PIA to be split into two, Gulf airlines may buy core business

Published September 25, 2014
A Pakistan International Airlines (PIA) plane prepares to take off at Alama Iqbal International Airport in Lahore - Reuters/File
A Pakistan International Airlines (PIA) plane prepares to take off at Alama Iqbal International Airport in Lahore - Reuters/File

NEW DELHI: Pakistan plans to split ailing national flag carrier PIA into two companies and sell control of the core business to a global airline over the next 18 months, but political opposition to the sell-off will be intense, the country's privatisation czar said.

Financial advisers are now in talks with several airlines about taking over cash-strapped Pakistan International Airlines , which has some 17,000 employees but just 36 aircraft - and 10 of them are grounded due to a lack of spare parts.

Mohammad Zubair told Reuters in an interview during a visit to New Delhi on Wednesday that no decision had been taken on the buyer, but he mentioned Emirates Airline, Etihad and Qatar Airways - the Gulf giants that dominate the regional sector - as possibilities.

“It's going to be the most difficult sale,” said Zubair, who is aiming to raise around $4 billion this fiscal year from the sale of stakes in several companies, anticipating demands that the government hold onto PIA and nurse it back to health itself.

“If we are saying that for 25 years PIA has been going from bad to worse, we can't claim that we are business-savvy and we can turn it around,” he said. “Anyone who thinks that the government can fund it is living in a fool's paradise.”

Zubair, a former IBM chief financial officer for the Middle East and Africa, was tapped by Prime Minister Nawaz Sharif to take charge of a central plank of economic reforms promised by Islamabad in return for a International Monetary Fund bailout.

Pakistan announced this week it will seek to raise about $815 million through a sale of shares in Oil & Gas Development Co (OGDC), its largest offering in eight years.

Zubair said investors are returning to Pakistan after weeks of anti-government protests in Islamabad that have now fizzled out, and the OGDC deal representing 7.5 percent of the company's share capital would be a test of their confidence.

The OGDC sale is part of a sell-off drive to raise capital for an economy that has been crippled for years by power shortages, corruption and militant violence, and to staunch huge losses from dysfunctional companies. Zubair said the losses of power distribution companies alone are equivalent to one-sixth of the government's fiscal revenues.

Next on the block will be the government's 40 percent stake in Habib Bank Ltd, which will be sold in two stages between November and next March, for around $1.2 billion.

Also ahead is the sale, targeted at domestic investors, of the state's 7.5 percent stake in Allied Bank Ltd, for around $150 million, Zubair said.

'Perhaps I'll Arrive'

Once a source of pride for the country, PIA's decay has made it the butt of jokes, one of which goes that its initials actually stand for 'Perhaps I'll Arrive'.

Flights are regularly cancelled and engineers say they have to cannibalise some planes to keep others flying.

Related: PIA airhostess held with drugs

Last year a PIA pilot was jailed in the United Kingdom for being three times over the alcohol limit before he was due to fly. Pakistani media reported that another pilot delayed a New York-bound flight for more than two hours as he waited for a sandwich delivery.

Over the years, critics say, governments have manipulated state corporations like PIA for political and financial gain, giving jobs to so many supporters that the size of the workforce has become unsustainable in the face of mounting losses.

Zubair said that PIA's employee-to-aircraft ratio, at around 600, is one of the worst in the world and keeps going up as more planes are grounded.

Under his plan, the airline will be spun off as a separate entity and PIA's other interests - such as ground-handling, catering, hotels and even a poultry business - would go into a holding company that would be retained by the state.

To avoid mass layoffs that would run into political opposition the holding company would absorb all the employees, keep a share in the airline to earn dividend income and then sell off each of its interests individually over time.

Zubair said he could not proceed with the sale of PIA as quickly as other companies, partly because parliament may have to approve legislation allowing it to pass into private hands.

“It's more politically sensitive,” he said. “PIA is not going to be sold just like that.”

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Crisis conference
Updated 04 Feb, 2023

Crisis conference

PTI's refusal to engage with the govt in such testing times will only be seen as sign of ideological bankruptcy.
Revenge politics
04 Feb, 2023

Revenge politics

A SENSE of déjà-vu prevails as cases pile up against PTI politicians, many of whom, along with their allies and...
Inappropriate remarks
04 Feb, 2023

Inappropriate remarks

OFFICIALS of the state, especially when representing the country at international forums, need to choose their words...
Delay in the offing?
Updated 03 Feb, 2023

Delay in the offing?

Govt must realise that political stability in the country cannot be achieved by extra-constitutional actions.
Divisions in PML-N
03 Feb, 2023

Divisions in PML-N

DISCORD and drama in PML-N ranks escalated this week when Shahid Khaqan Abbasi revealed he no longer holds a party...
Wikipedia ‘downgrade’
03 Feb, 2023

Wikipedia ‘downgrade’

ATTEMPTS to police the internet by states, often by giving opaque justifications for the action, are never a good...