Pakistan has been indulged in efforts to privatize its financially struggling national airline, Pakistan International Airlines (PIA). However, things have gone downhill, with a sole bidder was interested to buy the airlines, that fell short of expectations.
In a bid held on Thursday, Blue World City, a real estate development company and the sole bidder, proposed just PKR 10 billion (approximately ₹30.25 crore) for a 60% stake in PIA. This bid, far below the government-set minimum price of PKR 85 billion, raises questions about the viability of the government’s privatization plan and its impact on Pakistan’s economic reforms.
Pakistan’s government has sought to privatize PIA and other unprofitable state-owned enterprises to meet conditions imposed by the International Monetary Fund (IMF) as part of a $7 billion bailout package. The decision to privatize PIA stems from its staggering debt, mounting operational costs, and an aging fleet, which have rendered the airline unprofitable. Despite owning assets valued at around PKR 152 billion, PIA has struggled to maintain financial sustainability due to a workforce of over 7,000 employees, debt obligations amounting to billions of rupees, and its inability to operate in key markets such as the European Union, where it has been banned since 2020.
The government initially pre-qualified six potential bidders in June, hoping for a competitive process to maximize the airline’s sale price. However, only Blue World City participated in the final bidding, with five others opting out due to stringent government conditions concerning tax liabilities, guaranteed investments, and employee retention.
Blue World City’s PKR 10 billion offer fell drastically short of the government’s expectations. According to reports, the government aimed to secure at least PKR 85 billion from the sale of the 60% stake.
Despite this, the chairman of Blue World City, Saad Nazir, stood by the bid, stating, “We have considered the government price and decided to stand with our best price of PKR 10 billion.” Nazir suggested he would involve Chinese and Turkish investors to help rejuvenate PIA if the bid were accepted.
Blue World City’s Chief Operating Officer Seham Raza expressed disappointment over the lack of competition in the bidding process, lamenting the withdrawal of other potential buyers. “I wished there would have been healthy competition and feel sad that all other bidders have pulled out,” Raza said, highlighting the challenges facing PIA’s privatization effort.
Despite government efforts to attract interest, PIA’s issues have dissuaded most investors. The airline’s workforce includes over 2,400 daily-wage employees, and any prospective buyer would be required to make significant investments between $500 million and $700 million to revamp PIA’s operations. Additionally, bidders requested reduced duties and tax waivers, which the government ultimately declined, further complicating the sale process.
Moreover, PIA’s current liabilities, such as high employee costs and outdated aircraft, pose challenges to any turnaround strategy. Aviation industry experts caution that substantial financial and managerial input is needed to transform PIA into a profitable entity, given the airline’s existing liabilities and operational inefficiencies.
The failed attempt to secure a competitive bid for PIA indicates that the airline’s privatization process may be a non-starter, leaving the government with tough decisions on how to proceed. Without sufficient buyer interest, the state may have to consider alternative options to improve PIA’s operational and financial outlook.
This setback not only impacts Pakistan’s plans to privatize PIA but also adds pressure to meet IMF requirements aimed at revamping Pakistan’s struggling economy.
PIA’s failed privatization underscores the challenges the government faces in reforming its state-owned enterprises, many of which operate under similar financial strain.
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