Pakistan International Airlines' restructuring plan approved by new Board of Directors
New Board of Directors also look at voluntary retirement options
Dubai: The privatisation and restructuring plan for Pakistan International Airlines (PIA), the country's flag carrier, has been approved by the newly constituted Board of Directors during a meeting held on March 25, Pakistani media has reported.
An official announcement endorsed the scheme for the airline's privatisation and restructuring. According to the statement, the Board of Directors will collaborate with the Securities and Exchange Commission of Pakistan (SECP).
According to media sources, various proposals concerning the future of the organisation's employees were discussed during the meeting. According to the reports, the government appointed the consultancy Ernst & Young (EY) to develop the airline's plan, and it completed its task during the caretaker setup.
Sources told Geo TV that the voluntary retirement scheme was also discussed under the EY plan—presented before the board—and that the transaction advisor has also proposed to retire the employees with five years of service left.
The International Monetary Fund (IMF) urged Pakistani authorities to privatise its state-owned enterprises to revitalize its struggling economy partially. Pakistan will receive the final instalment of the $3 billion IMF bailout package in April, a loan secured in June of last year. However, funding is conditional on reforming and selling loss-making state-owned enterprises.
Last week, the Pakistani Cabinet approved establishing a holding company to transfer state-guaranteed legacy PIA debt and payables of more than $2.23 billion held by a consortium of seven local banks. Removing the liabilities from PIA's balance sheet will make the airline more attractive to potential purchasers.
In January, Pakistan's board of the Privatization Commission, chaired by Caretaker Federal Minister for Privatisation, Fawad Hassan Fawad, greenlit the transaction structure to sell a 51 per cent stake in Pakistan International Airlines. A consortium led by EY presented the proposal, suggesting the sale of the majority stake and the division of PIA's assets and liabilities.
EY has divested the PIA into two entities, one 'clean' and the other to be parked in a holding company with legacy debt. The latter includes negative equity of 825 billion rupees in loans, creditors' money, and losses, reported Reuters. The clean entity will be offered for sale.
Tribune reported, citing a source familiar with the developments surrounding the airline's sell-off, that EY's briefing to the board projected that PIA's privatisation might fetch $250-300 million for the government.