ISLAMABAD (Reuters) - Pakistan will try to privatize its national airline before general elections due this year, privatization minister Daniyal Aziz said, as the ruling party seeks to restart sales of state-run businesses.
Pakistan International Airlines (PIAa.KA)(PIA), hemorrhaging money and losing market share to Gulf-based rivals such as Etihad and Emirates, has been hit by management turmoil in recent years and a 2016 plane crash that led to 47 deaths.
The privatization of loss-making entities that were draining the exchequer was a key priority for the Pakistan Muslim League-Nawaz (PML-N) party when it swept to power in 2013.
PIA was among 68 state-owned companies earmaked for privatization in return for a $6.7 billion International Monetary Fund package that helped Pakistan to stave off a default in 2013.
Despite some initial success, the process stalled in 2016 after staff protests caused havoc with PIA operations and the government passed a law that effectively made it impossible to privatize the airline.
But Aziz, chairman of the Privatisation Commission, told Reuters that new plans have been drawn up to sell off PIA and he would take the proposals to the cabinet committee on privatization, chaired by Prime Minister Shahid Khaqan Abbasi.
“Next step would be going to the cabinet committee ... and that’s imminent, maybe even next week,” Aziz said in his Islamabad office this week.
The new plans focus on splitting up the carrier, with the core airline business being separated from vast peripheral operations such as catering, hotels and maintenance, Aziz said. The core airline would then be sold.
But to complete the transaction, Aziz said, the government would have to pass laws in parliament to reverse the 2016 legislation that converted PIA into a limited company and effectively barred the government from giving up management control.
The impetus to sell PIA has grown as the airline has piled up huge losses estimated by its former CEO in March at about $30 million a month. Total debt stood at 186 billion rupees ($1.8 billion) at the end of 2016.
When asked how soon could a buyer could acquire PIA, Aziz said: “Tomorrow morning. If you have the money, come and buy it.”
Aziz gave no indication of an expected valuation.
Both Emirates and Etihad had shown interest in buying PIA before the government backed down from privatization in 2016, the English-language Express Tribune newspaper reported, citing an unnamed official.
Analysts have been skeptical about the government’s ability, or willingness, to take on powerful unions and embark on a privatization process so close to general elections likely in July or August.
Aziz said that, owing to time restraints ahead of the elections, the privatization commission will focus on one state company per sector, including a bank and an energy company.
He added that there has been “huge interest” in buying Pakistan Steel Mills, once the pride of Pakistan’s industrial output but now shut and bleeding cash.
“We will get runs on the board, but the real challenge is to bring to fruition the two big animals: one is PIA and the other one is Steel Mills,” Aziz said.
Reporting by Drazen Jorgic; Editing by David Goodman