Privatization draft for sale of Pakistan's national airline finalized

Pakistan's Privatization Commission has finalized the draft for the privatization of the national airline, with 60% of its shares set to be sold on October 1.

Pakistan International Airlines (PIA) is not operationally sustainable at present, and the buyer will need to invest PKR 70 billion ($250 million) annually. To make PIA profitable, a total investment of PKR 200 billion is required over three years.

The investment plan aims to increase the number of aircraft from 20 to 45 within three years. Instead of immediately investing $500m for the purpose, the buyer will follow a three-year plan.

The buyer will also bear PKR 35bn in salaries, but the federal government will handle the pensions of retired employees before privatization. According to officials, the buyer will be allowed to lay off employees after two to three years.

The privatization draft stipulates that PIA's name will remain unchanged, and no routes will be terminated without federal government’s approval.

The draft also includes conditions for the lifespan of aircraft, which must be less than 10 years, and improvements in services and route growth. The buyer is expected to gain significant profits from routes to Paris, Canada, and Saudi Arabia. PIA's routes to Europe and North America are also set to be restored.

PIA's assets are valued at PKR 155bn, while its liabilities amount to PKR 200bn. PIA’s total losses stands at PKR 45bn.

The final draft with bidders will be finalized on Wednesday, and approved by the federal cabinet this week. The bidding process will take place on October 1, with the share transfer process expected to be completed within two months.

PIA currently has 320 certified pilots, and the need for staff will increase with the number of aircrafts. The airline receives up to PKR 1.5bn in FED on ticket sales, which is expected to double. Officials noted that Air India was sold for only $360m despite a loss of $9bn at the time of sale.