Govt seeks no guarantees for profitable routes after privatising PIA

Amid the failure to revive the cash-bleeding PIA, government is left with no other option but to sell it to any potential investor

By Mehtab Haider
April 19, 2024
This picture released on February 9, 2023, shows Pakistan International Airlines (PIA) aircraft parked inside a shade in Nur Khan Engineering Complex in Islamabad. — X/PIA

ISLAMABAD: Amid the failure to revive the cash-bleeding Pakistan International Airlines (PIA), the government is left with no other option but to sell it to any potential investor.


However, there is a need to accomplish the desired task to avoid repetition of mistakes, which have been committed in the past for undertaking the privatisation of different transactions. Some relevant questions have surfaced after the Privatization Commission’s (PC) flawed strategy where the EOI did not seek any guarantees for the continuation of flight operations on certain profitable routes.

If any foreign investor gets PIA and turns it into just local or connecting flights for all profit-earning destinations around the globe, how the government will impose a bar on it when there is no mention of it in the Expression of Interest (EOI).

Some rough estimates worked out by the aviation experts and shared with The News disclosed that the ticketing amount and dividends of any international buyer might require a foreign exchange of approximately $1 billion on an annual basis.

“If all outstanding liabilities to the tune of over Rs800 billion will be parked in a separate company and the clean PIA will be privatized without seeking guarantees of continuation of its operation on profitable routes, then the option of intelligent winding-up should have been deliberated and explored,” top official sources said while sharing background briefing with The News here on Wednesday. When the option of intelligent winding up would be made public, then all the creditors would rush to secure recovery of their outstanding loans and liabilities.

The recovery could be managed in the range of 6 to 10 percent of total outstanding loans and liabilities, so if the outstanding liabilities stood at Rs600 billion parked into a separate company, then the settlement could be secured with payment of Rs60 billion maximum.

This scribe sent out two questions to the spokesperson of Privatization Commission (PC) to inquire whether the government sought any guarantees for the enactment of certain profitable routes. “If not, don’t you think the intelligent winding up of PIA could be a more feasible option instead of privatizing it under the existing arrangement.”

In his response to the queries, the spokesperson replied, “Obligations for investors about PIA branding, business and routes will be reflected in the Sales Purchase Agreement (SPA) to be finalized with successful bidder.”

About intelligent winding up related questions, the spokesperson preferred not to reply to the query. However, the sources who possessed expertise in undertaking transactions argued that the successful bidder would be bound to comply with the requirements advertised through Expression of Interest published in different national and international media outlets on April 2, 2024.

“It might cause a controversy at a later stage,” the official sources feared and added that there were certain international routes which resulted in earning Rs1 billion.

The operation flights to the UK, Europe, Canada and other parts are quite profitable and their continuation must be protected after selling it out to any foreign buyer.

It is also the wish of Pakistani authorities that there should be joint ventures of foreign and domestic buyers, so that some portion of earned profits and dividends would remain here in Pakistan.