PIA privatisation plan okayed by newly-formed board

KARACHI: The privatisation and restructuring plan of Pakistan International Airlines (PIA) on Tuesday was approved by its recently constituted board of directors.

The 83rd meeting of the PIA’s board of directors was held on Tuesday (March 25) during which the scheme of arrangement for the airline’s privatisation and restructuring was approved, as per the official announcement.

The board of directors will coordinate with the Securities and Exchange Commission of Pakistan (SECP), said the statement.

Meanwhile, as per the sources, the plan also discussed different proposals regarding the future of the organisation’s employees, Geo News reported.

The government had appointed Ernst & Young — a global financial advisory firm — to prepare the plan for the loss-making firm which completed its task during the caretaker setup.

The International Monetary Fund (IMF) has asked the Pakistani authorities to privatise the bleeding state-owned enterprises to revitalise the sick economy.

Under the E&Y plan — presented before the board — the voluntary retirement scheme was also discussed, the sources said, adding that the transaction advisor has also proposed to retire the employees who have four years of service left.

It is important to mention that the PIA’s BoD has been inactive since October 2023 and the federal cabinet recently approved its reconstitution as it is mandatory to seek its approval for the major decisions regarding the company.

In the past, elected governments have shied away from undertaking unpopular reforms, including the sale of national flag carrier. But Pakistan, in deep economic crisis, agreed in June 2023 to overhaul loss-making state-owned enterprises under a deal with the Fund for a $3 billion bailout.

The government decided to privatise PIA just weeks after signing the IMF agreement.

The caretaker administration, which took office in August to oversee the February 8 election, was empowered by the outgoing parliament to take any steps needed to meet the budgetary targets agreed with the IMF.

“Our job is 98 percent done,” Privatisation Minister Fawad Hasan Fawad told Reuters when asked about the plan to sell the airline. “The remaining two percent is just to bring it on an excel sheet after the cabinet approves it.”

“What we have done in just four months is what past governments have been trying to do for over a decade,” Fawad said. “There is no looking back.”

Details of the privatisation process have not been previously reported.

PIA had liabilities of Rs785 billion ($2.81 billion) and accumulated losses of Rs713 billion as of June last year. Its CEO has said losses in 2023 were likely to be Rs112 billion.

Two sources close to the process told Reuters that a 51 percent stake with full management control would be offered to buyers after parking the airline’s debts in a separate entity, under the 1,100 page report from Ernst & Young.

Fawad did not give specific details of the size of the stake to be sold, but confirmed the plan involved the carrier’s debts being spun off into a separate entity.

Meanwhile, seven international investors have expressed interest in the PIA and airports, the aviation ministry said on Tuesday.

Pakistan plans to sell the PIA and outsource three of its airports in a bid to stem losses and generate foreign exchange reserves at a time when the country’s $350 billion economy faces a balance of payment crisis.

An adviser for the deal told Pakistan’s ministry of defence production and aviation that “seven international investors including Germany, France, Netherlands, Qatar, UAE, Malaysia and Turkiye have shown their interest” besides local groups, the statement said.

The ministry did not clarify whether the investors are companies or governments.

Islamabad has engaged the World Bank’s International Finance Corporation (IFC) as an adviser for the outsourcing process, and EY for the airline deal.

The push to expedite the sales comes ahead of Pakistan seeking yet another IMF bailout after a current standby arrangement expires on April 11.