Government Aims to Divest Majority Stake in PIA

The federal administration intends to divest between 51% and 100% of its shares in Pakistan International Airlines Company Limited (PIACL). This initiative involves revised conditions for the pre-qualification phase of the bidding procedure, which is anticipated to conclude by the next fiscal year.

A renewed Expression of Interest (EoI) concerning the privatization of PIA has been officially released, setting a deadline for submissions on June 3, 2025. This marks the second EoI issued by the incumbent government, incorporating updated stipulations.

Each application must be accompanied by a non-refundable fee of Rs1.4 million. The privatization proposal encompasses essential business divisions, including passenger services, ground handling, cargo operations, flight training, culinary services, and engineering. Furthermore, significant assets belonging to the airline are included in the offering.

During a press briefing on Thursday, the Advisor to the Prime Minister on Privatisation, Muhammad Ali, alongside the Secretary of the Privatisation Commission, Usman Akhtar Bajwa, provided comprehensive details regarding the share offload of PIA, DISCOs, and the Roosevelt Hotel.

According to officials, provincial governments and state-owned entities (SOEs) are not eligible to participate in the PIA bidding process. However, in response to an inquiry, Secretary Bajwa indicated that the Fauji Foundation is eligible to participate in the bidding, as it does not fall under the SOEs category.

Addressing a question about the Rs29 billion profit reported by PIA, Muhammad Ali clarified that the airline’s equity had transitioned from negative to zero. However, since PIACL is not a listed entity, profit distribution will occur following an audit of its financial records.

The Cabinet Committee on Privatisation (CCoP) will determine the new reference price and the volume of shares to be divested, considering the entity’s transaction structure.

Revised Pre-Qualification Criteria for PIA Privatization:
  • Applicants can be scheduled airlines.
  • For non-airline entities, they must demonstrate management and operation of a non-airline business for the past decade, with minimum annual revenues of PKR 200 billion (USD 715 million), evidenced by audited financials from December 2023 or later, and a minimum annual revenue of Rs100 billion (USD 360 million) for each of the last three years.
  • Applicants, either individually or as a consortium, must possess Rs28 billion (USD 100,000,000) in cash or liquid assets.
  • The applicant’s net worth should be at least Rs30 billion (USD 110,000,000). If applying as a consortium, the combined net worth of its members must also be at least Rs30 billion (USD 110,000,000), with the lead member having a net worth of at least Rs8 billion (USD 29 million).
  • Applicant accounts must undergo auditing by internationally recognized chartered accounting firms or auditors listed in Category “A” or “B” per the State Bank of Pakistan’s panel under Section 35(1) of the Banking Companies Ordinance, 1962.
  • Bank credit references should detail acquired credit lines and confirm the applicant’s (or each consortium member’s) consistent and timely payment of outstanding bank liabilities. Verification of the latest Credit Information Bureau (ECIB) status should affirm no history of default or relevant information regarding any defaults during the last 10 years.
  • Replacement of lead consortium members is permissible up to 15 days before bidding, contingent upon meeting pre-qualification criteria and RSOQ instructions.

The government has previously unveiled incentives, including an exemption from the 18% general sales tax (GST) on the acquisition or leasing of new aircraft. Tax and legal protections will also be granted in specific cases. Moreover, certain liabilities from PIA’s balance sheet will be transferred to enhance the appeal to prospective purchasers.

The Roosevelt Hotel, a 19-story establishment in midtown Manhattan owned by the Roosevelt Hotel Corporation (a PIA subsidiary), has been closed since 2020.

The Secretary of the Privatisation Commission noted that the CCoP instructed the PC Board to prioritize one of three considered options. The joint venture (JV), offering multiple alternatives, will be addressed at the board level. The proposed transaction structure for the long-delayed divestment of the Roosevelt Hotel will shift its focus from leasing options to either an outright sale or a JV.

Regarding the privatization of DISCOs, the Power Division is scheduled to finalize preparations for the privatization of three power distribution companies (DISCOs) — Hesco, Pesco, and Fesco. A financial advisor will be appointed by July 2025.