Pakistan's privatisation minister, Abdul Aleem Khan, says the government will try again to auction PIA - Pakistan International Airlines (PK, Islamabad International) and ask the International Monetary Fund to approve a PKR26 billion rupee (USD94 million) tax exemption designed to make the state-owned carrier more attractive to prospective purchasers.
Taking on old debts, including existing tax liabilities, and the Federal Board of Revenue's (FBR) refusal to remove an 18% general sales tax (GST) on new aircraft, were key reasons why October's auction flopped.
According to local news outlets, Khan told the Senate Standing Committee on Privatisation on November 18 that the government would auction PIA again and that Prime Minister Shehbaz Sharif wants to see the airline privatised. Khan also said that this time the bidding process would be much shorter.
"I urged the FBR to waive GST on new aircraft purchases, but they remain rigid," he said. "This tax has significantly raised costs for acquiring new planes."
He says the FBR's supervising ministry, the Ministry of Finance, could easily authorise the waiver but had chosen not to do so before the auction. The government is now revisiting the issue. The government has also asked the IMF to greenlight a plan to exempt any buyer from paying PIA's existing PKR26 billion tax liability. However, any requested tax relief and liability restructuring must align with the broader economic framework that is part of the IMF's USD7 billion extended fund facility bailout package.
A sole bidder placed a single PKR10 billion (USD36 million) bid for PIA - far less than the government's PKR85 billion (USD306 million) reserve price. The government declined to accept the bid.
The minister said PIA operates lucrative routes and can be transformed into a profit-generating institution, although he did not say what those routes were. The airline reported a calendar 2023 loss exceeding PKR75 billion rupees (USD270 million) and has amassed debts of over PKR825 billion (USD3 billion) - although the bulk of that debt was transferred to a separate holding company before the October auction.
Any successful bidder in last month's auction would have been left holding onto around PKR45 billion (USD162 million) in liabilities, which includes the monies owed to the FBR. In addition to not waiving the tax on new aircraft, Khan says the failure to remove these liabilities was a major deterrent to potential buyers, despite them asking for this to be done.
"I recommended the government to accept the bidders' requests but it did not listen," said the minister.
Khan added that talks continued with several parties based in the Gulf, including Abu Dhabi Ports, which he said had showed some interest. "We have learnt our lesson, and PIA cannot be sold without completely cleaning the balance sheet from all liabilities," he said. "Until the balance sheet numbers are positive, no private company or foreign government will invest in it."
