In a renewed effort to offload the loss-making Pakistan International Airlines (PIA), the Privatisation Commission board on Tuesday recommended divesting between 51% and 100% of the airline’s share capital along with management control. The decision, chaired by the newly appointed Advisor to the Prime Minister on Privatisation, Muhammad Ali, also leaves room for the government to partially retain ownership, with the final share percentage to be determined after consultations with potential investors.
The recommendation comes as part of Pakistan’s second attempt to privatise PIA, following a failed bid last year that saw limited interest due to government influence and stringent conditions. The decision aligns with assurances given to the International Monetary Fund (IMF) that PIA’s privatisation will be completed by July 2025, a deadline underscored by Prime Minister Shehbaz Sharif’s recent push to accelerate government downsizing efforts.
During Tuesday’s meeting, the board advised the Cabinet Committee on Privatisation (CCOP) to proceed with the sale, with final terms and conditions to be ironed out during the bidding process. “The government is offering flexibility this time, ranging from a majority 51% stake to a full 100% transfer,” said Muhammad Ali. “We’ll gauge investor appetite before finalising the structure.”
The renewed bid follows a disappointing first attempt, where six shortlisted parties hesitated to partner with the government, citing its overbearing role in decision-making. Investors had demanded 80% to 100% ownership to avoid interference, while the government had set a minimum of 60% shares for sale. The sole bidder in that round—a real estate developer—offered just Rs10 billion against a minimum asking price of Rs85 billion, leading to the process collapsing.
This time, the Privatisation Commission has hinted at three potential bidders, including two who previously withdrew after the government refused to waive an 18% sales tax on aircraft leases and offload Rs45 billion in liabilities from PIA’s balance sheet. Sources suggest a third, unexpected contender with no aviation experience but significant influence could also join the fray. The IMF’s relaxation of these conditions in December, coupled with PIA’s reopening of European routes, is seen as a major draw for investors.
Despite the optimism, challenges remain. The government has already spent Rs1.2 billion of a Rs1.9 billion fee on financial advisor Ernst & Young, which faced criticism from former Privatisation Minister Abdul Aleem Khan for its handling of the initial bid. Nonetheless, Ernst & Young will continue as a partner in this second attempt. The commission plans to issue an Expression of Interest (EOI) by the end of March—a deadline it may struggle to meet—followed by investor shortlisting and due diligence from April to June.
Roosevelt Hotel Privatisation Also on the Table
In the same meeting, the board reviewed options for privatising the Roosevelt Hotel Corporation in New York. While no final decision was made, a briefing with the financial advisor was scheduled to assess the best approach. Last week, the CCOP directed the commission to pursue competitive bidding for the lucrative property, leaving open whether to opt for an outright sale or a partnership model.
The commission is considering three structures proposed earlier: a full sale of the hotel land, a joint venture for future development, or a 99-year lease. Although the financial advisor previously favored a joint venture to maximize returns, the board had suggested exploring a government-to-government deal last August—a recommendation that diverged from expert advice. The final proposal will be submitted to the CCOP for approval after further deliberation.
As Pakistan races to meet IMF commitments and streamline its public sector, the success of these privatisation efforts will hinge on attracting credible investors and balancing government control with market demands. With deadlines looming and past failures in mind, all eyes are on the Privatisation Commission to deliver.
