- Govt’s minimum expected price was Rs 100 billion, Lucky and Arif Habib consortia entered open auction, starting at Rs 115 billion
After a competitive open auction between the respective consortia led by Lucky group and Arif Habib group. The Pakistan International Airlines has finally been sold to Arif Habib consortium for Rs 135 billion.
The open auction for 75% of PIA started at Rs 115.25 billion, Rs 250 million above the highest initial bid, made by the Arif Habib Consortium. The Lucky Cement consortium’s Rs 115.25 was met with incrementally higher bids from Arif Habib consortium. At Rs 121 billion, forwarded by AHL group, Lucky consortium opted for a 30 minute break.
After the break, the increments increased significantly. When the eventual bid reached Rs 134 billion by Lucky consortium. A whopping Rs 135 billion by Arif Habib group was not met with a further bid by Lucky.
The consortium led by Arif Habib Limited contains strong business and corporate entities like, Arif Habib Corporation Limited, Fatima Fertiliser Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited. The winning consortium will now have to option to buy the remaining 25% of the PIA within the next 90 days.
The Bidding Process:
Earlier, the sealed bids for the sale of 75% stake in PIA were opened and minimum expected price of the government was revealed at the public event held in Islamabad. The bidding for the national carrier was then supposed to go into open auction.
Starting at a high, the initial bid price offered by Lucky Cement consortium, was Rs 101.5 Billion. The bid price offered by Air Blue, was a significantly low Rs 26.5 billion. Meanwhile, Arif Habib consortium took the cake in initial bids by bidding Rs 115 billion for the national carrier.
Meanwhile the minimum expected price of the government, as approved by the Cabinet Committee on Privatisation (CCOP), was Rs 100 billion.
The bidding process then entered an open auction phase, wherein the base price was set at Arif Habib’s Rs 115 billion and minimum increment set at Rs 250 million.
The opening of bids happened at a revised time of 4:30 pm. The submission and opening of bids scheduled for today, December 23, 2025, will decide the fate of the national carrier, which has long been a subject of political debate and financial strain.
The federal cabinet had also formally endorsed the recommended reference price for 75% of PIA, set by the Privatisation Commission Board.
Earlier, the three consortia, led by Lucky Group, Air Blue, and Arif Habib Limited, respectively, submitted their sealed bids to acquire control of PIA. The bids were initially scheduled to be opened at 3:30 pm, but the timing was later revised to 4:30 pm, with the process set to be broadcast live for transparency.
Following the submission of bids, the matter was referred to the Privatisation Commission and CCOP for consideration of the minimum expected price for the divestment of PIACL.
If more than one bid exceeded the reference price, an open auction was to take place. The Privatisation Commission emphasized that today’s bidding process is designed with transparency, efficiency, and responsibility, aiming to build public trust and ensure fairness and accountability in the privatization of PIA.
After years of failed attempts, PIA’s privatisation is now at a critical juncture, and the pressure is mounting as the clock ticks toward the deadline.
Muhammad Ali, confirmed in a recent interview that the Fauji Foundation, a key player in the bidding, had withdrawn from the race, leaving three bidders to compete for the 75% stake in PIA.
The push for privatising PIA has been ongoing for over a decade, with successive governments attempting to streamline operations and reduce the national carrier’s massive losses.
PIA’s financial woes are well documented. The airline has accumulated staggering debts, and for years, it has been struggling with negative cash flow, mounting liabilities, and an underperforming fleet. The government has previously taken steps to address the airline’s issues by restructuring its debt and offloading bad assets into a holding company, but has neither been able to turn it around , nor been able to sell it off.
Despite repeated efforts, political hurdles, bureaucratic delays, and strong opposition have repeatedly derailed the process. However, the tables have turned this time, and the latest round of privatisation is seen as a critical step towards resolving the airline’s financial crisis and boosting Pakistan’s aviation sector. The government has finally been able to find buyers for the national carrier.
The current bidders include two major consortia and one independent airline. The first consortium is led by Lucky Cement Limited, Hub Power Holdings Limited, Kohat Cement Company Limited, and Metro Ventures (Private) Limited, while the second consortium consists of Arif Habib Corporation Limited, Fatima Fertiliser Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited. The third bidder is Air Blue (Private) Limited, which is competing independently.
M. Ali stated, “Bidders can add a maximum of two more entities in their consortium after winning the bid. The condition is stringent. It could be a leading and strong local group, or otherwise an international airline.”
PIA currently operates 18 out of a fleet of 34 aircraft and has air service agreements with 97 countries. The airline also holds landing rights in more than 170 countries, making it an attractive proposition for the right bidder.
The winner of the privatisation bid will acquire a 75% stake in PIA, with the government retaining the remaining 25%. Of the proceeds, 92.5% will go to PIA, while the remaining 7.5% will be transferred to the national exchequer. The successful bidder will also have the option to acquire the remaining 25% of the airline after the transaction is finalised, although this decision must be made within 90 days of the deal’s completion.
As revealed by Muhammad Ali, 2 of the initial four bidders wanted to bid for the entire 100% of the airline.
The bidders will also need to deposit two-thirds of the bid amount within 90 days, with the remaining one-third payable within one year.
The government has structured the deal to ensure that no asset owned by PIA, such as its real estate, is included in the transaction. This ensures that the privatised airline can focus on its aviation business without being weighed down by non-core assets.
Has Fauji Foundation actually exited?
Many may find the withdrawal of the Fauji Foundation from the bidding process as a surprise. But to those who have followed the pre-bidding drama of PIACL, it does not seem odd.
The foundation, as is well-known, is a very powerful conglomerate, with interests spanning across various sectors. It meets the necessary bidding criteria and had initially shown strong interest in acquiring PIA. However, its exit from the bidding process has the potential of being construed as such.
Concurrently, Muhammad Ali, in an interview, clarified that Fauji Foundation’s exit does not signal a lack of interest, hinting at the possibility of a post-bidding merger with the successful bidder. A repeated mention by the government of consortia being allowed to add entities to their consortium, post-bidding, also points towards this likely possibility.
It was important to note that while all the consortia’s openly did not want to join hands with each other, with the Lucky group going as far as rejecting a joint-venture proposal pitched by Arif Habib Group at a PM-led meeting last week, there was but one company that all the bidders wanted on their side. The erstwhile Fauji Foundation, a charitable trust that supports the welfare of martyrs and ex-servicemen.
This sets the stage for an intriguing development where Fauji might still become a player in PIA’s future, albeit not directly through the privatisation process, but joining any of the players who might win the bid.
The Airline’s Debt and Liabilities and Key Considerations for the Winning Bidder
While the bidding process may seem straightforward, potential buyers will need to grapple with PIA’s immense financial challenges. PIA’s negative equity is a major concern. As of June 2023, the airline’s liabilities totaled over Rs 825 billion, and its negative equity had ballooned to Rs 649 billion. The government has addressed this by creating the PIA Holding Company, which will absorb the majority of the airline’s bad debts, but the remaining liabilities of Rs 26 billion will stay with PIA and be paid off over five years.
With the debt restructured, the successful bidder will have the chance to operate a leaner airline, with a reduced burden of liabilities, but the restructuring also includes a provision to allow banks to renegotiate the deal if the privatisation does not occur within the next three years.
For the winning bidder, the main attraction lies in the opportunity to revamp PIA’s operations while inheriting its vast network of routes and established market presence. The airline’s international and domestic routes, as well as its brand recognition, make it a prime candidate for expansion. Moreover, the government’s efforts to restructure PIA’s debts make it a more manageable investment than it would have been just a few years ago.
However, the process will not be without challenges. The new owner will need to address PIA’s legacy issues, including its tarnished reputation, inefficient operations, and high overhead costs.
The airline’s workforce, once bloated with over 11,000 employees, has already been reduced to 6,500, but labor concerns will remain a crucial issue. The privatisation terms include protections for employees, ensuring no layoffs for one year and securing their pensions and benefits.
And by far the biggest consideration to keep in mind is airline’s financial history. The sole reason for why the state has been adamant on selling it. While the new entity formed as a result of restructuring PIA’s debts, to make it a more attractive asset, brings in a different set of considerations; the operational efficacy of the airline is thoroughly captured by a decade of financial rot.
PIA’s financial position between 2017 and the first half of 2023 shows persistent operating stress, reflected in consistently negative operating cash flows and a steadily widening equity deficit.
Cash-flow data indicates that the airline generated negative operational cash flows in every year from 2017 to 2022; ranging between Rs 22 billion and Rs 24 billion, annually. In the first half of 2023, operating cash flow briefly turned positive at Rs 15 billion, but this came alongside a sharp rise in financing and investment outflows. Over the full period, operating deficits were largely financed through continued borrowing, shown by the consistently large financing inflows: Rs 33 billion in 2017, Rs 32 billion in 2018, Rs 19 billion in 2019, Rs 31 billion in 2021, and Rs 4 billion in 2022.
The reliance on borrowing is also reflected in the airline’s rising cost of finance, which increased from Rs 15 billion in 2017 to Rs 50 billion in 2022. Finance costs remained one of the airline’s largest expense lines throughout the period, often overshadowing any cash improvements from operations or investments. The elevated servicing burden contributed materially to the airline’s continuing losses and liquidity strain, prompting repeated engagement with lenders and the federal government over restructuring options.
The accumulated impact of recurring operating losses and growing financial liabilities is also visible in PIA’s negative net worth, which expanded steadily from –Rs 291 billion in 2017 to –Rs 649 billion by June 2023.
This is the context in which the government approved a significant restructuring of PIA’s liabilities. A new holding company was created to absorb the airline’s bad assets and the bulk of its debt, including commercial loans, trade debts, and government borrowings. More than Rs 650 billion in liabilities out of PIA’s Rs 825 billion total debt are being transferred to this vehicle. Within this, Rs 268 billion in commercial debt has been specifically restructured: banks agreed to extend maturities to 10 years and reduce interest rates from around 23.5% to a maximum of 12%, conditional on progress toward privatisation by 2027. If the privatisation does not occur within that timeline, lenders retain the right to reopen the arrangement and adjust pricing to prevailing rates.
The scale of this negative equity underscores the challenge prospective buyers face when assessing the airline’s balance sheet without restructuring. Even after the restructuring, the PIAHCLA, the holding company representing PIACL, shows a net negative equity of -Rs 563 billion, as of December 2024. The entity paid a total of Rs 60.2 billion in annual finance costs in the CY2024.
However, the restructuring also reduces the leverage of the aviation business that will be offered to investors. Based on the June 2023 balance sheet, the operating entity retains assets of around Rs 160 billion and will shoulder remaining liabilities estimated at Rs 175 billion, rather than the full legacy debt burden. A significantly smaller debt stock is expected to improve the cash-flow profile of the privatised entity.
Despite the operational and financial challenges illustrated in the historical data, the airline still represents a strategic asset due to its route rights, brand, and foreign-currency revenue potential. These factors, combined with the ongoing debt restructuring, are among the reasons several bidders have expressed interest as the privatisation process proceeds.
