Pakistan’s PIA Attracts Single Bid at Fraction of Expected Rs85 Billion

In a recent development, Pakistan International Airlines (PIA) has attracted an Rs10 billion bid from its sole bidder, Blue World City, for a stake in the struggling national carrier. This offer falls significantly short of the government’s minimum expectation of Rs85 billion.

Despite pre-qualifying six groups for the bidding process in June, only Blue World City, a real estate development company, participated. The government, under Prime Minister Shehbaz Sharif, is looking to offload a 51-100% stake in PIA as part of a broader plan to reform loss-making state enterprises and raise funds under a $7 billion IMF program. The Privatisation Commission has requested the bidder to match the minimum price, but Blue World City stood firm, stating, “We wish the government all the best if they don’t want to accept our bid.”

According to Mohammed Sohail, CEO of Topline Securities, the gap between the government’s reference price and the current bid could necessitate either accepting the bid or re-evaluating the privatisation strategy for PIA.

Three pre-qualified groups that opted out cited concerns about policy continuity, especially under a coalition government, and the likelihood of a policy shift with a new administration. Recent moves by the government, such as the termination of power purchase agreements and re-negotiations of sovereign guarantees, have raised questions about the reliability of long-term contracts in Pakistan. Sakib Sherani, economist and head of Macro Economic Insights, noted that these changes introduce risks for foreign and local investors, even with sovereign guarantees.

Additional factors affecting bidder interest included high taxes on the aviation sector, PIA’s legacy issues, and inconsistent government communication. Privatising PIA has remained a politically sensitive decision in Pakistan, largely due to anticipated layoffs and the airline’s tarnished reputation.