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EDITORIAL: Yet another delay appears to be on the cards with respect to the privatisation of Pakistan International Airlines (PIA) as potential buyers have brought up a plethora of concerns regarding the terms the government had set in the proposed shareholder and sale-purchase agreements.

Initially, a target was set to privatise the national carrier by June-July 2024, which was later extended to October 1, and then to October 31.

With new demands emerging from the bidders, it’s likely that even this latest deadline will be missed, as potential buyers are reportedly seeking tax breaks, a reduction in the number of employees they must take on, and further clarity on the airline’s liabilities.

More significantly, they have also expressed unwillingness to accept certain performance targets set by the government, including increasing the number of aircraft, flying on agreed domestic and international routes, and making a guaranteed investment of $500 million in the airline.

The matter of privatising PIA has always been a political hot potato, passed between various governments, each unwilling to take decisive action due to the potential public backlash in case of a botched sale. This has put a spotlight on the complexity of privatising a state-owned entity mired in inefficiency and burdened by huge, unsustainable debt/losses.

Had PIA’s privatisation been undertaken years earlier, it might have been a simpler endeavour; instead the delay has allowed its losses and liabilities to compound, complicating the government’s efforts to protect its interests and those of the thousands of PIA employees at risk of losing their jobs.

The current decrepit state of the national carrier makes it imperative for the government to acknowledge the bitter reality: no sensible buyer would consider acquiring it unless offered significantly more favourable terms than currently on offer.

Some targets set for potential buyers are in clear need of recalibration. For example, expecting the buyer to operate on pre-determined routes is questionable, as PIA’s routes, apart from perhaps a couple, aren’t as lucrative as believed. In fact, given the billions in losses and liabilities, any governmental expectation to generate significant revenue from the privatisation process is certainly misguided.

The aviation business is a highly specialized and after deregulation globally, extremely competitive. A new entrant with no or little prior experience of the said field can hope to master in a short period.

As once very aptly put by Virgin Atlantic’s Sir Richard Branson, “If you want to be a millionaire, start with a billion dollars and launch a new airline.” The ideal buyer, then, for PIA would’ve been an existing airline with at least some history of having operated a viable aviation business.

However, most of the bidders are either new entrants to the field, or financially strong entities that have negligible experience and knowledge of running an airline. The enormity of the challenge posed by PIA has led to an inevitable chipping away at the government’s terms by the bidders, making it increasingly likely that it will have to cede some ground with respect to the targets set for the potential buyer.

The government’s apprehensions about possibly being accused of selling off the family silver for peanuts are understandable, but nevertheless a reassessing of the terms set out in the proposed agreements is in order.

At the same time, it must also be ensured that this process doesn’t turn into an exercise of cannibalization of the airline, with its individual assets being sold off. That would be contrary to what a successful privatisation process looks like, where PIA continues to operate after being re-profiled and restructured by the new owners.

Ultimately, the government needs to ensure that adequate investments are made in PIA by the successful bidder, the interests of the workforce are protected as much as possible and the airline is eventually able to function as a viable business.

Copyright Business Recorder, 2024

Comments

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IMTIAZ CASSUM AGBOATWALA Oct 09, 2024 07:41am
Looks like another disaster in the making . Only the private sector which has love for commercial aviation can make it a success .
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KU Oct 09, 2024 10:41am
It's not a herculean task if we take out the corrupt elements from equation. But this is a fine example of 'enemies of state' n they exist across other public sector loss making entities.
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Mumtaz Malik Oct 10, 2024 11:45am
The government has shortlisted Fly Jinnah, Airblue, Arif Habib Corporation, Blue World City, Pak Ethanol (Pvt) Consortium and YB Holdings Consortium for the privatization of PIA.
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Mumtaz Malik Oct 10, 2024 11:45am
The government had initially planned to privatize the airline by June-July 2024 but later extended the deadline to October 1.
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Mumtaz Malik Oct 10, 2024 11:46am
PIA - Pakistan International Airlines (PK, Islamabad International) has lost PKR21. 8 billion Pakistani rupees (USD78. 2 million)
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Mumtaz Malik Oct 10, 2024 11:47am
Due to the prolonged maintenance of some of its aircraft over more than ten years, an Auditor General's report said.
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Mumtaz Malik Oct 10, 2024 11:48am
One of the major challenges facing PIA is its staggering debt burden of Rs 800 billion, including interest payments.
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Ligmanutz I Khan Oct 10, 2024 12:58pm
Incompetency and corruption makes everything herculean task.
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Taruq sultan Oct 10, 2024 08:41pm
The buyers have gone bonx, they want PIA at peanuts price to sell it later to a worthy buyer free from all liabilities..Smarts nuts to be thrown in a wastepaper basket...
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A. Chak Oct 10, 2024 10:34pm
The way PIA is functioning, peanuts , is all that can be expected.
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