Pakistan's Arif Habib Group buys PIA for PKR 135 billion

A consortium led by Arif Habib Group has acquired Pakistan International Airline (PIA) for PKR 135 billion.

The group, which also includes AKD Group, Fatima Fertilizer, The City School, and Lake City Holdings, emerged victorious after a bidding war with another consortium led by Lucky Cement.

The government had approved four potential bidders: a consortium led by Arif Habib Group, AKD Group, Fatima Fertilizer, The City School, and Lake City Holdings; another consortium led by Lucky Cement, included Hub Power, Kohat Cement, and Metro Ventures; and two companies — Fauji Fertilizer and Airblue.

However, Fauji Fertilizer had later decided not to participate in the bidding process. The company can join the winning bidder if invited, Adviser to the Prime Minister on Privatization Mohammad Ali had previously told Nukta.

Initially, the consortium led by the Arif Habib Group quoted a price of PKR 115 billion. It was followed by the PKR 101.5 billion quoted by the Lucky Cement consortium. Ariblue, a competitor of PIA, quoted PKR 26.5 billion.

The two groups — led by Arif Habib Group and Lucky Cement — exceeded the government-determined reference price of PKR 100 billion and moved to the second round of the bidding.

The second round saw a fierce bidding war between the two groups, which saw the bidding price increasing to PKR 135 billion before Lucky Cement backed out.

The Arif Habib group-led consortium has acquired a 75% stake in PIA. However, they can buy a full 100% stake after paying a premium of 12.5% to the government on the remaining stake.

Second attempt

This is the second time the bidding process has been held for the national airline. The previous attempt in October 2024 had drawn only one bid of PKR 10 billion from Blue World City, far below the floor price of PKR 85 billion set by the government. Thus, the bid had been rejected.

If successful, this would be the first major privatization in nearly two decades and would fulfil a key condition of the $7 billion International Monetary Fund loan program. Earlier this year, the government sold First Women Bank Limited to a UAE-based entity for PKR 4.1 billion.

Under the privatization structure, the government is offering 75% of PIA’s shares, while retaining a 25% stake, with the option for the successful bidder to acquire it at a later stage. Of the proceeds from the sale, 92.5% will be reinvested directly into PIA, while 7.5% will go to the government.

What's different this time

As part of revised terms aimed at attracting investors, the buyer will not be required to pay sales tax on the purchase of new aircraft. Liabilities that weighed down the previous bidding attempt have also been addressed, officials told Nukta earlier.

In the earlier privatization round, investors were required to clear outstanding dues of PKR 33 billion, including PKR 26.6 billion payable to the Federal Board of Revenue and PKR 7 billion owed to Pakistan Aviation. Officials said these liabilities will not be transferred to the new owner this time, as the issue of PIA's payables has been resolved ahead of the bidding date.

Officials said the previous process was also affected by delays in securing a goods and services tax concession from the IMF, which has since been addressed. In addition, the reopening of PIA's routes to the United Kingdom and Europe after a 4.5-year-long ban has improved the airline's prospects, increasing expectations of a better valuation.

This government has presented this privatization as a turnaround strategy rather than a simple sell-off. A five-year business plan has already been finalized, under which most of the funds will be used to revive the airline. Key targets include expanding the fleet from 18 aircraft to around 38 over the next few years, supported by an 18% GST exemption on leasing new aircraft.