Pakistan International Airline gets lone bid at nearly one-eighth of minimum price in privatisation process

FILE PHOTO: FILE PHOTO: View of the Pakistan International Airlines (PIA) passenger plane, taken through a glass panel, at Islamabad International Airport, Pakistan October 3, 2023. REUTERS/Akhtar Soomro/File Photo/File Photo

Pakistan's air carrier PIA has received a lone bid during its privatisation process on October 31, with real estate group Blue World City offering only $36 million for a 60% stake in the airline, significantly lower than government's expectations of the minimum price.

The privatisation committee had set the minimum price at about $306 million, and the sole bid that has been offered is 8.5 lower than the price of $305 million being sought for a controlling stake in Pakistan International Airline. Other six shortlisted groups did not deposit the ‘earnest money’, thus were not eligible to bid.

"We have considered the government price and decided to stand with our best price of Rs 10 billion," Tribune quoted Saad Nazir, the owner of Blue World City. The bidding was livestreamed, and shares of PIA rose in trading, before falling sharply by 5% by the end of the session.

Blue World Group had said that it plans to revive the airline by getting aircraft on lease, and seek financial support from Chinese and Turkish investors.

News agency ANI had reported in early October quoting ARY News, that the bidders were seeking significant changes in conditions, with a key demand being immediate dismissal of all employees, acquisition of 75% stake in the airline, and government backing the settlement of outstanding liabilities. The bidders were not keen to retain employees or assume pension liabilities. Pakistan is yet to comment on bidders' demand for duty cut and taxes waiver. One of the condition also requires the potential buyer to reduce the average age of the fleet, which would require induction of new aircraft.

The frequent changes to the privatisation process too has led to scepticism among potential investors, ARY News had reported citing sources.  This stake sale in PIA is part of Prime Minister Shehbaz Sharif’s agreement with the International Monetary Fund to hive off loss-making PSUs.

Cash-strapped Pakistan is attempting to revive the economy by selling loss-making state-owned enterprises, including the national airline as well some energy utilities. The airline has not been profitable in almost two decades, having had to curtail operations last year after running out of funds to pay for fuel. The airline is the fourth largest loss-making government enterprise in Pakistan.