The government has announced plans to sell the Precision Engineering Complex (PEC), a subsidiary of Pakistan International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs2.5 billion in cash. This amount is just one-fourth of the bid made earlier by a single investor for a 60% stake in PIA.
According to officials, PEC’s total valuation stands at Rs6.5 billion, which includes Rs4 billion in pension liabilities for both current and retired employees. PEC specializes in producing high-precision components for aerospace and other industries.
A ministerial committee has approved PEC’s transfer to PAF at a valuation of Rs6.5 billion, and a formal summary is being prepared for federal cabinet approval. The deal separates PEC from PIA’s core operations, classifying it as a non-core asset under PIA’s holding company, which holds Rs623 billion in liabilities.
As of December, PEC’s assets were valued at Rs1.2 billion, while its liabilities stood at Rs2.9 billion, resulting in negative equity of Rs1.73 billion.
Under the agreement, PAF will pay Rs2.5 billion in cash over five years and assume Rs3 billion in pension and provident fund liabilities for 259 retired employees over the next decade. Additionally, PAF will cover Rs1.1 billion in liabilities for 251 current employees.
The four-member ministerial committee, led by Finance Minister Muhammad Aurangzeb, and including the ministers for defense, aviation, and privatization, finalized the deal’s structure. A sub-committee, headed by the additional secretary of corporate finance, evaluated PEC’s assets and liabilities, determining the Rs6.5 billion sale price using the discounted cash flow method.
To ensure a smooth transition, PAF plans to establish a special purpose vehicle, maintaining current employees’ contractual terms, including salaries, benefits, and allowances.
Efforts to privatize PIA earlier this year faltered, with only one bidder offering Rs10 billion against a reserve price of Rs85.03 billion. Privatization Minister Abdul Aleem Khan attributed the failure to insufficient support from the Finance Ministry and bidders’ demands for substantial debt write-offs.
Despite PEC’s negative equity, the Finance Ministry approved the Rs2.5 billion cash deal. PEC’s assets include property, equipment, spare parts, trade receivables, and cash deposits, while its liabilities encompass employee obligations and trade payables.
