The Government said Tuesday that the new buyer of the International Airlines of Pakistan would require investing up to RS70 billion in the loss airline for a period of five years, but the final investment needs would be evaluated only after the audited accounts are available next month.
The secretary of the Privatization Commission, Usman Bajwa said that the new investors would require investing RS60 billion at RS70 billion during the five years. He made the statement during a meeting of the Permanent Committee of the Senate on Privatization, which was chaired by Senator Dr. Affan Ullah Khan of the PML-N.
Usman Bajwa said the new investment will be aimed at financial recovery, operational improvements and the increase in fleet size.
During the last failed attempt to privatize PIA, the government established the investment limit at $ 300 million and the new limit appeared on the lower side compared to the last time. One of the possible reasons can be the assumption of better profitability due to the opening of international routes to Europe and the United Kingdom and tax exemptions on the lease of aircraft.
Usman Bajwa said Pia decided to start flights to Manchester since August 14 after the United Kingdom raised a prohibition of PIA flights. The prohibition had been imposed after the last PTI government said that PIA pilots had false titles.
The prime minister on Privatization Muhammad Ali said after the meeting that the total airline investment requirements would be evaluated once the audited financial accounts for the period of the end of June are available in the middle of next month.
The privatization of the secretary said there were security concerns regarding PIA routes in North America, but efforts were being made to address and eliminate these concerns.
The investor will retain 85% of the amount of the offer to invest money in the airline. The government will obtain only 15% of the money from the offer.
The age of the PIA fleet has also increased to 18 and a half years and the new investor would have to double the fleet in five years, said the secretary. The CEO of Pia said earlier this month that the airline was currently flying 19 planes.
The Government had previously stated that the PIA showed a gain of RS26 billion last year, but a report from the Ministry of Finance broke the claim and declared that the airline, in fact, incurred a net loss of RS4.6 billion and an “accounting benefit” of RS26 billion due to the treatment of past losses as future assets “should not be interpreted badly as a sign of operational profitability.”
The Government wants to sell participations of 51% to 100% together with the management control. He had also tried to privatize PIA last year, but ended up receiving an offer of RS10 billion against RS85.03 billion minimum price.
The Permanent Committee also reviewed a report that highlighted the complaints of Piacl pensioners. It was also revealed that pension liabilities for 6,625 PIA employees amounted to RS14. 9 billion. Expressing concern, the senator of President Dr. Affan Ullah Khan’s committee commented that the amount of the pension was extremely low, asking how people are expected to survive.
In response, the Privatization Ministry declared that pension policies are reviewed and updated regularly according to allocations. The president directed that the wise and scale pension details, including the amount received and the distribution process, will be presented at the next meeting of the committee
The secretary said that the due diligence process for prequalified companies has begun and that field visits would begin soon. He said that from next week; Prequalified companies will make visits to the site and participate in expert sessions. These sessions will include informative sessions about conditions and aircraft routes, as declared by Usman Bajwa.
The officials of the Privatization Commission said that PIA’s current business model was not sustainable. They said that the perspectives of privatization have increased after RS45 billion were withdrawn worth more liabilities from the PIA balance and parked in the new holder company.
They said that the last failed attempt will not affect the new bidding process. The secretary of the secretary said the government was before providing RS100 billion annually to keep PIA in operation.
The committee was informed that the Pakistan Mineral Development Corporation (PMDC) is not yet included in the privatization list. Senator Zeeshan Khanzada questioned why this institution was being privatized.
The senators also consulted the basis of the privatization decision, noting that the Ministry of Petroleum lacks the mandate of privatizing the PMDC.
With respect to Zarai Taraqiati Bank Limited (ZTBL), the committee that is included in phase one of the privatization list approved by the Government in August 2024. ZTBL is currently currently hiring a financial advisor was informed.
The President’s committee questioned the delay in hiring a financial advisor, noting that the last meeting was held on January 31, when the offers were presented and evaluated. He expressed concern that almost six months have passed without the end of the appointment. The Ministry responded that the process generally takes six to eight weeks, but was delayed due to the high demands of rates in almost RS5 billion, which is forcing a restart of the process.
