PIA
ISLAMABAD: Pakistan International Airlines (PIA) has attracted a mere Rs10 billion bid from the sole interested party, significantly lower than the government’s minimum expected price of Rs85 billion.
The bid comes at a critical time as Prime Minister Shehbaz Sharif’s government seeks to sell a 51-100% stake in the debt-ridden national carrier to raise funds and reform state-owned enterprises. These reforms are part of the $7 billion International Monetary Fund (IMF) programme that Pakistan is implementing to stabilize its economy.
The bidding process, which had initially been scheduled for October 1, was delayed by a month and rescheduled for October 31, allowing potential buyers more time.
Despite the government pre-qualifying six groups in June, only one bidder—real estate developer Blue World City—submitted the necessary final documents by the Tuesday deadline. This lack of interest from other groups has raised questions about the attractiveness of the deal and the government’s ability to provide long-term stability for the airline.
Concerns about policy continuity and the government’s commitment to upholding agreements were among the reasons why other pre-qualified bidders chose not to submit bids.
Officials from three groups, speaking anonymously to Reuters, cited apprehensions regarding the long-term viability of any agreements signed with the current government, particularly with general elections looming.
The Shehbaz Sharif-led government, which is a coalition of various political parties, may face challenges in maintaining policy consistency if a new administration comes to power.
The sale of PIA has been a contentious issue for successive governments, largely because of its potential to trigger significant layoffs, making it politically sensitive.
Historically, previous governments have been hesitant to pursue the sale of the national airline due to the social and economic impact it would have on the workforce.
Adding to bidders’ concerns are the government’s recent moves, including the termination of power purchase contracts with five private companies earlier this month and the renegotiation of sovereign agreements.
Such actions have raised red flags about the stability and reliability of doing business in Pakistan, even under sovereign contracts.
Sakib Sherani, an economist and head of Macro Economic Insights, noted that changes to decade-old contracts with Independent Power Producers (IPPs), many of which are funded by foreign investors, have increased the risks of investing in Pakistan.
Other issues deterring potential buyers included unattractive terms for the sale, inconsistent government communication, heavy taxation on the airline sector, and PIA’s long-standing operational and financial troubles. With a reputation marred by inefficiencies and legacy issues, PIA’s appeal as an investment remains questionable.
The lack of competitive bids in this round further complicates the government’s efforts to offload its stake in the airline, especially as it grapples with the broader task of managing state-owned enterprises under the conditions of the IMF programme. Whether or not the government will move forward with the sole bid or reconsider its approach to the sale of PIA remains to be seen.
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