PIA Privatisation: Bids Invited March 2024 - Key Hurdles Cleared, Boosting Investor Confidence
By M Muzamil Shami - February 26, 2025
ISLAMABAD – The Pakistani government is set to launch the privatisation process for Pakistan International Airlines (PIA), inviting expressions of interest (EoIs) in early March 2024. This move aims to transfer the national carrier to private ownership before the current fiscal year concludes, as confirmed by an official from the Privatisation Commission. This renewed effort follows previous attempts that were stalled due to investor concerns, but significant progress has been made to address these issues.
Key Developments and Overcoming Hurdles:
Crucial hurdles that previously hindered the PIA privatisation have been effectively cleared. The International Monetary Fund (IMF) has granted a waiver on the 18% general sales tax for new aircraft purchases, a key concern for potential investors. Furthermore, the government has agreed to absorb PIA's Rs45 billion negative equity, significantly improving the airline's financial appeal. These concessions are designed to attract serious bids and ensure a successful transfer.
During a session of the National Assembly’s Standing Committee on Privatisation, chaired by MNA Farooq Sattar, Secretary Usman Bajwa provided detailed updates. He revealed that $4.3 million of the $6.8 million advisory fee to Ernst & Young has been disbursed, with the remaining balance to be settled upon the completion of the PIA privatisation process.
PIA's Real Estate Assets:
The committee also delved into PIA’s valuable real estate portfolio. This includes 26 properties under PIA Holdings and five directly owned by the airline. A prime plot in Islamabad’s Blue Area, valued at Rs10-12 billion, is currently under review. Notably, PIA Holdings also owns seven overseas properties, including the Scribe Hotel in Paris and the Roosevelt Hotel in New York, both classified as commercial assets. The Roosevelt Hotel’s lease is set to expire in May, triggering a three-month notice period for vacating the property. These assets represent significant value for potential investors.
PECO’s Future:
The committee also discussed the Pakistan Engineering Company (PECO) in Lahore, which was added to the privatisation list last August. 1 Secretary Bajwa reported that PECO currently lacks an active production line and employs only 32 individuals. 1 National Investment Trust (NIT) holds a 23% stake acquired from the open market, but the Ministry of Industries has raised concerns about the transparency of these transactions. Private sector representatives highlighted PECO’s historical significance, noting its past role in manufacturing aircraft parts in the 1960s and its former status as a source of national pride. They also mentioned that under private sector management, the company’s losses were significantly reduced. The committee has directed the privatization secretary to consult with the industries and law secretaries and submit a comprehensive report within 40 days.
Considering the significant steps taken to address investor concerns, do you believe the PIA privatisation will succeed this time? What are your thoughts on the potential impact of private ownership on the airline's future and Pakistan's aviation sector? Join the discussion!
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