Pakistani minister says offers for PIA must be "respectable"

Pakistan's privatisation minister, Abdul Aleem Khan, says majority-state-owned PIA - Pakistan International Airlines (PK, Islamabad International) must be sold but not at a heavy discount. Khan fronted media in Islamabad on November 3 to explain why the October 31 auction of PIA only garnered one bid - a lowball offer of PKR10 billion rupees (USD36 million) that was well under the government's reserve price of PKR85.03 billion (USD306 million).

The minister said any offer must be "respectable." Blue World City chairman Saad Nazir, who submitted the sole bid, told journalists that this is all PIA is worth and that it does not make commercial sense to raise the bid for a company with "significant leakages."

Since last week's auction flop, the government of the province of Khyber Pakhtunkhwa has submitted an expression of interest to buy PIA and there are conflicting reports about interest from the Punjab government. Khan said he has no problems with provincial governments looking at PIA provided they can meet the minimum sale terms.

Nazir said if the government does not accept his bid, he would start his own airline. "If the government does not privatise PIA, we wish them all the best," he declared. "If they want to run the airline themselves, we pray for them. We will start our own airline."

Pakistan's Dawn newspaper reports that government insiders did not take Blue World seriously in the lead-up to the auction, and their "frivolous" bid confirms that view. Yet Blue World was the only one of six short-listed bidders to put down so-called earnest money before the auction.

Khan says most of the terms and conditions for PIA's privatisation were set in place before the current government was elected and he took on responsibility for privatising the airline. Per those original terms, around PKR600 billion (USD2.16 billion) of liabilities were removed from PIA's balance sheet and shifted to another holding company. This left liabilities of approximately PKR230 billion (USD827.8 million) on PIA's books. At the weekend, Khan said one option now open to him was to shift the remaining liabilities off the airline's balance sheet and then to try again to “sell a clean PIA.”