The caretaker government is making binding plans for the new set-up to sell loss-making Pakistan International Airlines (PIA), according to the privatisation minister and other officials.
In the past, elected governments have shied away from undertaking unpopular reforms, including the sale of the flag carrier. But Pakistan, in deep economic crisis, agreed in June to overhaul loss-making state-owned enterprises under a deal with the International Monetary Fund (IMF) for a $3 billion bailout.
The government decided to privatise PIA just weeks after signing the IMF agreement.
The caretaker administration, which took office in August to oversee the Feb 8 election, was empowered by the outgoing Parliament to take any steps needed to meet the budgetary targets agreed with the IMF.
“Our job is 98 per cent done,” Privatisation Minister Fawad Hasan Fawad told Reuters when asked about the plan to sell the airline. “The remaining 2pc is just to bring it on an excel sheet after the cabinet approves it.”
Fawad said the plan, drawn up by transaction adviser Ernst & Young, will be presented to the federal cabinet for approval before the tenure of the administration ends following the election.
The cabinet will also decide whether to sell the stake by tender or through a government-to-government deal, Fawad said.
“What we have done in just four months is what past governments have been trying to do for over a decade,” Fawad said. “There is no looking back,” he said.
Details of the privatisation process have not been previously reported.
PIA had liabilities of Rs785bn ($2.81bn) and accumulated losses of Rs713bn as of June last year. Its CEO has said losses in 2023 were likely to be Rs112bn.
Progress on the privatisation will be a key issue if the next government goes back to the IMF once the current bailout programme expires in March.
Caretaker Finance Minister Shamshad Akhtar told reporters last year that Pakistan would have to remain in IMF programmes after the expiry.
Two sources close to the process told Reuters that a 51pc stake with full management control would be offered to buyers after parking the airline’s debts in a separate entity, under the 1,100 page report from Ernst & Young.
Reuters could not independently confirm the contents of the report. Fawad did not give specific details of the size of the stake to be sold, but confirmed the plan involved the carrier’s debts being spun off into a separate entity.
Ernst & Young did not respond to requests for comment.
PIA spokesman Abdullah Hafeez Khan said the airline was assisting the privatisation process, extending “full cooperation” to the transaction adviser.
Ishaq Dar, who has previously served as the finance minister previously and has been named by the PML-N to retain the portfolio if it forms the next government, told Reuters that the sale of PIA will be fast-tracked.
“It will, God willing, move ahead with fast speed,” he said.
In a report in mid-January, the IMF expressed satisfaction over the measures initiated by the caretaker government to accelerate reforms of state-owned enterprises, specifically mentioning the amendment of the PIA privatisation law.
Under the privatisation plan submitted by Ernst & Young to the government on Dec 27, government-guaranteed legacy debt and payables — which are held by a consortium of seven domestic banks — will be parked in a holding company, Fawad and two sources involved in the process said.
Fawad said the government and the consortium had an agreement in place regarding the settlement of the legacy debt, which includes negative equity of Rs825bn in loans, creditors’ money and the losses. He provided no further details.
The sources had earlier said the banks wanted a five-year bond issued against the debt with a 16.5pc coupon on the paper, while the finance ministry was offering only 10pc.
The banks have not commented on the deal.
Besides its losses and debt, PIA’s governance and safety standards have been questioned by global aviation authorities for some years.
In early 2020, Czech and Hungarian air force jets were scrambled to intercept a PIA flight with 300 people on board as it went astray due to an “avoidable human error” by its pilot, according to a previously unreported confidential report by a PIA inquiry board, which was reviewed by Reuters.
In May that year, the crash of a PIA plane in Karachi killed nearly 100 people and a fake pilot licence scandal erupted later in 2020.
The scandal led to the European Union Aviation Safety Agency (EASA) banning the national carrier from flying to its most lucrative routes in Europe and the UK.
The 2020 ban is still in place and has cost the airline nearly Rs40bn in revenue annually, according to government records presented in parliament.
The airline has been pleading with EASA to lift the ban even provisionally, but to no avail, according to correspondence between it and PIA reviewed by Reuters.
The financial crisis has also led to seizure of PIA aircraft by creditors in recent months, according to the airline. One aircraft was taken at Kuala Lumpur airport for non-payment of lease fees, and another in Toronto for non-payment of ground handling, PIA said.
Source: Dawn
"The remaining 2pc is just to bring it on an excel sheet after the cabinet approves it," says Privatisation Minister Fawad Hasan Fawad.
www.dawn.com
