Pakistan’s attempt to sell its national flag carrier Pakistan International Airlines Corp. has received a successful bid, marking a watershed moment for the country that has been attempting to privatize the airline since the 1990s.
Businessman Arif Habib’s consortium made the highest bid of 135 billion rupees ($482 million) for a 75% stake in a live auction, according to a televised briefing of the auction in Islamabad. The transaction is higher than the government’s minimum price of 100 billion rupees and poised be one of the largest privatization transactions in Pakistan’s history.
The airline once a regional powerhouse has been able to stay afloat only because of regular government bailouts. Past attempts to sell the airline have been blocked by opposing political parties and employees that halted flight operations.
The sale is part of broader reforms tied to a loan program with the International Monetary Fund. Pakistan also plans to sell New York’s Roosevelt Hotel and privatize power distribution companies next year.
To boost investor appetite since the last auction, authorities have reduced PIA’s debt, exempted new aircraft purchases from sales tax, and offered protection against certain tax and litigation claims. The new terms were approved by the IMF. The airline has gotten permission to resume flights to UK after a ban this year.
Many demands of the bidders have been met including a commitment that all exemptions will remain intact for 15 years, privatization adviser Mohammad Ali said by phone last week. Majority 92.5% of the proceeds from the sale will go into the airline, said Ali.
The sale is expected to reshape the South Asian country’s aviation landscape and inject fresh capital into the beleaguered flag carrier. The new owner will also face fresh competition with a few more airlines looking to start domestic operations.
The top bidder will have the option to acquire the remaining stake at a 12% premium. The sale also includes properties owned by the airline including in cities like Amsterdam, New York, New Delhi and Mumbai.
The airline has struggled for years with operational inefficiencies, an aging fleet of 18 planes, losses and political intervention that led to it having one of the highest aircraft-to-employee ratios globally
Habib is a well-known Pakistani businessman who started his career in the financial markets in 1970 as a stockbroker at the Karachi Stock Exchange. He has expanded his business interests into asset management, fertilizers, steel, real estate, and other sectors. The consortium also includes Fatima Fertilizer Co. and AKD Group.
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