PIA board of directors approve privatisation, bifurcation plan

KARACHI: The recently-constituted board of directors of Pakistan International Airlines (PIA) approved on Tuesday the privatisation and restructuring of the national flag carrier. 

According to the official announcement, the 83rd meeting of the PIA's board of directors was held on March 25 during which the scheme of arrangement for the airline's privatisation and restructuring was approved.

The board of directors will coordinate with the Securities and Exchange Commission of Pakistan (SECP), said the statement. 

Moreover, PIA has been bifurcated into two companies — PIA Corporation (PIAC) and PIA Holding. The PIAC will own the flying operations while the other one will own assets and liabilities.

The government had appointed Ernst & Young — a global financial advisory firm — to prepare the plan for the loss-making firm which completed its task during the caretaker setup.

The International Monetary Fund (IMF) has asked the Pakistani authorities to privatise the bleeding state-owned enterprises to revitalise the sick economy. The global lender wanted their governance to be improved and corruption to be controlled.

Under the E&Y plan — presented before the board — the voluntary retirement scheme was also discussed, the sources said, adding that the transaction advisor has also proposed to retire the employees who have four years of service left.

It is important to mention that the PIA's BoD has been inactive since October 2023 and the federal cabinet recently approved its reconstitution as it is mandatory to seek its approval for the major decisions regarding the company.

PIA privatisation plan

In the past, elected governments have shied away from undertaking unpopular reforms, including the sale of the flag carrier. But Pakistan, in deep economic crisis, agreed in June 2023 to overhaul loss-making SOEs under a deal with the Fund for a $3 billion bailout.

The government decided to privatise PIA just weeks after signing the IMF agreement.

The caretaker administration, which took office in August to oversee the February 8 election, was empowered by the outgoing parliament to take any steps needed to meet the budgetary targets agreed with the IMF.

"Our job is 98% done," former privatisation minister Fawad Hasan Fawad told Reuters when asked about the plan to sell the airline. "The remaining 2% is just to bring it on an excel sheet after the cabinet approves it."

"What we have done in just four months is what past governments have been trying to do for over a decade," Fawad said. "There is no looking back."

PIA had liabilities of Rs785 billion ($2.81 billion) and accumulated losses of Rs713 billion as of June last year. Its CEO has said losses in 2023 were likely to be Rs112 billion.