PIA privatisation attempt costs national exchequer $4.3 million in advisory fees

Pakistan International Airlines Corporation Ltd (PIAC) has caused the national exchequer to take a hit once again. According to reports, the federal government’s attempt to privatise the national carrier resulted in a colossal outflow of $4.3 million to a financial advisory firm.

As per reports, Privatisation Secretary Jawad Paul notified the National Assembly’s Standing Committee on Privatisation regarding the reason and details of the payment. Ernst & Young, a financial advising firm, was expecting to receive a total amount of $6.8 million.

However, authorities only disbursed 63 percent of the total agreed-upon payment amount, retaining $2.5 million until the advisory firm oversees the completion of transactions related to the privatisation of PIAC.

Jawad Paul told committee members about the Privatisation Commission’s efforts to successfully complete the valuation of properties that PIACL would retain. Moreover, he revealed that new valuations were used in the company’s financial statements – dated until the end of April 2024.

According to credible reports, committee members asked Jawad to let them know about the details of properties which have already been passed on to holding companies. The committee also engaged in discussions surrounding the losses the national exchequer incurred while unsuccessfully attempting to privatise the airline.

The privatisation attempt was nationally televised and did not even manage to secure the minimum set price of 85 billion rupees. The national carrier received an abysmally low bid of 10 billion rupees from a real estate developer.

However, new developments might allow PIA’s perceived value to rise in the minds of potential investors. After four and a half years, the airline has regained the rights to fly to Europe and now operates flights to Paris.

The moratorium on PIA’s services to Europe came about as a direct consequence of a post-crash speech by then-minister Ghulam Sarwar, who had claimed without any evidence that 40 percent of PIA’s pilots were flying with fraudulent licenses. Sarwar’s speech detrimentally impacted the airline's credibility, and the airline lost its goodwill with customers, which it had earned over the years. 

Nevertheless, after PIA flight 8303 crashed in Karachi, the company lost the right to fly to various high-traffic destinations such as the United States, Canada, European Union (EU) and United Kingdom (UK).

Moreover, PIA is reportedly set to receive the greenlight to resume flight operations, the official decision is still in the pipeline and will become official once UK regulators clear PIA’s status. 

If approved to fly to the UK, PIA’s chances of getting privatised might rise significantly. This is because bidders previously did not see the airline making significant revenues. However, Pakistan-UK routes are extremely lucrative given the size of the Pakistani diaspora residing within the UK. This could boost the profitability of the company, making it seem more attractive to potential buyers.