The government on Wednesday defended the privatization of Pakistan International Airlines (PIA), stating that the Rs135 billion bid submitted by the Arif Habib Corporation Limited-led consortium would generate an economic value of Rs55 billion for the national exchequer.
Speaking at a press conference, Adviser to the Prime Minister on Privatisation Muhammad Ali and Federal Minister for Information Attaullah Tarar outlined the rationale behind the privatization deal, which has faced criticism and competing narratives.
Ali explained that the privatization’s primary objective is to allow the private sector to manage PIA, as it is better suited to run such businesses. He added that private investment would bring in new aircraft and improve services. The Arif Habib-led consortium, which includes Metro Ventures, Fatima Fertilizer, and City Schools, emerged as the winning bidder for a 75% stake in PIA, offering Rs135 billion, surpassing the government’s initial price expectations. Ali revealed that the total value of PIA post-bid stands at Rs180 billion, with Rs45 billion attributed to the government’s remaining 25% stake.
Ali clarified that while properties of PIA were not included in the deal, the government would receive 7.5% (Rs10.125 billion) of the bid amount, with the remaining 92.5% (Rs124.875 billion) invested in PIA as new equity. The deal also provides incentives to the buyer, such as GST exemptions and no new taxes or levies. Despite the airline’s operational challenges, Ali emphasized that the capital infusion would address PIA’s financial issues, enabling it to become a full-service carrier once again. He also noted that PIA’s biggest asset is its landing rights, with the airline serving 30 destinations and holding agreements with 97 countries.
According to a presentation by Ali, the new buyers of Pakistan International Airlines (PIA) have acquired assets worth Rs191.2 billion and liabilities totaling Rs182.1 billion, resulting in a positive equity of Rs9.1 billion. In addition, the new owners received Rs9.5 billion in cash and bank balances and Rs14 billion in prepayments.
Ali outlined several financial benefits granted to the new investors, including a GST exemption on the induction of aircraft, engines, and parts. Additionally, no new taxes will be levied for 15 years, including on PIA’s fuel. The government has also provided a 15-year income tax exemption on dividend payments to avoid double taxation.
The new investors will also assume responsibility for clearing PIA’s Rs26.6 billion tax obligations with the Federal Board of Revenue (FBR), Rs7 billion in loans, and a Rs12 billion plot of land. The Rs26.6 billion tax liabilities will be paid in four annual installments over the next five years.
Ali further revealed that the new investors are committed to making Rs116 billion in capital investments by 2029. These investments will be distributed over the first five years, with Rs35.6 billion allocated in the first year, Rs37.4 billion in the second year, Rs23.2 billion in the third year, Rs11.9 billion in the fourth year, and Rs8 billion in the fifth year.
Ali also noted that PIA’s previous financial struggles stemmed from a high-cost structure, driven by overstaffing and inefficient fleet utilization. He said that the government has committed not to launch a new airline, but emphasized that while no such restriction exists for provinces, they should refrain from starting new airlines.
Meanwhile, Muhammad Ali, the privatisation adviser to the prime minister, told Reuters in an online interview that the state expects the new owner to be running the airline by April, subject to approvals. The process now moves to final approvals by the Privatisation Commission board and the cabinet, expected within days, with contract signing likely within two weeks and financial close after a 90-day period to meet regulatory and legal conditions.
