ISLAMABAD: The Privatisation Commission is set to privatise Pakistan International Airlines Corporation Ltd (PIAC) on December 23, as only three bidders remain in contention following the withdrawal of Fauji Fertiliser Company Ltd.
According to the programme circulated by the Privatisation Commission on Sunday, bidders will submit their bids between 10:45am and 11:15am. The commission will open the bids at 3:30pm in a process that the government has decided to broadcast live on television to ensure transparency.
The remaining bidders include a consortium comprising Lucky Cement Limited, Hub Power Holdings Limited, Kohat Cement Company Limited and Metro Ventures (Private) Limited; another consortium including Arif Habib Corporation Limited, Fatima Fertiliser Company Limited, City Schools (Private) Limited and Lake City Holdings (Private) Limited; and Air Blue (Private) Ltd.
Reference price process and cabinet approvals
Chairman of the Privatisation Commission and Adviser to the Prime Minister on Privatisation Muhammad Ali said Fauji Fertiliser Company Ltd had formally decided to quit the bidding process. Speaking in a YouTube interview, he explained that after bid submission on Tuesday, officials will place sealed bids in a transparent box.
Following this, the board of the Privatisation Commission will meet to determine the reference price. The Cabinet Committee on Privatisation will then approve the reference price, which authorities will announce at the time of opening the bids.
Ali said that if bids exceed the reference price, the commission will conduct an open auction. However, if bids fall below the reference price, the commission will give priority to the highest bidder. He added that the federal cabinet would approve the transaction within days, after which the commission would sign documents already received from bidders.
Transaction structure and payment terms
Under the transaction structure, bidders will compete for a 75 per cent stake in PIA. Of the total bid amount, 92.5 per cent will go to PIA, while 7.5 per cent will be transferred to the national exchequer. The government will retain the remaining 25 per cent shareholding.
Ali said the successful bidder could either acquire the remaining 25 per cent stake after payment or leave it with the government. The valuation of this stake will take place after the decision on the initial 75 per cent. Bidders have the option to purchase the remaining shares within 12 months by paying a 12 per cent premium, with a decision required within 90 days.
He said the government rejected a proposal to allow payment for the 75 per cent stake over one year, citing fairness concerns. The winning bidder will deposit two-thirds of the bid within 90 days and the remaining one-third within a year.
PIA outlook, assets and employee protections
Ali said reviving PIA would positively impact GDP growth, noting that aviation contributes only 1.3 per cent to Pakistan’s GDP, compared to 18 per cent in the UAE and 8.5 per cent in Saudi Arabia. He said PIA’s potential could significantly raise this contribution.
PIA currently operates 18 aircraft out of a fleet of 34 and holds air service agreements with 97 countries, along with landing rights in more than 170 countries. The airline has a net profit of Rs11 billion and equity of Rs30 billion, while liabilities of Rs26 billion will remain with PIA and be paid over five years.
Ali said no employee could be laid off for one year under the agreement, with pensions and perks fully protected. He added that PIA’s workforce has already reduced from 11,500 in 2011 to 6,500 through gradual downsizing.
