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Pakistan to sell national airline ahead of elections
View of a Pakistan International Airlines (PIA) passengers plane, taken through a glass panel, at the Allama Iqbal International Airpor in Lahore, Pakistan January 29, 2024. REUTERS/Akhtar Soomro
Leading up to the upcoming elections this week, Pakistan’s interim administration is formulating concrete plans for the future government to privatize the financially struggling Pakistan International Airlines (PIA), as disclosed by the minister overseeing the process and other officials.
Historically, elected governments have been hesitant to implement unpopular reforms, including the sale of the national carrier. However, in the face of a severe economic crisis, Pakistan committed in June to revamp loss-making state-owned enterprises under a $3 billion bailout agreement with the International Monetary Fund (IMF).
The decision to privatize PIA was made shortly after signing the IMF agreement. The interim administration, in power since August to supervise the February 8 election, was granted authority by the outgoing parliament to take necessary actions to meet the agreed budgetary targets with the IMF.
Privatization Minister Fawad Hasan Fawad mentioned that the plan, crafted by transaction adviser Ernst & Young, will be presented to the cabinet for approval before the administration’s term concludes post-election. The cabinet will decide whether to sell the stake through a tender process or a government-to-government deal.
Fawad emphasized that the progress made in four months exceeds the efforts of past governments over a decade, asserting, “There is no looking back.”
Details of the privatization process, including offering a 51% stake with full management control and the separation of the airline’s debts into a separate entity, were outlined in a report from Ernst & Young on December 27. The report’s contents could not be independently verified, and Fawad did not specify the size of the stake to be sold.
The interim government has expedited the divestment process by amending a 2016 law that previously impeded majority share sales. The Pakistan Muslim League-Nawaz party is anticipated to win the election, and its close aide Ishaq Dar assured a swift progression of the PIA sale.
Despite concerns from some airline officials about the potential devaluation of PIA during a rapid sale, aviation analyst Brendan Sobie asserted that the submitted plan is the only viable option to rescue the airline, acknowledging that the privatization process might be challenging and necessitate substantial restructuring.
PIA, with significant assets at major international airports and lucrative air routes, continues to grapple with financial woes, compounded by safety concerns and a ban on European routes since 2020. The airline, seeking relief from the EU ban, faces ongoing financial challenges, requiring approximately 23.7 billion rupees to sustain operations for another five to six months before the transition to a new owner.
