TLDR:
PIA may be sold to Gulf state
Foreign investor interest heightened after auction
Potential EU ban lift under discussion
ISLAMABAD (The Thursday Times) — The Pakistani government is gearing up to sell Pakistan International Airlines (PIA) to a Gulf state in a bid to privatise its struggling national carrier. After a failed auction last month that attracted a lone bid from a local real estate firm far below the PKR85 billion reserve price, officials have recalibrated their strategy. Reports indicate the government is seeking to negotiate a government-to-government sale, targeting Gulf nations like Qatar or Abu Dhabi for potential stakes of 51% to 100%.
PIA, an airline with historical significance but long burdened by financial woes, remains a crucial yet contentious asset. This new initiative comes amid a backdrop of persistent operational losses, compounded by an EU ban preventing Pakistani carriers from flying into European airspace since 2020. The ban, imposed due to safety concerns and exacerbated by incidents like a crash in Karachi and pilot credential irregularities, has severely impacted PIA’s financial health, given the significant revenue share generated by European routes.
Strategic shift to Gulf investors
The recent attempt to auction PIA proved challenging, reflecting the difficulties in attracting viable bids within Pakistan’s domestic sphere. Only one serious bid was presented by Blue World City, a real estate developer, which fell drastically short of expectations. The government’s Strategic Investment Facilitation Council (SIFC) is now tasked with approaching foreign investors, specifically from Gulf countries, in an effort to establish a more solid foundation for PIA’s future. The Council aims to secure interest by November 30, with focus placed on government-backed entities in Qatar or Abu Dhabi, both known for investing in foreign markets and potentially offering a lifeline to Pakistan’s embattled airline sector.
Challenges with safety compliance and EU ban
While discussions with Gulf investors are underway, Pakistan’s Civil Aviation Authority (PCAA) continues its struggle to restore EU access. A ban on PIA’s flights to Europe has been in effect since 2020, following an EU review citing concerns over Pakistan’s aviation safety standards. Despite improvements made by the PCAA, recent audits indicate persisting gaps in operational compliance and staffing, notably in the directorate responsible for flight standards. With a meeting scheduled with European Aviation Safety Committee (EASC) officials on November 19, the government remains hopeful for a change in status that could lift the ban, a move critical for restoring much-needed revenue streams from European flights.
PIA’s financial and operational constraints
Selling PIA remains a priority for the government, with multiple meetings held this week to explore feasible avenues for a successful sale. Given the geopolitical ties and economic implications, a Gulf state-backed acquisition is viewed as a potential solution to PIA’s long-standing financial and regulatory issues. This pivot underscores Pakistan’s recognition of the strategic leverage and investment capacity Gulf nations possess. However, the government must weigh the benefits of a Gulf-led takeover against potential public scrutiny and operational changes that may follow, all while addressing safety standards to possibly reopen the doors to Europe.