Only 1 of 6 shortlisted bidders submits 'earnest money' for stake in Pakistan's national airline

Only one of the six pre-qualified bidders have submitted earnest money — a deposit made to show the buyer's good faith or seriousness for purchase — for a stake in Pakistan's national airline.

This was confirmed by a spokesman for the country's Privatization Ministry, according to aBloomberg report.

The government has been trying to privatize the Pakistan International Airlines (PIA) for a long time, but the process keeps hitting snags. In June, the government shortlisted six pre-qualified bidders — Air Blue, Lucky Group, Arif Habib Group, Blue World, Pak Ethanol, and FlyJinnah.

However, only one of them submitted the earnest money by Tuesday's deadline, according to the spokesman. However, he declined to disclose the name of the bidder who submitted the earnest money.

The PIA problem(s)

The bidding for PIA was initially set for Oct 1 but was delayed to Oct 31, less than a week before the planned date.

Certain issues continue to hinder the process. Some prospective investors want to purchase 65% of the government’s shares, while others seek full ownership. Concerns have also been raised about the requirement to retain employees for two to three years, which some believe makes the deal impractical.

According to a senior official at one of the six shortlisted bidders, retaining employees will increase the “operating liabilities” for the buyer. The “Pakistan-unique” tax on aircraft acquisition is also considered “punitive”, making the airline non-competitive internationally.

Read more: Pakistan’s troubled privatization plan struggling to take off

Another less-discussed issue, according to the official, is the terminated United States and European routes for PIA. In April, PIA management expressed hope that flights to Europe would resume by June, but this did not happen. The airline’s annual revenue loss from the suspension of European flights is estimated at PKR 70 billion.

“This is not a PIA issue, but one involving the Civil Aviation Authority (CAA). US and EU aviation authorities expect certain standards from their counterparts, and CAA has so far failed to meet those expectations,” the official told Nukta.

“The government has been trying to resolve the matter, but unless it’s resolved, there’s no sense in buying PIA for domestic and less profitable routes.”