Is Pakistan trying to sell its debt-ridden national carrier, PIA, to Qatar?

Pakistan may sell its national carrier, Pakistan International Airlines (PIA), to a foreign government. Reports in Pakistani media say Qatar or Abu Dhabi could be the potential buyer of the debt-strapped airline.

The privatisation of state-run PIA is part of the Pakistan government’s efforts to offload a 51-100 per cent stake in the national carrier. Earlier this year, local media reports said 10 companies submitted bids to buy a majority stake in PIA.

Let’s take a closer look.

Will PIA go to foreign govt?

Pakistan is planning to sell PIA to a foreign government under a government-to-government (G2G) agreement, as per an ARY News report.

Qatar or Abu Dhabi are being seen as potential buyers, sources told the Pakistani news channel.

The Strategic Investment Facilitation Council (SIFC), a new body supported by the Pakistani military, is mulling to invite expressions of interest (EOIs) from international investors by November 30.

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Negotiations with Qatar or Abu Dhabi could be expedited with the help of pre-decided terms and conditions, as per the ARY News report.

Qatar has expressed “interest” in buying PIA for over $2 billion, a senior official told Pakistan’s The Nation newspaper on the condition of anonymity.

Privatisation Minister Fawad Hasan Fawad has held talks with officials from Qatar and meetings were underway for a smooth sale of the national carrier, as per the Pakistani newspaper.

An ARY News report in April said that investors from Qatar, Abu Dhabi and Saudi Arabia were briefed on the privatisation of PIA, including the “profitable” investment in the airline’s international routes.

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In March, Pakistan ’s aviation ministry claimed seven international investors showed interest in PIA and three airports put up on sale.

An adviser for the deal told Pakistan’s ministry of defence production and aviation that “seven international investors including Germany, France, Netherlands, Qatar, UAE, Malaysia and Turkiye have shown their interest”, along with local groups, Reuters cited the statement as saying.

Efforts to sell PIA

PIA is part of the Pakistan government’s plan to sell off over 80 of its state-owned enterprises as envisaged under a $7 billion International Monetary Fund (IMF) programme.

On Wednesday (November 13), Pakistan rejected the sole bid for a stake in the national flag carrier . The final bidding process had attracted only one bid of Pakistani Rupees (PKR) 10 billion ($36 million) for a 60 per cent stake in PIA, Reuters cited the privatisation ministry as saying.

The bid by the real estate firm Blue World City was turned down, as it was well under the minimum price of PKR 85 billion set by the government.

“The privatisation issues will be completed in accordance with the laws and regulations and keeping in view the national interest before us because the final decision on the issues of privatisation of PIA and other institutions has to be taken by the cabinet committee,” the federal minister for Privatisation, Abdul Aleem Khan, said in a statement.

As per Pakistan’s Dawn newspaper, the Khyber Pakhtunkhwa government has shown interest in buying PIA. Earlier this month, it said it was ready to surpass the PKR 10 billion bid by the Blue World Consortium. However, the Pakistani government is yet to respond to the offer.

The misfortunes of PIA

PIA has lost over $3.6 billion in the past two decades. Once one of the best airlines in the region, it is now ridden with debt. From overstaffing to corruption, there is a long list of PIA’s woes.

The national airline incurred a loss of PKR 75 billion in the nine months ending September 2023. Amid pressure from the IMF to end subsidising money-losing entities, cash-strapped Pakistan has ramped up efforts to sell the airline.

The government tried to privatise PIA in 2016 but failed in its efforts. A strike by employees that triggered a weeklong flight suspension had forced the government to abandon its plans.

However, this time, the military-backed SIFC is advocating for the national carrier’s sale.

“What makes things different now is that the military is actively pushing for this reform,” Michael Kugelman, director of the South Asia Institute at the Wilson Center in Washington, told Nikkei Asia.

Pakistan is eyeing to increase its foreign direct investment (FDI). To sell PIA to foreign investors, the government is taking steps to identify and resolve any ‘bottlenecks’ in its privatisation bid.

It remains to be seen how long it will take for Pakistan to privatise its financially struggling airline.

With inputs from agencies