Pakistan’s state-owned airline, Pakistan International Airlines (PIA), has been auctioned. The Arif Habib Group has acquired PIA for Rs 4,320 crore. What is interesting is that the Pakistan government itself had estimated the company to fetch close to Rs 1,320 crore less.
An open bidding round was held for the airline between the Arif Habib Group and the Lucky Cement Group, with the latter bidding only up to Rs 4,288 crore. There were three contenders to buy the airline: a business group led by Lucky Cement, a group led by Arif Habib Corporation, and the private airline Airblue.
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The bids
All three groups submitted their bids in sealed envelopes for the first round. The Arif Habib Group submitted a bid of Rs 3,680 crore, Lucky Cement bid Rs 3,248 crore, and Airblue bid Rs 848 crore. Airblue subsequently dropped out of the race.
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Government sells 75% stake in PIA
Pakistan, facing a severe financial crisis, has decided to sell its 75% stake in PIA. Today was the last day for submitting bids, which were presented in sealed envelopes, and the entire event was broadcast live on state television. Just two days before the deadline, Fauji Fertilizer Private Limited, an army-linked fertilizer company, withdrew from the bidding process, leaving only three contenders in the race.
Why was the airline sold?
IMF policy:
To secure further loans from the International Monetary Fund (IMF), Pakistan must privatise loss-making government-owned companies. As part of this condition, Pakistan is privatising 24 state-run enterprises, including PIA.
Financial constraints:
Another reason for selling the airline is the government’s inability to invest further in PIA due to financial constraints. Passengers have also faced persistent issues due to the airline’s poor management.
Image issues:
In 2020, a PIA aircraft crashed in Karachi, killing 96 people. Subsequent investigations revealed that the licences of more than 250 PIA pilots were either suspicious or fraudulent. The accident severely tarnished the airline’s image and left the company with a debt of approximately Rs 25,000 crore.
Hope for better growth
Currently, Pakistan’s aviation sector contributes only about 1.3% to the country’s GDP, making the decision to sell the airline more viable. Under immense pressure from the IMF, the government has already sold ports and airports. Last year, Pakistan also decided to lease out Islamabad Airport.