The match is on. PIA privatization bidding is on 23rd December with a live media broadcast. This is the second attempt by this government (overall third attempt) to privatize the national air carrier. The earlier process in October 2024 failed when there was only one bidder pricing at a small fraction of the then reserve price. The serious player at that time backed out due to legacy debt and taxation issues, which are majorly dealt with this time around.
Four bidders have been pre-qualified – Lucky Cement consortium (including Habib Ullah Khan and others), Arif Habib consortium (including Fatima Fertilizer and others), Fauji Fertilizer and Airblue. First two consortiums are being considered as serious in the same order, while the third player is eyeing to join the winning party and both consortiums are more than willing to have Fauji Fertilizer as a partner.
Both the interested parties have done their homework. More money and time is being spent by the Lucky group while Arif Habib consortium’s interest is growing day by day. They both have engaged international aviation consultants. Lucky is eyeing Turkey’s Pegasus as a technical partner while Arif Habib has hired Seabury Aviation Partners as a consultant.
The two serious parties have asked for several changes in the structure and the Privatization Commission has almost accepted all. There is no apparent reason for both to not participate. And the credit goes to the Privatization Commission, especially its minister and his core team, for the progress. However, old guards within the system still do not want the deal to go through for their own vested political interests.
Seeing the operational profit of privatization and the financial modeling by new members of the privatization board, some feel that the government may increase the reserve price, which was Rs 85 billion last year. Majority of money, around 90 percent, is to be injected into the privatized entity if 75 percent shares are to be transferred. In case of 100 percent, which is a wish of one group, the remaining 25 percent as green shoe option amount is to be transferred to the government.
The rumor is that expected reserve price could be Rs 90–100 billion. The government should not think of fetching higher amounts. It should look at the bigger picture, that is to privatize the white elephant, as the last big privatization was done twenty years ago. This could be a positive headline for Pakistan and pave the way for privatizing much more difficult SOEs in the energy sector.
The potential buyers are eyeing to turn around the airline, which used to be a star decades ago. The deal could be a confidence booster, as a transparent process is being run and value is likely to be added through international partners. The to-be buyers are bringing international aviation expertise and there will be spillovers as local talent is likely to develop.
However, if this attempt to privatize fails, the serious bidding parties may lose interest. The fate of PIA could become like Pakistan Steel Mills, just a liability for the government. And if it succeeds, this could be the watershed moment and usher in a new era of privatization.