Pakistan International Airlines (PIA) has been sold to a consortium led by Arif Habib Limited for Rs 135 billion, following a closely contested open auction that concluded one of the country’s most prolonged and politically sensitive privatisation efforts. The sale clears the government’s minimum valuation and marks a decisive step toward transferring control of the national carrier to the private sector.
The bidding process, held in Islamabad and broadcast live to ensure transparency, brought together major corporate players vying for a 75% stake in PIA. It followed years of failed attempts to offload the airline, which has long struggled under heavy debt, operational inefficiencies, and persistent financial losses.
How the auction played out
Sealed bids submitted earlier in the day set the stage for a competitive auction. The Arif Habib-led consortium emerged as the strongest contender from the outset, offering Rs 115 billion. The Lucky Cement-led consortium followed with a bid of Rs 101.5 billion, while Air Blue, bidding independently, submitted a significantly lower offer of Rs 26.5 billion, which fell well short of the government’s expectations.
Once it became clear that more than one bidder had crossed the government’s minimum expected price of Rs 100 billion, the process moved into an open auction phase. What followed was a tense exchange of incremental bids between the two leading groups, as each attempted to outmaneuver the other in measured steps.
The bidding gained momentum after a brief pause requested by the Lucky Cement consortium when the price touched Rs 121 billion. Upon resumption, bid increments became sharper. Lucky Cement eventually raised the offer to Rs 134 billion, but this was immediately countered by a Rs 135 billion bid from the Arif Habib group. With no further bid forthcoming, the Arif Habib-led consortium was declared the successful bidder.
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Composition of the winning consortium
The winning group brings together a diverse set of business interests. Alongside Arif Habib Corporation Limited, the consortium includes Fatima Fertiliser Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited. Under the privatisation terms, the consortium will assume management control through a 75% ownership stake, while the government will retain the remaining 25%.
The deal also allows the winning bidder to purchase the government’s remaining stake within 90 days, a provision that could eventually result in full private ownership of the airline. Of the sale proceeds, 92.5% will go directly to PIA, with the remaining 7.5% transferred to the national exchequer.
Fauji Foundation’s withdrawal and lingering questions
One of the notable developments surrounding the auction was the withdrawal of the Fauji Foundation, initially regarded as a serious contender. Its exit narrowed the field but did not end speculation about its potential involvement.
Muhammad Ali, speaking in a recent interview, clarified that the (PAK army owned) Fauji foundation’s withdrawal should not be interpreted as a loss of interest. Under privatisation rules, winning consortia are permitted to add up to two new entities after securing the bid, leaving open the possibility of a post-bidding partnership. This has fueled expectations that Fauji Foundation could still emerge as a strategic participant in PIA’s future.
Why bidders remained interested despite PIA’s history
PIA’s financial difficulties are among the most severe in Pakistan’s corporate landscape. By June 2023, the airline’s liabilities had exceeded Rs 825 billion, while its equity position had deteriorated to a deficit of Rs 649 billion, reflecting years of operating losses, rising finance costs, and heavy reliance on borrowing.
To make privatisation feasible, the government undertook a major restructuring exercise. A separate holding company was created to absorb the bulk of PIA’s bad debt, transferring more than Rs 650 billion in liabilities away from the operating airline. Banks also agreed to restructure Rs 268 billion in commercial loans, extending maturities and reducing interest rates, subject to the successful completion of the privatisation within the agreed timeline.
As a result, the entity being sold to investors carries a significantly lighter debt burden, improving its cash-flow outlook compared to previous years.
Strategic value beyond the balance sheet
Despite its troubled finances, PIA continues to hold strategic value. The airline operates 18 aircraft out of a fleet of 34, maintains air service agreements with 97 countries, and holds landing rights in more than 170 destinations worldwide. These route rights, along with brand recognition and foreign-currency revenue potential, were key factors attracting investor interest.
For the new owners, however, the opportunity comes with formidable challenges. Reviving PIA will require operational reforms, cost discipline, and a sustained effort to rebuild public confidence in the airline’s reliability and service standards.
What happens next
Under the terms of the agreement, the winning consortium must deposit two-thirds of the bid amount within 90 days, with the remaining one-third payable within a year. Importantly, the transaction excludes PIA’s non-core assets, including real estate holdings, allowing the new management to focus solely on aviation operations.
After more than a decade of stalled privatisation attempts, the sale represents a turning point for Pakistan’s aviation sector and its broader reform agenda. Whether this landmark transaction leads to a lasting turnaround for the national carrier will depend on how swiftly and effectively the new owners translate ownership change into operational recovery.
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