This marks an important landmark in the process of privatization by Pakistan International Airlines. As per reports from Pakistan International Airlines Holding Company, it has made its first move on the Share Purchase and Subscription Agreement, which now means that Pakistan International Airlines Corporation Limited has been transferred majority stake to the winning bidder.
Stake transfer under the PIA privatisation scheme results in PIA Equity Ltd being a holding of the investor, which owns 66.67% of the shares of PIACL. PIA Holding Company owns 33.33% of the shares in PIACL, thus ensuring that there is an element of government stake in the national flag carrier.
New Money Going into PIACL
The stake owner has made the first instalment towards the agreed investment into PIACL, whereby PIACL receives the money as new equity by issuing new shares.
The reason why this is important is that PIA has been operating in a state of heavy debts and losses for many years. The provision of an equity infusion prior to the completion of all stages of the privatisation process would help the airline to meet its pressing needs.
The controlling interest held by the firm is that of the 66.67 percent, giving PIA Equity Limited the power to control the board of directors as well as the strategy. The remaining shareholding of 33.33 percent by the government provides an adequate residual ownership for overseeing and influencing the policy but not interfering in management matters.
The Importance of the PIA Privatisation Stake Transfer
The company recorded losses running into hundreds of billions of rupees through years of ownership by the country’s government.
The transfer of stakes to privatization is where the circle is broken. The private investors bear the majority of the financial success of the airline, putting less burden on the taxpayers of Pakistan and more on those who invested money in PIA considering its future success.
After the transfer of majority stake and equity injection into PIACL, the process of privatization has entered into an execution stage where the quality of management decision-making rather than the deal itself will make all the difference to PIACL’s future success.
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PIA Enters a New Era of Its History
The completion of the transaction related to the privatisation stake of PIA is the first step towards shaping the future of the airline. Now all eyes will be on how PIA Equity Ltd uses the newly raised funds, deals with historical debt of the airline, and re-establishes the reputation of PIA as one of the best airlines in Asia.
This is good news for the aviation industry in Pakistan, its customers, and also for all those thousands of people working in PIA who depend on the revival of the airline. The tough task of converting a perennially loss-making national airline into a commercially-viable private one lies ahead.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
