Three Gulf countries are eyeing a majority stake in PIA - Pakistan International Airlines (PK, Islamabad International) as the freshly elected Pakistani government pushes on with the majority state-owned carrier's planned partial privatisation. Reports from multiple Pakistan-based outlets say the United Arab Emirates (UAE), Saudi Arabia, and Qatar are in talks with the new Shehbaz Sharif administration. ch-aviation flagged Qatar's interest in PIA six months ago.

In addition, entities associated with the governments of France, the Netherlands, Germany, Malaysia, and Türkiye, have also reportedly expressed interest in PIA. However, the Gulf countries are said to be the "most interested." The Pakistani government plans to sell 51% of loss-making PIA along with control of its day-to-day operations.

The partial privatisation is a response to an International Monetary Fund (IMF) USD3 billion bailout package in which Pakistan must either wholly or partially privatise a raft of underperforming state-owned entities in return for the funds. Of all those entities, PIA Pakistan International Airlines, with its PKR825 billion rupee (USD3 billion) debt, is the biggest burden on Pakistan's taxpayers.

Islamabad finalises deal with PIA's banks

Meanwhile, the new government has finalised a term sheet with seven local banks, paving the way for them to issue no-objection certificates. PIA collectively owes the banks PKR268 billion (USD965 million). What would happen and who would be responsible for that debt had become a sticking point holding up the partial privatisation process.

The Express Tribune reports the government and banks hammered out a deal late last week. The banks have agreed to roll over the debts for ten years and reduce the annual interest rate from 23.5% to 12%. If the government fails to conclude PIA's privatisation within three years, the banks retain the right to renegotiate the deal and apply an interest rate equal to the 2027 prevailing rates.

The government intends to split the present PIA entity into two, transferring over PKR650 billion (USD2.33 billion) of commercial loans, trade debts, and government borrowings into a new holding company, leaving a relatively clean balance sheet to be presented to potential PIA buyers.

The Pakistani government will be responsible for the new holding company's debts. The government intends to use the proceeds from the partial privatisation to pay down/pay off the debts. In the meantime, the newly negotiated interest rate will cost taxpayers PKR32 billion (USD115.2 million) per annum, and the banks will retain priority rights over the holding company’s assets. However, the deal opens the way for the government to file a scheme of arrangement with the Securities and Exchange Commission of Pakistan.

Separately, further details have become available on the freshly reconstituted PIA board. ch-aviation had reported on the PIA board reshuffle last month. The new 11-person board includes seven independent directors and four government officials. The heads of local commercial banks, including the CEO of the Al Falah Bank, Atif Aslam Bajwa, and the CEO of the United Bank, Shehzad Dada, comprise most of the independent directors. The government officials include the aviation, finance, privatization, and planning commission secretaries. Additionally, Air Vice Marshal Aamir Hayat is re-affirmed as PIA's CEO.