PTBP Web Desk

The Pakistani government has set its sights on concluding the privatization of Pakistan International Airlines Company Limited (PIACL) within the current fiscal year, 2024-25, as disclosed in a recent National Standing Committee on Privatisation meeting. This significant economic move is coupled with strategic considerations for the privatization of the Roosevelt Hotel in New York City, aiming to address substantial financial liabilities.

Privatization of PIACL

The government’s agenda to privatize PIACL was a focal point during the committee meeting chaired by MNA Farooq Sattar. The privatization process has gained momentum with the International Monetary Fund (IMF) approving crucial fiscal adjustments:

• GST on Aircraft: The IMF has agreed to remove an 18% Goods and Services Tax (GST) on aircraft, which directly benefits PIACL’s operational costs.
• Negative Equity Cleanup: Furthermore, the IMF has consented to the cleanup of Rs45 billion in negative equity for PIACL, a decision that could rejuvenate the airline’s financial health.

With these developments, the government plans to leverage the positive momentum by issuing a new Expression of Interest (EOI) for potential investors by the end of the month. The opening of European routes for PIA is seen as a strategic advantage to attract investment.

Strategic Advisory and New Transaction Structure

To steer this complex process, the government has decided to re-engage Ernst & Young as the financial advisor for PIACL’s privatization. New clauses will be incorporated into the transaction structure to ensure a smooth and beneficial privatization:

• Fresh EOI: Following the route openings, a new EoI will be issued, targeting investors interested in the revitalized airline.

Roosevelt Hotel Privatization Options

Parallel to PIACL’s privatization, the government is evaluating three distinct pathways for the Roosevelt Hotel in New York:

1. Outright Sale: This option would see the hotel sold completely, with the process expected to conclude within three years.
2. Joint Venture: A partnership could be formed, potentially taking 8 to 10 years to fully materialize, focusing on shared ownership and management.
3. Long-term Lease: Alternatively, a 99-year lease is under consideration, providing long-term revenue while retaining some control over the asset.

These options will be reviewed by the Cabinet Committee on Privatisation (CCoP), which will decide based on the recommendations from a committee set up under the Minister of State for Finance.

State Life Insurance Corporation (SLIC)

On another note, the privatization of the State Life Insurance Corporation (SLIC) is also on the agenda, though at an initial stage. The CEO, Shoaib Javed Hussain, mentioned that SLIC’s sale would proceed after certain amendments to the Life Insurance Nationalization Order (LINO) are approved.

Committee’s Role and Future Actions

The National Standing Committee on Privatisation has extended the sub-committee’s term by three months to delve deeper into the reasons behind PIACL’s decline. This sub-committee is tasked with providing a comprehensive report to guide future actions.