PIA’s Transparent Privatization, Airports Outsourcing on Track: Advisor

Tue Dec 26 2023
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ISLAMABAD: Prime Minister Special Aide on Aviation Air Marshal (Retd) Farhat Hussain Khan on Tuesday informed the upper house of the parliament that the privatization of Pakistan International Airlines (PIA) aligns with the government’s strategy to privatize loss-making entities.

During the Question Hour, the Adviser assured the Senate about the transparency in the privatization process of PIA through an open tender. He disclosed that the initial phase would involve the privatization of PIA as a flight entity, with decisions regarding other properties to be determined later by the Privatization Commission.

Addressing the outsourcing of airports, the advisor mentioned the signing of a Transaction Advisory Services Agreement (TASA) between the Pakistan Civil Aviation Authority and the International Finance Corporation (IFC), a World Bank Group subsidiary. The agreement, approved by the Federal Cabinet in line with the Public Private Partnership Authority (P3A) Act, focuses on outsourcing operations at three international airports in Islamabad, Karachi, and Lahore.

The IFC will serve as the transactional advisor for airport outsourcing, starting with Islamabad International Airport for a 15-year period. The timeframes for the remaining two airports will be established by the Federal Government based on an IFC-prepared detailed study.

PIA Privatization and Airport Outsourcing Strategy

The successful bidder for Islamabad International Airport will be revealed after completing the bidding process, with the outsourcing concession expected to conclude before June 2024, according to the advisor. He clarified that the operation and management of specific airport components would be outsourced, while critical services such as the Air Traffic Control Tower and Air Navigation services would remain under the control of the Pakistan Civil Aviation Authority.

Financially, the outsourcing involves a fixed initial amount from the successful bidder, alongside a percentage of airport revenue. The initial payment for Islamabad International Airport is set at US $100 million, with financial details for Karachi and Lahore airports to be determined based on the IFC’s analysis.

Responding to another query, the advisor informed the Senate that while PIA secured operational profit in Jan-June 2023, it incurred a net loss of Rs 61.6 billion as of June 30, 2023, due to high financing costs and exchange losses. PIA’s accumulated liabilities stood at Rs. 809 billion as of the same date.

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