Pakistan sells loss-making PIA for 135 billion

Pakistan on Tuesday successfully organised the privatisation process of the national flag-carrier, selling it at Rs135 billion to a consortium led by a local investment company. The ceremony to privatise the Pakistan International Airlines (PIA) was held in Islamabad where all three pre-qualified parties, including Lucky Cement, private airline Airblue and investment firm Arif Habib, deposited their sealed bids into a transparent box.

The bids were opened in the second phase of the ceremony, where Arif Habib emerged the highest bidder, offering Rs115 billion, followed by Lucky Cement with Rs105.5 billion and Airblue with Rs26.5 billion to buy the airline. After the bid had been opened, the Government announced that the reference price was Rs100 billion. Under the rules, the two highest bidders were offered the opportunity to compete in the opening auction process. Both Arif Habib and Lucky Cement fiercely competed to win the airline and jacked up the offer money step by step until Arif Habib group offered Rs135 billion, which went unchallenged.

“We congratulate Arif Habib group,” a member of the Lucky Cement said while yielding to the massive offer by the rival. The Government was initially offering 75 per cent stakes, but the successful bidder would have 90 days to purchase the remaining 25 per cent shares. According to the rules, 92.5 per cent of the sale proceeds from the sale of the initial 75 per cent shares of the PIA will be allocated to the airline for reinvestment, while the remaining 7.5 per cent will be transferred to the Government.

The investor will also be required to commit an investment of Rs 80 billion over the next five years. Earlier, the Government had taken responsibility for PIA’s liabilities of Rs 654 billion last year. The entire bidding process was shown live on local televisions to ensure transparency. The auction was the second attempt at selling the airline after the first effort last year failed to attract the demanded price.

Earlier, Prime Minister Shehbaz Sharif, while addressing a meeting of the federal cabinet, thanked Government officials and the Privatisation Commission for their role in the national carrier’s privatisation. He stressed that the process has been made “transparent”, stating that it will be the “largest transaction” ever in Pakistan’s history. PIA was once the leading airline in the world, but years of mismanagement sank its services and reputation, finally leaving no.