Arif Habib–led consortium wins open auction with Rs135bn bid for 75% shares

Rs135bn Bid Seals First Major Privatisation in Two Decades

The federal government on Tuesday completed the privatisation of Pakistan International Airlines (PIA), selling a 75% stake in the national flag carrier to an Arif Habib–led consortium, marking the first major privatisation transaction in nearly 20 years.

The consortium comprising Arif Habib, Fawad Ahmed Mukhtar, Gohar Ejaz, and Aqeel Karim Dhedhi submitted the highest bid of Rs135 billion during the 13th round of open auction, surpassing a competing group led by Muhammad Ali Tabba.

Out of the total bid value, the government will receive Rs10.1 billion in cash, while the remaining amount will be invested directly into PIA to support its revival, according to the prime minister’s adviser on privatisation, Muhammad Ali.

Competitive Bidding and Disqualifications

Air Blue was disqualified from the bidding process after offering Rs26.5 billion, significantly below the government’s minimum price of Rs100 billion. The reserve price was set lower than the previous failed attempt, when the government sought Rs85 billion for 60% shares while the airline carried negative equity.

The bidders collectively valued PIA at Rs180 billion ($640 million) for 100% equity.

Heavy Fiscal Cleanup Before Sale

To facilitate the transaction, the government removed nearly Rs670 billion in liabilities from PIA’s balance sheet, a burden now transferred to taxpayers. For the current fiscal year alone, debt servicing costs are estimated at Rs35 billion, expected to continue for at least six years.

Additional incentives extended to bidders included:

• Waiver of 18% sales tax on aircraft leasing
• Rs36 billion in tax credits
• Extended timelines to clear over Rs33 billion in dues to the Federal Board of Revenue (FBR) and the Civil Aviation Authority (CAA)

Payment Structure and Future Ownership Options

The winning consortium will deposit two-thirds of the bid amount within three months, with the remaining sum payable within one year. Share transfer equivalent to one-third of the bid price will be withheld until full payment is made.

The buyer has also been granted three months to exercise the option to acquire the remaining 25% stake at a 12% premium, and may induct up to two additional partners, including an international airline. Officials indicate that Fauji Fertilizer Company may potentially join as a fifth partner.

Revival Plans and Operational Targets

The government has set performance expectations for the new owners, including:

• Increasing functional aircraft from 18 to 40 within four years
• Expanding passenger volume from 4 million to 7 million annually

Arif Habib announced plans to add 18 aircraft initially, with a long-term goal of expanding the fleet to 64 aircraft, depending on traffic demand.

Employee Protection and Liabilities

Employee-related medical liabilities have been shifted to a holding company and will continue to be funded by the government. The new owner is barred from laying off any employee for one year, and has been given additional time to clear outstanding dues to FBR and CAA.

PIA currently employs around 6,900 permanent staff and 2,900 contractual workers.

Strategic Assets and Global Access

Despite its financial struggles, PIA retains valuable strategic assets, including 170 international slot pairs at some of the world’s busiest airports, notably London Heathrow, along with routes across the Gulf, Europe, and North America.

Roosevelt Hotel and Additional Approvals

On the same day, the Economic Coordination Committee approved Rs2 billion to clear tax liabilities and loan repayments of the Roosevelt Hotel in New York, owned by PIA Investment Limited.

Economic Signal and Investor Confidence

The successful privatisation is expected to pave the way for the sale of other loss-making state-owned enterprises and restore investor confidence amid Pakistan’s challenging business environment.

Prime Minister Shehbaz Sharif welcomed the development, stating that regardless of the winning consortium, “Pakistan is the ultimate winner.” He termed the strong participation of leading business groups a powerful vote of confidence in the country’s economic future.