Pakistan's parliament debates failed national airline sale, new committee formed

Members of the National Assembly – the lower house of parliament in Pakistan – criticized the initial privatization bid for Pakistan International Airlines (PIA) as unprofessional on Thursday.

Law Minister Senator Azam Nazir Tarar announced that a new committee has been formed for PIA's privatization, expressing optimism for higher bids following the restoration of European and other international routes.

The discussion took place during question hour, chaired by Deputy Speaker Syed Mustafa Shah, when MNA Sehar Kamran inquired about the national airline's privatization status and current situation.

Parliamentary Secretary for Aviation Asia Ishaq informed the House that out of PIA's 34 aircraft, only 17 are operational, while 12 have become completely inoperable and remain in a state resembling a graveyard in Karachi. The remaining aircraft are undergoing maintenance or repairs.

She reported that PIA currently employs 7,300 people, with the airline disbursing PKR 35 billion in salaries and PKR 38 billion in pension payments during the year 2023 alone. These substantial personnel costs have contributed to the airline's financial burden.

The airline's total debt burden stands at PKR 850 billion, of which the government has assumed PKR 623 billion in accordance with IMF directives. This assumed debt includes loans from 285 commercial banks worth PKR 20 billion. Despite this significant debt restructuring, PIA still carries PKR 183.6 billion in outstanding liabilities. Moreover, the airline has consistently incurred monthly losses ranging between PKR 12.5 billion and PKR 15 billion since September 2023.

Government's performance under fire

Addressing the October privatization bid, Ishaq acknowledged that only one bidder qualified despite extensive marketing efforts. She defended the government's approach, noting that marketing services were procured from multiple premier institutions. While acknowledging the disappointing response, she maintained that declaring the Privatization Commission a complete failure would be an excessive reaction to the situation.

PPP's Sehar Kamran delivered a sharp critique of the privatization process, stating that spending $6.8 million on consultancy fees alone represented a mockery of the privatization effort. She argued that marketing efforts were insufficient and suggested that the entire privatization process, which has been ongoing since 2015, followed a calculated but flawed plan.

The Parliamentary Secretary defended the consultancy expenditure, explaining that financial consultants operate under specific terms and conditions, with payments tied to achieved milestones and successful outcomes rather than being provided upfront.

Federal Law Minister Azam Nazir Tarar provided additional context about PIA's privatization challenges, noting that previous attempts encountered difficulties with bidder pre-qualification requirements. He expressed optimism about future prospects, citing the restoration of European and other international routes as positive developments. While declining to speculate on potential bid values, he assured that the privatization process, including the appointment of financial advisors, adhered to legal requirements and established procedures.

PPP member Naveed Qamar attributed the first privatization attempt's failure to administrative incompetence and unresolved structural issues within the organization. His party colleague Nabil Gabol criticized the current valuation, provocatively stating that it amounted to less than the worth of a Karachi-Islamabad bus service license.

In response to fellow member Qadir Patel's concerns about the proliferation of special committees, the Law Minister assured the House that any successful buyer would be required to operate within an established regulatory framework that protects national interests.

What happened between Nov. 2023 and Jan. 2024?

• November 2023: Financial advisory services agreement signed with EY Consulting LLC
• February 2024: Federal Cabinet approved PIA restructuring, legal separation plan, and transaction structure
• April 2024: Invited expressions of interest for 51-100% stake acquisition in PIACL with management control
• June 2024: Multiple expressions of interest received; 6 interested parties pre-qualified by PC Board
• October 2024: Blue World Consortium (BWC) emerged as the sole bidder, submitting a PKR 500 million deposit
• October 13, 2024: BWC submitted a bid of PKR 10 billion (against minimum expected price of PKR 85 billion) in a live broadcast
• November 2024: PC Board rejected BWC's bid, with CCOP endorsing this decision on November 14