Pakistan Privatises 75% Stake in PIA: Arif Habib Consortium Emerges Victorious with Rs135bn Bid
ISLAMABAD – In a landmark event marking Pakistan’s first major privatisation in nearly 20 years, the government has successfully sold a 75% stake in Pakistan International Airlines Corporation Ltd (PIACL) to the Arif Habib consortium for Rs135 billion. The process, conducted through a transparent and competitive auction, was telecast live across television and social media platforms, drawing national and international attention.
Auction Highlights
Pre-Qualified Bidders
Three consortia submitted bids for the national airline:
- Lucky Cement Consortium – comprising Lucky Cement Limited, Hub Power Holdings Limited, and Kohat Cement Company Limited.
- Arif Habib Consortium – comprising Arif Habib Corporation Limited, Fatima Fertilizer Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited.
- Airblue Consortium – which exited after the first round.
The Fauji Foundation initially expressed interest but later withdrew.
First Round Bidding
- Lucky Cement: Rs101.5 billion
- Airblue: Rs26.5 billion
- Arif Habib Consortium: Rs115 billion
The minimum expected reference price set by the government was Rs100 billion.
After the first round, a 30-minute consultation break allowed top bidders to discuss strategy.
Second Round Bidding
- Base price: Rs115 billion (set by the highest first-round bid)
- Minimum increment: Rs250 million
During the open auction:
- Lucky Cement raised its bid to Rs134 billion.
- Arif Habib consortium countered with Rs135 billion, securing the win.
Outcome: The government will receive Rs10.12 billion in cash, while the remainder will be reinvested in PIA for expansion and operational improvements.
About the Arif Habib Consortium
The consortium plans to expand PIA’s fleet and bring operational efficiencies:
- Phase 1: Expand to 38 aircraft
- Phase 2: Expand to 65 aircraft (based on demand)
Arif Habib emphasized that the privatisation will promote investment, provide confidence to employees, and create new employment opportunities. The consortium is also considering inviting foreign airlines as partners within 90 days of cabinet approval.
“PIA is our national institution. With capital investment, we can resolve shortcomings and bring the airline back to glory,” said Arif Habib.
The consortium also paid Rs4 billion above the adviser’s valuation (Rs131 billion), reflecting an entry premium for acquiring an operational business.
Government and Policy Perspective
Prime Minister’s Remarks
PM Shehbaz Sharif hailed the privatisation as a “historic day for Pakistan”, highlighting it as a milestone in the government’s commitment to reform loss-making state-owned enterprises.
“Regardless of which consortium won, Pakistan is the ultimate winner,” he stated.
Privatisation Commission
Muhammad Ali, Adviser to the PM on Privatisation, emphasized transparency and fairness in the process. The 75% stake was sold, with the remaining 25% retained by the government, and the winning bidder has the option to acquire it later within a year at a 12% annual premium.
Economic Experts
Khaqan Najeeb, economist, noted that the privatisation is a positive microeconomic reform, enabling reinvestment and expansion. He highlighted the importance of proper regulation, smooth policy-making, and operational efficiency for the airline’s long-term success.
Finance Minister Muhammad Aurangzeb added that the transaction will attract local and foreign investors, and reduce the burden of losses previously suffered by PIA. Defence Minister Khawaja Asif also praised the transparency and noted that lifting of Europe and UK bans contributed to investor confidence.
Financial Structure
- Sale Price: Rs135 billion
- Cash to Government: Rs10.12 billion
- Reinvestment in PIA: Remainder (~92.5%)
- PIA Fleet: 18 aircraft (expected to double in 3–4 years)
- Revenue Allocation: 92.5% of proceeds reinvested in airline; 7.5% retained by government
- Option to Buy Remaining 25%: Within 90 days, with 12% annual premium
Historical Context
- Previous attempts to privatise PIA collapsed due to low investor interest and unresolved financial challenges.
- The airline has suffered losses of Rs800 billion over the last 20 years.
- The current transaction represents a major step in economic reform, aligning with a $7 billion IMF programme.
Privatisation Benefits
- Investment Promotion: New capital will improve operations and fleet expansion.
- Employment Opportunities: Experienced employees will get growth opportunities, with new positions created as the fleet expands.
- Operational Efficiency: With the infusion of capital, PIA can modernize and compete globally.
- Economic Confidence: Strong participation by local conglomerates signals trust in Pakistan’s economy.
Future Plans
- Expand fleet to 38–65 aircraft, depending on demand.
- Possibly involve foreign airlines and investors.
- Upgrade infrastructure, repair aircraft, and modernize operations.
- Reinforce governance and regulatory compliance.
FAQs
Q1: Who won the PIA privatisation?
A1: The Arif Habib consortium won the bid for a 75% stake at Rs135 billion.
Q2: What companies are part of the consortium?
A2: Arif Habib Corporation Limited, Fatima Fertilizer Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited.
Q3: How will the Rs135 billion be used?
A3: Rs10.12 billion will go to the government as cash; the remaining amount (~92.5%) will be reinvested in PIA to expand fleet and operations.
Q4: Will employees be affected?
A4: No. Employees are expected to benefit from expanded operations and investment, with new employment opportunities.
Q5: Does the government retain any stake?
A5: Yes, the government retains 25% of PIA, with an option for the consortium to acquire it later.
Q6: What are the future expansion plans?
A6: Initially expand the fleet to 38 aircraft, eventually to 65, improve infrastructure, and potentially involve foreign airline investors.
Q7: Why was the auction significant?
A7: It is Pakistan’s first major privatisation in almost two decades, signaling economic reform and investor confidence in the national economy.
Conclusion
The successful privatisation of PIA marks a historic milestone for Pakistan, combining transparency, competitiveness, and strategic investment. The Arif Habib consortium’s takeover is expected to revive the airline, improve operational efficiency, and expand services, while also providing a model for future privatisation of state-owned enterprises.
