A Cabinet committee has greenlighted the privatisation of PIA – Pakistan International Airlines (PK, Islamabad International) following the passing of an amendment bill to address the airline’s PKR71 billion rupee (USD247 million) annual losses and align it with international aviation safety and regulatory standards.
The Ministry of Finance announced the Cabinet Committee on Privatisation (CCoP) on August 8 decided to include PIA in a list of ongoing privatisation programmes.
On August 7, the Pakistan Senate unanimously passed “The Pakistan International Airline Corporation (Conversion) (Amendment) Bill, 2023”, amending an earlier Act of 2016, to address the airline’s financial situation, reported several Pakistani media, including Express Tribune and The Nation newspapers and the Augaf news site. On social media, the Senate announced that the passing of the legal amendments would “solve most of the PIA issues”. PIA has been banned from the European Union, the UK, and the US following a 2020 scandal over fake pilot licenses.
Leader of the House and Finance Minister, Muhammad Ishaq Dar, said the ban contributed PKR59 billion (USD205 million) of PIA’s annual PKR71 billion loss. As reported, the European Union Aviation Safety Agency (EASA) is to conduct an on-site audit of the Pakistan Civil Aviation Authority (PCAA) in September 2023 and has confirmed that constructive dialogue was taking place with the regulator over PIA resuming flights to the EU. The government has mooted the resumption of flights in October, pending a successful EASA audit.
Meanwhile, The Tribune newspaper and Urdu-language Express News TV disclosed the government’s plans to semi-privatise and restructure PIA as a public-private partnership with foreign capital. The process is to happen in phases, with completion scheduled for 2025.
A new holding company will be registered with Pakistan’s Securities and Exchange Commission (SECP). All assets and liabilities of PIA will be transferred to it, and the airline will be incorporated into the holding firm as a debt-free subsidiary. According to the plan, 40% of PIA will be sold to an international strategic equity partner, and management will be outsourced. A foreign consultancy will be hired to handle the restructuring process in a transparent manner.
In the first phase, the holding company will be registered with the SECP, unburdening the subsidiary airline from its debt. In the second phase, the flag carrier will be restructured and semi-privatised.
The Finance Minister highlighted the dire financial state of PIA, its total liability totalling close to PKR743 billion (USD2.5 billion), which includes bank loans totalling PKR383 billion (USD1.3 billion). He pointed out that the government had provided a sovereign guarantee, obliging it to pay PKR262 billion (USD912 million) in case of default by the airline. Furthermore, PIA is burdened with outstanding debts of PKR360 billion (USD1.2 billion) to the Pakistan State Oil Company (PSO), the Federal Board of Revenue, and PCAA. He expressed concern that PIA is projected to lose PKR110 billion (USD383 million) this year alone, ballooning its debt to PKR853 billion (USD3 billion) by the end of 2023. The airline’s annual losses were projected to reach PKR259 billion (USD259 million) in 2030.
According to the Finance Ministry, the CCoP has also approved hiring a financial adviser to process the sale of the PIA-owned Roosevelt Hotel in New York, which closed in December 2020 following Covid-19 and has since been operated as a shelter for illegal immigrants.
Source : CH Aviation