Gulf States Lead the Charge in Potential Stake Acquisition of Pakistan International Airlines

In a significant move towards the partial privatisation of PIA – Pakistan International Airlines, three Gulf nations, namely the United Arab Emirates (UAE), Saudi Arabia, and Qatar, have emerged as frontrunners in acquiring a majority stake in the carrier. This development comes as Pakistan’s newly elected government, under the leadership of Shehbaz Sharif, advances the privatisation plan of the majority state-owned airline. The interest from these Gulf countries underscores a keen intent to invest in PIA, which has been reported by multiple Pakistan-based media outlets and highlighted by aviation industry tracker ch-aviation, particularly noting Qatar’s interest six months prior.

The privatisation initiative, aimed at selling 51% of the debt-laden PIA along with control over its daily operations, is part of a broader strategy to comply with conditions of an International Monetary Fund (IMF) bailout package valued at USD3 billion. The package requires Pakistan to divest from various underperforming state-owned entities, with PIA, shouldering a substantial debt of PKR825 billion (approximately USD3 billion), identified as a significant financial drain on the country’s resources.

Further to the Gulf states, governments and entities from France, the Netherlands, Germany, Malaysia, and Türkiye have also expressed interest in acquiring a stake in PIA. Nonetheless, the interest from the Gulf region has been notably pronounced, positioning these countries as primary contenders in the privatisation process.

In preparation for the sale, the Pakistani government has successfully negotiated terms with seven local banks to address PIA’s debt obligations, which amount to PKR268 billion (USD965 million). This agreement, facilitating the issuance of no-objection certificates by the banks, involves rolling over the airline’s debts for a decade and reducing the annual interest rate significantly. This crucial step not only resolves a major impediment to the privatisation process but also delineates the government’s commitment to restructuring PIA’s finances to make it an attractive proposition for potential buyers.

The government’s strategy includes splitting PIA into two entities, thereby isolating the airline’s substantial liabilities into a new holding company. This move aims to present a cleaner balance sheet for the airline, enhancing its appeal to investors. The proceeds from the privatisation are earmarked for settling the restructured debts, with the government taking responsibility for the holding company’s liabilities.

With the privatisation process gaining momentum, further details regarding the reconstituted PIA board have come to light. The new board composition includes a mix of independent directors and government officials, with significant representation from the heads of local commercial banks, signaling a robust governance framework to steer PIA through its privatisation journey and beyond.

This unfolding scenario represents a pivotal moment for Pakistan’s aviation sector, as it not only seeks to alleviate the financial burden on the state but also opens up avenues for enhanced international collaboration and investment in its flag carrier.