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WEB DESK
KARACHI: In an important move set to redefine the country’s aviation landscape, the loss-making Pakistan International Airlines (PIA) is charting a new course towards privatization, with its sights set on a lucrative deal potentially worth up to $300 million.
This strategic pivot, approved by PIA’s newly reconstituted board of directors, aligns with the government’s broader economic reform agenda, particularly in anticipation of securing a fresh loan program from the International Monetary Fund (IMF).
The decision, made during the board’s inaugural meeting on March 25, 2024, marks a significant milestone in PIA’s storied history, positioning the national carrier at the forefront of Pakistan’s privatization drive. With the government eyeing a completion date of June 15, 2024, for the sell-off, there’s a palpable buzz around the potential involvement of Middle Eastern investors, hinting at a new dawn for the airline.
Contrary to speculation, insiders clarify that PIA’s privatization is not a direct precondition for the next tranche of IMF support, but it undoubtedly complements the broader fiscal stabilization measures under consideration. Finance Minister Muhammad Aurangzeb’s upcoming discussions with the IMF in mid-April will likely shed further light on how PIA’s strategic divestment fits within Pakistan’s economic recovery framework.
Ernst & Young, a name synonymous with global financial expertise, has been tasked with steering the privatization process. Their preliminary estimates suggest a fetching price tag of $250-300 million, though due diligence by potential buyers could adjust the final valuation. The Middle East emerges as a probable destination for PIA’s new ownership chapter, with the United Arab Emirates and Qatar named as interested parties.
The announcement to the Pakistan Stock Exchange (PSX) underscored the seriousness of the board’s intent, outlining a Scheme of Arrangement for restructuring and privatization that adheres to the directives of the Securities and Exchange Commission of Pakistan (SECP). This strategic bifurcation of PIA aims to segregate its core operations from its financial liabilities, which include a significant domestic and foreign debt portfolio.
Abdullah Hafeez Khan, PIA’s Spokesperson, emphasized the board’s commitment to executing the government’s privatization blueprint without resorting to workforce reduction measures like Voluntary Separation Schemes. This approach seeks to preserve employee morale while navigating the complexities of the privatization process.
The backdrop to this dramatic shift is a challenging financial scenario, where the airline’s debts have necessitated a rethink of its operational and financial structures. The government’s preferential treatment of domestic bank loans to PIA, particularly the handling of a $88 million foreign currency loan, reflects a nuanced approach to managing the airline’s obligations while minimizing fiscal strain.
As PIA embarks on this transformative journey, the broader implications for Pakistan’s economy and its aviation sector are profound. The potential infusion of $300 million from the sale, coupled with the strategic realignment of the airline, could serve as a template for revitalizing other state-owned enterprises. With the clock ticking towards the June deadline, the stakes are high, but so are the potential rewards for PIA and its stakeholders.