Government Aims to Offload Majority Shares in PIA with New Bidding Conditions

The federal administration is looking to divest between 51% and 100% of its shares in Pakistan International Airlines Company Limited (PIACL). New prerequisites for pre-qualification in the bidding procedure are anticipated to be finalized by the next fiscal year.

A revised Expression of Interest (EoI) concerning PIA’s privatization has been released, setting a submission deadline for June 3, 2025. This marks the second EoI issued by the current administration, incorporating updated stipulations.

Each application must include a non-refundable payment of Rs1.4 million. The privatization plan encompasses all significant business divisions, including passenger services, ground handling, cargo, flight training, flight kitchen, and engineering. The airline’s primary assets are also included in the offering. During a media briefing on Thursday, the Advisor to the Prime Minister on Privatization, Muhammad Ali, alongside the Secretary of the Privatization Commission, Usman Akhtar Bajwa, provided specifics on the divestiture of PIA shares, DISCOs, and the Roosevelt Hotel.

Provincial governments and state-owned entities (SOEs) are ineligible to participate in the PIA bidding process. However, in response to a query, Secretary Bajwa of the Privatization Commission indicated that the Fauji Foundation could participate in the bidding, as it does not fall under the SOEs category. Addressing a question about PIA’s reported Rs29 billion profit, Muhammad Ali stated that PIA’s equity had been adjusted from negative to zero. However, because PIACL is not a listed entity, any profit distribution will occur following an audit of its accounts.

The Cabinet Committee on Privatization (CCoP) will establish a new reference price and the volume of shares to be offloaded, considering the entity’s transaction structure.

New Pre-Qualification Criteria for PIA Privatization:
  • Applicants can be scheduled airlines.
  • For non-airline businesses, applicants must have managed and operated a non-airline enterprise(s) for the past decade with minimum annual revenues of PKR 200 billion or USD 715 million, as demonstrated by audited financial statements from December 2023 or later. They also need a minimum annual revenue of Rs100 billion or USD 360 million for each of the last three years.
  • Applicants (either individually or as a consortium) should possess Rs28 billion or USD 100,000,000 in cash or liquid assets.
  • Applicants must have a net worth of at least Rs30 billion or $110,000,000. If applying as a consortium, the combined net worth of the members must be at least Rs30 billion or $110,000,000, with the lead member having a net worth of at least Rs8 billion or $29 million.
  • Applicant accounts must be audited by internationally recognized chartered accountants or auditors listed in Category “A” or “B” as per the State Bank of Pakistan’s panel under Section 35(1) of the Banking Companies Ordinance, 1962 (as amended).
  • Bank credit references must include details of credit lines, confirmation that the applicant (and each consortium member) has consistently paid outstanding bank liabilities on time, and verification of the latest Credit Information Bureau (ECIB) status, affirming no history of default during the last 10 years.
  • Lead consortium members can be replaced at least 15 days before bidding, provided they meet the pre-qualification criteria and RSOQ instructions.

The government has already unveiled various incentives, including an exemption from the 18 percent general sales tax (GST) on new aircraft purchases or leases. Additionally, coverage will be provided in certain tax and legal cases. The initiative also includes transferring specific liabilities from PIA’s balance sheet to attract potential buyers.

The 19-story Roosevelt Hotel in midtown Manhattan, a PIA subsidiary, has been closed since 2020.

The Secretary of the Privatization Commission stated that the CCoP has instructed the PC Board to prioritize one of three options considered by the forum. A joint venture (JV) with multiple options will be considered at the board level. The proposed transaction structure for the long-pending divestment of the Roosevelt Hotel shifts its focus from leasing options to an outright sale or a JV.

Regarding the privatization of DISCOs, the Power Division is expected to finalize preparations for privatizing three power distribution companies (DISCOs)—Hesco, Pesco, and Fesco—with a financial advisor to be hired by July 2025.