A spokesperson for Pakistan International Airlines (PIA) described the unexpectedly low bid for the airline’s privatization as “unfortunate.”
“There were high expectations surrounding this process, given that PIA is one of the oldest airlines in the world. Such a low bid does not reflect its true potential as a profitable entity,” said Abdullah Hafeez Khan during an appearance on Aaj News’ News Insight with Amir Zia on Thursday.
His comments followed the suspension of the bidding process, which resulted in a bid of Rs10 billion, far below the airline’s valuation of Rs85 billion.
Cash-strapped Pakistan aims to sell a 51-100% stake in the debt-ridden PIA to raise funds and reform struggling state-owned enterprises, as outlined in a $7 billion International Monetary Fund program.
Initially, the Privatisation Commission had deemed six bidders eligible for the process, but five have since withdrawn. The shortlisted companies included Air Blue Limited, Arif Habib Corporation Limited, Fly Jinnah, YB Holdings Private, Pak Ethanol Private, and the Real Estate Consortium Blue World City.
Khan noted that PIA has undergone restructuring into PIA Holding Company and PIA Sales, which cleared the debts that had plagued its balance sheet for the past two decades.
“This financial relief has allowed PIA to emerge as a ‘clean company’ and a ‘profitable organization’ at the operating level,” he stated.
He also highlighted that the London Heathrow route alone is valued at around $100 million (approximately Rs30 billion), alongside a fleet of 33 aircraft, including 17 A320s, which range in value from $120 million to $150 million each. Even older aircraft retain significant value, he emphasized.
Khan mentioned that “confusion” during the bidding process affected potential investors’ perceptions.
“PIA is an international entity requiring substantial foreign investment for its operations; however, foreign investors shied away, and those who participated struggled to accurately assess PIA’s financials and assets.”
Notably, no Western companies were involved in the privatization effort, despite the Privatization Commission reaching out to friendly nations. Khan remarked, “We will need to start over and prepare from scratch.”
Despite the restructuring, PIA’s total asset value stands at Rs165 billion, with 60% of the shares offered for privatization valued at Rs99 billion.
Local investors expressed frustration over inaccurate data and misrepresentation from the Privatization Commission and its advisors. They paused the privatization process for three months to conduct a new audit but ultimately withdrew.
One investor cited “uncertainty” regarding PIA’s international routes and the ambiguity surrounding its debt as primary reasons for their withdrawal.
The sole bidder that remained submitted a proposal demonstrating limited experience in real estate, presenting an “unserious bid” that fell short even of the value of a single PIA aircraft.
