The government’s initial attempt to privatize Pakistan International Airlines failed. The only bid presented was Rs10 billion, significantly lower than the expected Rs85 billion.
Blue World City, a real estate firm, declined to meet the government’s set minimum of Rs85.03 billion for 60% ownership.
Read: Only One Buyer Steps Up in PIA Privatization Bidding
Blue World City proposed Rs10 billion at this public auction, merely 12% of the endorsed Rs85 billion by the Cabinet Committee on Privatization.
The base price was $305 million in U.S. dollars, and the offer was a mere $36 million.
Before the bid opening, the Privatisation Commission board and the Cabinet Committee on Privatization convened. No government ministers attended the ceremony; only two federal secretaries attended.
Following recommendations from the Privatisation Commission board, the Cabinet Committee on Privatisation set the sale price for 60% of the shares at Rs85.03 billion. The government invited the sole bidder to match this price, which Blue World City declined.
Saad Nazir, owner of Blue World City, stated, “After considering the government’s price, we chose to submit our highest offer of Rs10 billion.”
Only Blue World City proceeded with the bidding out of six pre-qualified entities. The others withdrew, citing unacceptable government terms regarding tax obligations and other investment requirements.
This marked the government’s first significant attempt to privatize its fourth-largest loss-making entity, ending abruptly at the bidding stage. The government segregated approximately Rs 625 billion of PIA’s debt into a separate entity to enhance the deal’s attractiveness.
Post-separation, PIA was left with liabilities of Rs202 billion against assets of approximately Rs163 billion, assessed at book value. Yet, the bidders were reluctant to assume tax and contingent liabilities.
This unsuccessful privatization could influence the government’s future privatization plans.
The government initially offered a 51% to 100% stake in the airline but then decided on 60%.
The government rejected the bidders’ requests for tax reductions, offering a decade-long exemption from new taxes. The new owner would also need to reduce the average fleet age from 17 to 10 years within five years, necessitating new aircraft.
Blue World City’s bidding consortium included Blue World Aviation and IRIS Communication Limited.
