PIA okay restructuring, investment

PIA okay restructuring, investment

The shareholders of Pakistan International Airlines (PIA) have given approval for the restructuring of the airline, which is likely to take place in July-August 2024. The move is expected to face no political resistance to the sale of core operations, potentially to foreign investors due to the need for foreign exchange. , as recommended by the International Monetary Fund (IMF).

During the Extraordinary General Meeting (EOGM) held on Saturday, the management of the national carrier reported achieving ‘operating profit’ for the first time in 13 years. Management is projecting the resumption of flights on two major European routes, including Paris, and to UK cities by June, aiming to boost revenue from these profitable routes.

A PIA spokesperson informed The Express Tribune that the airline is conducting a survey to seek approval from shareholders to transform PIA Corporation Limited into PIA Holding Limited by splitting it into two segments: Corporate Undertakings and Non-Core Undertakings. “Shareholders overwhelmingly voted in favor of (creating) PIA Holding Company.”

In their address to the shareholders, the chairman and CEO of PIA outlined the implementation of the government’s decisive measures for the improvement of the airline. The high-level participation of government officials in the meeting shows the government’s seriousness and commitment to correcting the loss-making entity.

Prominent participants at the meeting included the federal secretary of the Privatization Commission, the aviation secretary, legal experts from financial advisors, and PIA’s board of directors.

They highlighted the national carrier’s outperformance in calendar year 2023, leading to reporting ‘operating profits’ after 13 years. The airline’s share price has risen significantly, “increasing its value by 700 times.” PIA plans to start operations in Europe and the United Kingdom from June 2024 after passing the European Union Aviation Safety Agency (EASA) audit.

JS Global, Head of Research, Amreen Soorani stated in a post-PIA EOGM commentary that management briefed shareholders that the restructuring process is on track to be completed by July-August 2024, barring unforeseen circumstances.

The company is confident that political opposition will not prevent progress; “Relevant authorities are ready to deal with such situations,” he added.

PIA’s privatization is a core recommendation from the IMF, as the government negotiates a new loan package from the leading global lender. Pakistan has approached the IMF for an Extended Fund facility (EFF) worth $6 billion over three years. Soorani mentioned that the resumption of flights on the two European routes is expected to recover significant revenue losses (around Rs70 billion annually). The addition of two new destinations (Paris and UK cities) will offer approximately 20-25 flights per week cumulatively. Separating PIA’s debt has freed up operating cash for important investments in improving aviation infrastructure and services, the analyst said.

The Finance Division has approved the re-profiling of PIA’s debt with commercial banks at an estimated interest rate of 12%. The Board of Directors informed that the potential improvement in PIA Core’s performance and dividend is expected to help the repayment of Holdco’s debt. The remaining modalities will be announced in the near future. The government aims to sell a majority stake (51% or more) of its existing 96% stake in the restructured PIA to private investors. The company’s response to the recent Expression of Interest (EoI) will be a major factor influencing the final timeline.

Earlier, the aviation ministry was quoted as reporting that seven international investors had expressed interest in acquiring Pakistan’s national airline and airport, which the country had put up for sale. Germany, France, the Netherlands, Qatar, the United Arab Emirates, Malaysia and Turkey, along with local groups, are among those who have expressed interest in buying the country’s assets.

However, foreign media recently reported that the Privatization Commission of Pakistan has officially invited EOI to sell 51-100% of the share capital and management control of Pakistan International Airlines. “Government agencies issued invitations on April 2.”

EOIs are open to companies, firms, bodies corporate and other legal entities. However, it is not open to individuals or any entity owned or controlled by the federal or provincial governments of Pakistan. Interested parties have ai time until May 3, 2024, to submit their electronic EOI, along with a non-refundable processing fee of $5,000.

The outlet added that earlier reports suggested Qatar, Saudi Arabia, and the United Arab Emirates were in talks with the Pakistani government to buy a stake in PIA. Entities from other countries have also expressed interest.

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