Pakistan International Airlines (PIA) is expected to be run by a new owner from April next year and receive fresh capital under a deal to privatise the flag carrier, the country's privatisation chief said on Wednesday.
A consortium headed by the Arif Habib Corporation emerged as the top bidder in a live-televised auction for a 75% stake in PIA on Tuesday, marking a breakthrough for the government's long-delayed privatisation of the carrier.
The Arif Habib consortium offered Rs135 billion ($482.14 million), surpassing a government reserve price of 100 billion rupees, in a sharp turnaround from last year's failed sale attempt.
Muhammad Ali, the privatisation adviser to the prime minister, told Reuters in an online interview that the state expects a new owner to be running the airline by April, subject to approvals.
The process now moves to final approvals by the Privatisation Commission board and the cabinet, expected within days, with contract signing likely within two weeks and financial close after a 90-day period to meet regulatory and legal conditions.
Ali said the government would receive about Rs10 billion in cash upfront and retain a 25% stake valued at around Rs45 billion.
The deal was structured to inject fresh capital into the airline rather than simply transfer ownership, he said.
"We did not want a situation where the government sells the airline, takes its money and the company still collapses," Ali said.
The winning consortium also comprises fertiliser maker Fatima, private school network City Schools and real estate firm Lake City Holdings Limited.
Ali said Fauji Fertiliser Company, a military-run conglomerate, did not bid but could still join the winning consortium as a partner, noting the buyer can add up to two partners - including a consortium partner or a foreign airline - if they meet the qualifying criteria.
Allowing partners adds financial strength and could bring global aviation expertise, he said.
IMF PRESSURE
Ali said safeguards, including retained earnest money and an additional payment on signing, would allow the government to move to the second-highest bidder if the deal fails to close.
On labour, Ali said the buyer must retain all employees for 12 months after the transaction, with contracts unchanged, adding that the PIA workforce has already shrunk in recent years.
The sale is closely watched by the International Monetary Fund, which has pressed Pakistan to halt losses at state-owned enterprises.
Ali said the privatisation was a key test of Pakistan's reform credibility with the IMF, adding that failure to offload loss-making state firms risked renewed pressure on public finances.
He said closing the deal would signal momentum on reforms and privatisations, adding that the government was working through a pipeline of future transactions once PIA closes.
Reuters