Pakistan sells its loss-making national airline - who bought it and the debt involved

Pakistan has privatised its loss-making national carrier, Pakistan International Airlines (PIA), for Rs 135 billion following a highly competitive bidding process.

The ceremony, held in Islamabad, saw three pre-qualified parties - Lucky Cement, private airline Airblue, and investment firm Arif Habib - submit their sealed bids into a transparent box. The bids were opened in the second phase of the ceremony, with Arif Habib emerging as the highest bidder, offering Rs 115 billion, followed by Lucky Cement at Rs 105.5 billion and Airblue at Rs 26.5 billion.

The government set a reference price of Rs 100 billion. The two highest bidders, Arif Habib and Lucky Cement, then engaged in a fierce bidding war, with Arif Habib ultimately offering Rs 135 billion - an amount that went unchallenged. "We congratulate Arif Habib group," a member of Lucky Cement said, acknowledging their rival's substantial offer.

Under the terms of the deal, the winning bidder will initially acquire a 75% stake in PIA but will have 90 days to purchase the remaining 25%.

According to the agreement, 92.5% of the sale proceeds from the initial 75% stake will be reinvested into the airline, while the remaining 7.5% will be allocated to the government. The investor is also required to commit Rs 80 billion in investment over the next five years.

In a significant move, the Pakistani government had assumed responsibility for PIA's liabilities amounting to Rs 654 billion last year.

Prime Minister Shehbaz Sharif, in a meeting with the federal cabinet, praised the government's efforts, stressing that the privatisation process had been transparent. He also referred to the transaction as the "largest transaction" in Pakistan's history.

This auction marks the second attempt at selling the airline, with a failed effort earlier last year not reaching the desired price.

Once a leading global airline, PIA's years of mismanagement led to a significant decline in its services and reputation, forcing the government to explore privatization as the only viable option.