PIA bidding delayed amid investor concerns

The privatisation of Pakistan International Airlines Corporation Limited (PIACL) is facing delays as the bidding process, originally scheduled for October 1, has been postponed to a month later.  

According to media reports, Secretary Privatization Usman Akhtar Bajwa has confirmed that the new bidding date has been rescheduled for October 31, although the Privatization Commission has not officially announced the postponement. 

Sources attribute the delay in PIA’s privatisation to a lack of strong bidder interest and unresolved issues, including ongoing court cases, an ageing fleet, and civil aviation challenges. 

In June, six consortia were pre-qualified to bid for a 60% stake in PIA, including Fly Jinnah Limited, Air Blue Limited, Arif Habib Corporation Limited, and consortia led by Y.B. Holdings, Pak Ethanol, and Blue World City. 

A major concern for bidders is the European Union’s ban on PIA flights to Europe, which was one of the airline’s most profitable routes. 

However, PIA CEO Amir Hayat remains optimistic, stating that an audit has been completed, and the European Union Aviation Safety Agency (EASA) is expected to lift the ban by the end of the year.

In a recent board meeting, chaired by Privatization Minister Abdul Aleem Khan, recommendations were considered regarding permitted changes under the terms of the ‘Request for Statement of Qualification (RSOQ)’. Privatisation minister highlighted the potential profitability of PIACL, stating that with fresh investment, the airline could become a lucrative venture for its buyers.

According to sources within the Privatization Commission, no further changes in the consortiums will be allowed at this stage. The reserve price for PIA will be finalized by the federal cabinet before the bidding, along with the percentage of the bid amount to be allocated for the government and the portion to be reinvested in PIA as a rights issue.

Privatisation Secretary said that final bid documents were uploaded to the Virtual Data Room on September 18, with bidding parties currently in the final stages of due diligence. 

He also said that PIA’s fleet of 20 aircraft is expected to expand to 40-45 planes within the next three to five years, with plans to lower the fleet’s average age from 17 to 10 years through the induction of new planes.

Additionally, Rs35 billion has been allocated for the 7,360 current PIA employees, while pensions for 16,000 retired workers will be covered by the government. 

The delay adds to uncertainties surrounding the privatisation process, with bidders closely watching developments on the EU ban and other operational hurdles.

PIACL reported a loss of Rs75 billion in 2023, with its liabilities climbing to Rs825 billion, while its total assets stand at Rs161 billion.