The Pakistani government’s first serious effort to privatize Pakistan International Airlines (PIA) collapsed on Thursday when the sole bidder, Blue World City, proposed a final bid of Rs10 billion, a fraction of the government’s minimum price of Rs85 billion.
Single Bid Falls Short of Minimum Price
Real estate firm Blue World City offered Rs10 billion for a 60% stake in PIA, only 12% of the government’s minimum asking price. The Cabinet Committee on Privatisation (CCoP) had set a benchmark price of Rs85.03 billion (approximately $305 million USD), while Blue World City’s offer equated to only $36 million. Despite a public, televised bidding event, the process was brief due to the lack of competitive bidders.
Government Offer Unmatched by Blue World City
Blue World City, led by owner Saad Nazir, declined to match the government’s asking price. “We have considered the government price and decided to stand with our best price of Rs10 billion,” Nazir said.
Five Qualified Bidders Opt Out
Blue World City was the only entity to submit a financial bid from a pool of six pre-qualified bidders. The remaining firms—Arif Habib Corporation Limited, Fly Jinnah, Younus Brothers, Holdings Private Limited, Pak Ethanol Private, and Air Blue—withdrew, citing disagreements over government conditions on tax liabilities, workforce retention, and fleet expansion.
Government’s Terms Met With Resistance
To make PIA a more attractive investment, the government transferred Rs625 billion of PIA’s debt into a holding company, leaving PIA with Rs202 billion in liabilities and Rs163 billion in assets. However, bidders remained unwilling to shoulder remaining tax and contingent liabilities. The government required prospective buyers to invest $500-700 million and reduce the average age of PIA’s fleet from 17 to 10 years within five years, a condition that would necessitate significant new aircraft acquisitions.
Bidders Unwilling to Meet Employment and Tax Conditions
Another point of contention was the government’s stipulation that the new owner retain existing PIA employees for 1.5 years without changing their financial terms. Despite the government’s reduction of the employee retention period, bidders ultimately did not agree to these conditions.
Implications for Future Privatization Efforts
The failed attempt to privatize PIA, Pakistan’s fourth-largest loss-making entity, underscores the challenges facing the government’s broader privatization agenda. PIA cannot achieve operational sustainability without substantial investment and liability resolution, according to Privatisation Commission Secretary Usman Bajwa.
Blue World City’s Commitment to National Interests
After submitting the bid, Blue World City COO Seham Raza stated, “We placed our bid for the national flag, despite the financial risks and PIA’s business model.” Raza expressed disappointment over the lack of competitive bidding, adding that the company had joined forces with Blue World Aviation and IRIS Communication Limited to support their bid.
The government initially proposed a 51% to 100% stake but later reduced it to 60%. Attempts to provide tax reductions and waivers failed to attract other bidders, casting doubt on the feasibility of future PIA privatization.
