March 08, Islamabad – Federal Minister for Privatisation, Mr. Daniyal Aziz chaired a high level meeting on Wednesday with the officials of Aviation Division, Civil Aviation Authority, Ministry of Finance, PIA, SECP. The meeting was held to discuss the proposed segregation of core and non-core business of PIA, prior to valuation of assets and liabilities.
The Cabinet Committee on Privatization had approved the Privatisation Program in October, 2013 which included Restructuring of Pakistan International Airlines Corporation (‘PIAC’), followed by divestment of GoP equity stakes to strategic partner with management control (“Transaction”).
It may be recalled that the consortium was appointed by PC for the transaction which was to be undertaken in two phases i.e. formulation of restructuring & divestment strategy, following with facilitating private sector partnership in the core operations of PIACL.
Addressing the meeting, Daniyal Aziz said that only minority share of the airline is being offered to a third party as per unanimously passed law by all parties in the Parliament, the management control will remain with the government in accordance with that law. There was no impact on employees whatsoever and they will continue to perform their duties as they are performing now.
The minister further added that those deliberately trying to stir up trouble in the employees should not create false impression to politicize the process, already agreed upon by all.
Daniyal Aziz said that the recent Board of Directors of Privatisation Commission meeting, CCOP and cabinet passed and ratified the plans presented by the Minister/Chairman Privatisation for the PIA transaction.
It was proposed in the meeting that In order to limit the interest of potential strategic investor to the ownership and management of the core aviation function carve out of non-essential assets and liabilities to a Government entity.
Given the quantum of outstanding liabilities vis-à-vis the intrinsic value of underlying assets (and operating cash flow of the business), it was proposed to carve-out legacy liabilities from PIA to improve the financial situation of the core business and enable future investment.
It was also proposed that non essential real estate assets including Roosevelt Hotel USA, hotel Scribe in France, domestic and foreign properties, Precision Engineering Complex which would be retained by the Government of Pakistan. The airline business would attain positive balance sheet after transfer of legacy liabilities from PIACL which will further enhance its operational and structural outlook.
It is pertinent to mention that financial advisors of privatization commission had last year presented three models for the financial restructuring and segregation of core and non-core assets and liabilities of PIA. In the present meeting the participants deliberated upon those three models in detail and proposed the implementation of segregation. The participants agreed that the proposal to restructure PIA will be finalized after due process in accordance with the PIA conversion Act 2016.