in the PIA, induct new planes and revamp the existing fleet. The adviser said the privatization of PIA was completed due to the tireless efforts of all stakeholders over the last six months. He said Prime Minister Shehbaz Sharif, the Deputy Prime Minister Ishaq Dar and, COAS and Chief of Defence Forces Field Marshal Syed Asim Munir provided the guidance in this regard.

Muhammad Ali said the biggest asset of PIA is its landing rights. He said the airline currently operates on 30 destinations.

PIA is providing travelling facilities to more than four million passengers annually, the adviser said and added the PIA enjoys 30 percent share in the market.

Speaking of the occasion, Attaullah Tarar reaffirmed the government’s commitment to accelerating the privatization of loss-making state-owned enterprises. He said the journey to restore the lost glory of PIA has begun with its privatization, describing it as a historic moment.

The minister emphasized that PIA’s annual losses will no longer burden the national exchequer. He said the privatization process was carried out in a transparent and efficient manner.

New owners to ‘run’ PIA from April

In an interview with Reuters news agency, Muhammad Ali said the PIA is expected to be run by a new owner from April next year, subject to approvals, and receive fresh capital under a deal to privatise the flag carrier.

Muhammad Ali said the state expects a new owner to be running the airline by April, subject to approvals.

The process now moves to final approvals by the Privatisation Commission board and the cabinet, expected within days, with contract signing likely within two weeks and financial close after a 90-day period to meet regulatory and legal conditions.

The adviser said the government would receive about Rs10 billion in cash upfront and retain a 25pc stake valued at around Rs45 billion.

The deal was structured to inject fresh capital into the airline rather than simply transfer ownership, he said.

“We did not want a situation where the government sells the airline, takes its money and the company still collapses,” he said.

The adviser said said Fauji Fertiliser Company, a military-run conglomerate, did not bid but could still join the winning consortium as a partner, noting the buyer can add up to two partners including a consortium partner or a foreign airline if they meet the qualifying criteria.

Allowing partners adds financial strength and could bring global aviation expertise, he said.

Fauji Fertliser was initially in the race to acquire PIA shares but it later opted out of the bidding process.

Muhammad Ali said safeguards, including retained earnest money and an additional payment on signing, would allow the government to move to the second-highest bidder if the deal fails to close.

On labour, Ali said the buyer must retain all employees for 12 months after the transaction, with contracts unchanged, adding that the PIA workforce has already shrunk in recent years.

The sale is closely watched by the International Monetary Fund, which has pressed Pakistan to halt losses at state-owned enterprises.

The adviser said the privatization was a key test of Pakistan’s reform credibility with the IMF, adding failure to offload loss-making state firms risked renewed pressure on public finances.

Muhammad Ali said closing the deal would signal momentum on reforms and privatizations, adding the government was working through a pipeline of future transactions once PIA closes.

Privatization Commission Board  formally approves Arif Habib Consortium's bid 

Privatization Commission Board which met under the chair of Privatization Advisor Muhammad Ali, formally approved Arif Habib Consortium's bid for PIA auction. According to an official announcement, Arif Habib's Rs 135 billion bid for PIA was approved by the Board. Privatization Commission Board approved sale of 75 percent of PIA shares.