Pakistan requests interest in buying a PIA stake.

 

    As part of the changes recommended by the International Monetary Fund (IMF), Pakistan is offering for sale a stake ranging from 51% to 100% of its loss-making national airline, Pakistan International Airlines, the privatization panel announced on Tuesday. The sale of the flag carrier is expected to be highly contentious, hence past elected regimes have avoided it. However, the privatization process will help Pakistan in its efforts to pursue further financing talks with the IMF.

Sighting a PIA sell-off, the BoD takes a significant action.

            The panel hired EY Consulting as the deal's financial consultant and set a deadline of May 3rd for declarations of interest in PIA, which has hundreds of billions of rupees in arrears. The panel also announced the appointment in a newspaper ad.The Privatization Commission stated on its website that "the restructured PIA is being offered to potential investors in its new, 'debt-lite' structure for a 51%-plus stake." After completing every step of the transaction, the panel expected to finalize a share price agreement by June 24, it stated.

 

"There is a chance to invest in a full-service airline with the restructured PIA."

The panel states that PIA currently owns a 23% share of Pakistan's aviation market. With continued growth, the airline is expected to surpass 30% in the past. PIA loans currently total Rs429.267 billion, NA reported. Due to a lack of direct flights to destinations, the airline—which has a fleet of 34 aircraft, including 17 Airbus A320s, 12 Boeing B777s, and 5 ATRs—loses business to Middle Eastern carriers, which hold a 60% market share. The airline has agreements in place for landing slots at key airports such as London Heathrow and air service with 87 countries.

Reorganizing

    Through corporate restructuring, the operational subsidiary will be able to relieve a substantial amount of legacy debt by dividing aviation-related operations from non-core components. .

Government and domestic lender banks successfully conclude PIA's commercial debt negotiations Liabilities of 603 billion rupees ($2.2 billion) will be eliminated through restructuring, leaving 203 billion rupees ($730 million) on the purchased company's balance sheet.

The airline loses almost 40 billion rupees a year in income because of the continued embargo, the government has reported to parliament.The investment presentation stated, "PIA plans to restore its network, starting routes into the United Kingdom, Western Europe, and the United States."

 

    In 2023, PIA broke even at the earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) level. The group projected that through 2024, this performance level would continue. Global aviation authorities have, however, been questioning PIA's governance and safety standards for a while now, in addition to the losses and debt. Following a near-fatal PIA plane disaster in Karachi in 2020 and an incident involving a forged pilot license, the European Aviation Safety Agency (EASA) prohibited the airline from running its most lucrative routes across Britain and Europe.

The IMF and privatization

            The ownership offer, which includes management control, comes after Pakistan agreed to IMF proposals for budgetary restraint in exchange for a $3 billion rescue in June. PIA privatization: approved "scheme of arrangement" Pakistan is currently seeking to begin negotiations with the lender for a medium-term program essential to supporting an economy in trouble because of rising inflation, low foreign exchange reserves, and significant external funding requirements. State-Owned Enterprises (SOEs) should undergo changes that make ownership and government roles more explicit, according to the IMF. The airline's shares, which had surged more than 403% during the previous six months, fell 7.5% during intraday trading to reach the lower limit.