Bidding for Pakistan International Airlines Extended

Bidding for Pakistan International Airlines Extended
In a significant development, Pakistan’s Privatisation Commission has announced a one-month extension to the bidding process for the sale of a 60% stake in Pakistan International Airlines (PIA). The new deadline for final bids is now set for October 31, 2024, moved from an earlier date of October 1. This decision, as reported by ARY News, comes in response to lower-than-expected bidder interest and several unresolved issues surrounding the privatization of the state-owned carrier.

Initially, the pre-bidding deposits from potential buyers were to be submitted by September 27, with the auction slated for the following week. However, after a detailed briefing to senior government officials, it became evident that there were significant hurdles yet to be overcome. Among these issues, as detailed by Urdu News, was the government’s decision not to provide special tax concessions to the bidders, a stance that likely cooled the enthusiasm among the pre-qualified bidders.

The decision on taxes came amid pressures from some of PIA’s potential buyers who sought amendments to Pakistan’s tax legislation to level the playing field with foreign competitors. This request was not granted, even as the deadline for final, binding offers approached, putting further strain on the privatization process.

The government has laid out strict conditions for the sale, insisting on the retention of PIA’s brand and its existing routes. Furthermore, the future owner will be required to invest significantly in the airline, including a mandate to recapitalize the carrier with an investment of PKR 80 billion (approximately USD 288 million) within the first year and reaching USD 500 million over three years. This financial injection aims to rejuvenate the fleet, lowering its average age from 17 to 10 years, as stated by Usman Bajwa, the Secretary of the Privatisation Commission, during a session with the National Assembly Standing Committee on Privatisation.

Another key requirement set by the authorities is the employment guarantee for PIA’s current workforce of over 7,300 employees for at least two years post-acquisition, along with adherence to the national benefits and pensions regime. Additionally, the government will assume responsibility for the pension liabilities of some 16,000 former employees of PIA.

Among the contenders for PIA are prominent local entities including Fly Jinnah, AirBlue, Arif Habib Corporation Limited, and three consortia led by YB Holdings (Private) Limited, Pak Ethanol, and Blue World City.

PIA operates a diverse fleet of 32 aircraft serving 32 airports across 12 countries, according to ch-aviation PRO airlines data. This fleet includes A320-200s, ATR42-500s, and several models of the Boeing 777, though a significant number of these aircraft are currently inactive.

The extension in the bidding timeline reflects the complex nature of privatizing a major national carrier, compounded by economic considerations and regulatory challenges. The successful privatization of PIA is poised to reshape the landscape of Pakistani aviation, pending the resolution of the ongoing challenges that have delayed the process.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com