The Pakistan Government has granted approval to initiate privatization of Pakistan International Airlines (PIA), in an effort to take the flag carrier out of substantial losses.
The decision marked the reversal of a political choice made seven years ago, which played a role in the significant financial losses suffered by the airline.
The Cabinet Committee on Privatization (CCoP) meeting, headed by Finance Minister Ishaq Dar, marked a momentous amendment in the law by Parliament, allowing PIACL (Pakistan International Airlines Co. Ltd) to be included in the ongoing privatization initiative.
“The CCoP, after deliberation, decided to include PIACL in the list of active privatization projects of the ongoing privatization program, following an amendment in the law by Parliament,” the ministry stated.
This decision is expected to pave the way for potential buyers to acquire 100% stakes in PIAC, by removing the previous restriction of not transferring management control and the 51% ownership condition.
PIA, having experienced substantial cumulative losses amounting to Rs742 billion, has been grappling with financial challenges for some time. Recent figures indicate a loss of Rs110 billion during the current government’s tenure, contributing to the total loss of Rs80 billion last year, which is projected to increase to Rs112 billion.
Privatization to avert losses
Earlier on Friday, Pakistan’s Aviation Minister, Khawaja Saad Rafique, had sounded a warning about Pakistan International Airlines (PIA)’s precarious financial state.
Rafique’s concern stemmed from a projected loss of up to Rs259 billion (around $1 billion USD) for PIA by the next decade unless immediate measures are taken. This accentuated the urgency for comprehensive reforms, potentially including transferring administrative control to the private sector.
Presenting the “The Pakistan International Airlines Corporation (Conversion) (Amendment) Bill, 2023,” Rafique had stressed the need for foreign direct investment (FDI) and private sector involvement to rescue PIA from its staggering debt of Rs742 billion ($2.6 billion USD).
Roosevelt Hotel privatization
The CCoP also granted approval to appoint a financial advisor for the renowned Roosevelt Hotel, a PIA-owned landmark situated in New York. The Privatisation Commission is now set to initiate the process of hiring a financial advisor for the Roosevelt Hotel’s revitalization project. The commission will soon begin advertising this opportunity internationally.
This restructuring process marks a step towards unlocking the hotel’s potential for mixed-use development. The hotel had been leased to the New York City government for a three-year period at an affordable rent, which is significantly lower than prevailing market rates.
Key Facts
- PIA’s journey began in 1955 with the merger of Orient Airways
- In 1955, the first scheduled international service to London via Cairo and Rome started
- “Golden years of PIA” started in 1959, becoming a leading carrier in 6 years
- PIA introduced Boeing 707 aircraft in Asia in 1960
- PIA set a record for the London-Karachi flight of six hours, 45 minutes, and 33 seconds in 1962, unbroken to this day
- The service deteriorated in the late 1990s with allegations of political appointments, corruption, favoritism and nepotism.
- Currently, PIA’s financial performance per employee is the world’s worst
- Employee-to-aircraft ratio reduced to 260 in 2022 compared to 550 2017