ISLAMABAD – The privatisation of Pakistan International Airlines (PIA) has encountered significant hurdles, as potential buyers have refused to meet the government’s demand for a guaranteed investment of $500 million and declined to accept key performance targets including fleet expansion and operational increases on domestic and international routes.
According to sources, the government had set stringent conditions for PIA’s sale, aiming to revive the struggling airline.
Among these conditions were mandates to increase the number of aircraft and expand operations within three years.
However, at least two of the pre-qualified bidders have rejected these terms, stating they should not be part of the binding agreements.
The six shortlisted bidders—Fly Jinnah, Airblue, Arif Habib Corporation, Blue World City, Pak Ethanol (Pvt) Consortium, and YB Holdings Consortium—have raised concerns over the proposed shareholder agreements and sale-purchase agreements. These documents, drafted to protect the government’s interests, have been viewed as overly restrictive by some bidders.
Another sticking point is the allocation of sale proceeds. While the government proposed splitting the proceeds between the exchequer and reinvestment into PIA, several bidders have suggested that the entire amount be reinvested in the airline to ensure its financial recovery.
The negotiations have also stalled over the government’s demand for a $500 million to $700 million investment, which it deems critical to turning the airline profitable.
The government had requested bank guarantees to ensure this investment, but some bidders have only offered assurance guarantees, further complicating the process.
PIA’s total liabilities stand at Rs843 billion, with Rs623 billion already transferred to a holding company to make the airline more appealing to potential buyers.
Despite these efforts, the financial and operational responsibilities associated with the deal, including employee pension liabilities, remain a major concern for bidders.
The government had also proposed that the buyer retain PIA’s current employees for at least three years and take over their liabilities. However, bidders have refused to accept responsibility for the airline’s existing workforce, suggesting that only employees who receive fresh offer letters should be retained. The remaining employees, under the bidders’ proposal, would be transferred to a holding company.
The government had initially planned to finalise the privatisation process by mid-2024.
However, with negotiations still underway and no resolution in sight, the deadline has been extended to October.
