With just two days to go for general elections, the federal cabinet on Tuesday approved the restructuring of national flag carrier Pakistan International Airlines (PIA), state-run Radio Pakistan reported.

The development comes after the Election Commission of Pakistan (ECP) asked the government to “refrain from taking any further steps including the signing of an agreement” about the privatisation of PIA or its entities till its formal clearance.

In a letter to the cabinet secretary, the electoral watchdog had reminded the federal government of Article 230 of the Constitution, which explains the roles and limitations of the caretaker government and sought all relevant cabinet documentation, sources told Dawn.

The ECP had directed the government to “provide all relevant documents prepared for approval of the Cabinet containing comprehensive privatisation programme in relation to the privatisation of PIA” to the ECP as required under Clause 5(b) of the Privatisation Commission Ordinance, 2000 and Section 230 of the Constitution.

According to Radio Pakistan, the federal cabinet — chaired by caretaker Prime Minister Anwaarul Haq Kakar in Islamabad today — consented to the appointment of a financial advisor for the financial and administrative reorganisation of PIA.

“The cabinet was informed that PIA will be bifurcated into two companies namely TopCo and HoldCo. Basic engineering operations, ground handling, cargo, flight kitchen and training will be attached with TopCo, while departments like PIA Investment, Precision Engineering Complex and other subsidiaries as well as properties will be put under HoldCo,” the report said.

It highlighted that these measures would help attract investors towards PIA.

Moreover, the cabinet also directed its sub-committee on privatisation to dispose of matters related to state-owned entities’ claims of undecided amounts on the national flag carrier at the earliest, the report added.

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 to overhaul loss-making state-owned enterprises under a deal with the International Monetary Fund (IMF) 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 Feb 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 per cent done,” Privatisation Minister Fawad Hasan Fawad had told Reuters earlier this week. “The remaining 2pc is just to bring it on an excel sheet after the cabinet approves it,” he added.

Embroiled in crisis

PIA had liabilities of Rs785bn ($2.81bn) and accumulated losses of Rs713bn as of June last year. Its CEO said losses in 2023 were likely to be Rs112bn.

Besides its losses and debt, PIA’s governance and safety standards have been questioned by global aviation authorities for some years.

Besides its losses and debt, PIA’s governance and safety standards have been questioned by global aviation authorities for some years.

In early 2020, Czech and Hungarian air force jets were scrambled to intercept a PIA flight with 300 people on board as it went astray due to an “avoidable human error” by its pilot, according to a previously unreported confidential report by a PIA inquiry board, which was reviewed by Reuters.

In May that year, the crash of a PIA plane in Karachi killed nearly 100 people and a fake pilot licence scandal erupted later in 2020.

The scandal led to the European Union Aviation Safety Agency (EASA) banning the national carrier from flying to its most lucrative routes in Europe and the UK.

The 2020 ban is still in place and has cost the airline nearly Rs40bn in revenue annually, according to government records presented in parliament.

The airline has been pleading with EASA to lift the ban even provisionally, but to no avail, according to correspondence between it and PIA reviewed by Reuters.

The financial crisis has also led to seizure of PIA aircraft by creditors in recent months, according to the airline. One aircraft was taken at Kuala Lumpur airport for non-payment of lease fees, and another in Toronto for non-payment of ground handling, PIA said.

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