Cash-Strapped Pakistan Prepares To Sell Pakistan Airlines Ahead Of February 8 Elections

With financial challenges looming, Pakistan, under a caretaker administration since August, shoulders the burden of the loss-making Pakistan International Airlines (PIA). As the country gears up for general elections on 8 February, plans to expedite the sale of PIA under the new administration are in motion.

Privatisation Minister Fawad Hasan Fawad remarked, "We have completed 98 percent of our task." He explained that the final 2 percent involves formalizing the plan on an excel sheet post-cabinet approval.

Image - Pakistan International Airlines (PIA) flight. Courtesy - Reuters

The interim administration in Pakistan, authorized by the outgoing parliament, has been granted the authority to take necessary measures to meet budgetary targets aligned with the IMF agreement. In the face of economic crisis, previous elected governments had refrained from unpopular reforms, including the sale of the national carrier. However, in June, the administration committed to revamp loss-making state-owned enterprises as part of a $3 billion IMF bailout deal.

The decision to privatize PIA was made shortly after signing the IMF agreement, with Privatisation Minister Fawad Hasan Fawad revealing that the plan, crafted by Ernst & Young (E&Y), awaits Cabinet approval before the administration's tenure concludes post-election. The Cabinet will determine whether to sell the stake through tender or a government-to-government deal. Progress on PIA's privatization will be crucial if the incoming government revisits the IMF after the current bailout program ends in March. Reuters sources indicated a proposed sale of a 51% stake with full management control, safeguarding the airline's debts in a separate entity. While PIA supports the privatization process, concerns were raised by airline officials about a rapid sale potentially devaluing PIA. Aviation analyst Brendan Sobie emphasized that PIA's dire situation requires deep restructuring and debt clearance for a successful privatization. PIA, despite EU bans, generates substantial annual revenue and holds valuable slots at Heathrow, Manchester, and Birmingham. As of June 2023, PIA faced liabilities of 785 billion Pakistani rupees ($2.81 billion) and accumulated losses of 713 billion rupees. While its physical assets are valued at 105.6 billion rupees ($375 million), officials believe their market value could exceed $1 billion. The CEO indicated likely losses of 112 billion rupees in 2023. The government halted interest payments on PIA debt in March of the previous year, prompting consideration of privatization.