Pakistan's national airline PIA is up for sale: Who are the 3 bidders?

To attract more investors, the government reduced PIA's debt, removed sales tax on new aircraft, and offered protection from select taxes and legal issues to revive interest in the sale

Pakistan on Tuesday received three bids for the sale of its national airline, Pakistan International Airlines (PIA), Bloomberg reported.

 

According to the report, the government received sealed bids from two local business groups led by businessmen Muhammad Ali Tabba and Arif Habib, and one bid from local airline Airblue for a 75 per cent stake in the carrier. The government is likely to announce a minimum price and open the bids later today.

Why is bidding stronger for PIA this year?

According to the report, the government tried to sell PIA last year but received only one bid, which was far below its minimum price of around $300 million. This time, however, more buyers have shown interest.

 

To attract investors, the government reduced PIA’s debt, removed sales tax on the purchase of new aircraft, and offered protection from certain taxes and legal issues. It also promised that tax exemptions would remain in place for 15 years. About 92 per cent of the money raised from the sale will be reinvested in the airline.

Why is Pakistan selling its national airline?

Pakistan is selling PIA because the airline has been making losses for many years and has survived largely on government support. PIA has struggled due to poor management, an ageing fleet of just 18 aircraft, heavy losses and political interference.

 

The airline also has a disproportionately large workforce relative to the size of its fleet. The sale forms part of a broader plan to privatise loss-making state-owned enterprises.

 

Previous attempts to privatise PIA, dating back to the 1990s, failed due to resistance from employee unions and opposition from political parties.

How will the sale affect PIA’s future?

Selling the airline would help restructure it, as PIA urgently needs fresh funds to continue operations, Bloomberg reported. Over the next two years, the airline is expected to face a cash shortage of about ₹80 billion.

 

The sale is expected to bring new capital into PIA and help strengthen Pakistan’s aviation sector. A new owner would be able to invest in aircraft, services and operational improvements.

 

The buyer will also have the option to purchase the remaining shares later at a higher price. The deal includes PIA’s properties in cities such as Amsterdam, New York, New Delhi and Mumbai.