Pakistan delays PIA auction for third time as bidders seek more time

ISLAMABAD: The Pakistan government has delayed the auction of national carrier Pakistan International Airlines for the third time with no new date announced as potential bidders seek more time and information to assess the airline, a spokesman for the privatization ministry said on Friday.
The disposal of the flag carrier is a step that past elected governments have steered away from as it is likely to be highly unpopular, but progress on privatization is a precondition for cash-strapped Pakistan for an IMF bailout agreement approved this week.
The government announced in June it had selected six companies qualified to bid for PIA out of a pool of eight after receiving expressions of interest. The initial plan was to finalize the deal to sell PIA on the country’s Independence Day, Aug. 14, but the plan was delayed following requests from bidders who were waiting for the airline’s latest audited accounts, aircraft lease agreements and clarity on flights to Europe, which are currently banned. This was followed by September and October dates for the auction, but those have also not materialized. 
Pakistan plans to sell more than 51 percent of its stake in the loss-making airline as part of the economic reforms suggested by the IMF which approved a long-awaited 37-month $7 billion bailout deal on Wednesday that will require “sound policies and reforms” to strengthen macroeconomic stability and address structural challenges alongside “continued strong financial support from Pakistan’s development and bilateral partners.”
“Bidding is postponed but no new date is given officially,” Dr. Ahsan Ishaq, a spokesperson for privatization ministry, told Arab News on Friday.
He said the ministry had received “no official reason” from the bidders to delay the process but confirmed that they had been requesting more time and information to assess the carrier.
In August, the country’s central bank refused to grant a waiver or exemption to prospective buyers regarding PIA’s commercial bank loans of Rs268 billion ($971.1 million) and other financial guarantees in dollar terms, a development viewed as a setback to the privatization bid.
Dr. Ishaq said his ministry was in touch with the central bank to resolve the issue regarding all outstanding commercial loans of the national carrier before its final bid.
According to the ministry, the pre-qualified bidders for PIA include Air Blue, Arif Habib Corporation, Blue World City, Fly Jinnah, Pak Ethanol (Pvt) Consortium and YB Holdings Consortium.
Official data available with Arab News shows there are 88 commercially operated state-owned enterprises in Pakistan, with collective losses of up to Rs730.258 billion ($2.61 billion) in the fiscal year 2022 (FY22).
In its five-year privatization plan ending in 2029, the government has approved 24 state-owned enterprises for sale, including PIA.
The top ten loss-making Pakistani entities, including PIA with Rs97.5 billion, the National Highways Authority at Rs168.5 billion and the Peshawar Electric Supply Company Limited with Rs102.2 billion, accounted for cumulative losses of Rs650.197 billion ($2.33 billion) in FY22, according to official data.
In contrast, the remaining enterprises reported combined losses of Rs80 billion ($286 million) during the same fiscal year.
Dr. Ishaq said PIA’s cumulative losses alone had surpassed Rs800 billion ($2.86 billion), with the total asset valuation of the airline standing at approximately Rs160 billion ($572 million).
Haroon Sharif, a former member of the Cabinet Committee on Privatization and a senior economist, said the government should have started the privatization process with “simpler transactions” to improve the confidence of investors instead of trying to sell complicated organizations like PIA.
“It is difficult to smoothly privatize PIA as its accounts, assets and financial records are not as transparent as required by the bidders,” he told Arab News, suggesting that the government bifurcate the PIA into four or five different sections and privatize them in parts.
“The potential bidders will definitely want to see clear and transparent audits, assets and liabilities of PIA before going ahead for the final auction, so that’s why this may take some time,” Sharif said. “The government should also refrain from privatizing the national carrier in haste, otherwise it will backfire.”
With a fleet of 34 aircraft comprising 17 Airbus A320s, 12 Boeing B777s and 5 ATRs, the airline loses traffic to Middle Eastern carriers, who have a market share of 60 percent, because of an absence of direct flights to destinations.
The carrier has air service pacts with 87 countries, and landing slots at key destinations such as London Heathrow.
The re-organization plan of the business will separate the aviation-related aspects from non-core components, so freeing the operating subsidiary of a large portion of legacy debt.