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Pakistan National Carrier Sale Uncertain After Low Offer

An aircraft operated by Pakistan International Airlines Corp. at Indira Gandhi International Airport in Delhi, India. Photographer: Prashanth Vishwanathan/Bloomberg (Prashanth Vishwanathan/Bloomberg)

(Bloomberg) -- Pakistan’s sale of national flag carrier Pakistan International Airlines Corp. has become uncertain after the maiden bid was below the minimum price of about $306 million. 

Blue World City submitted a bid 8.5 times lower than the government’s expected price of 85 billion rupees, according to details provided by the Privatisation Commission in Islamabad. The government is going to review the outcome of the process, said the commission’s Secretary Usman Bajwa. Blue World, one of the six bidders shortlisted by Pakistan authorities, was the sole group to put in a final bid. 

Prime Minister Shehbaz Sharif’s cash-strapped government is trying to shore up the nation’s debt-ridden economy by selling loss-making state-owned enterprises that include the national airline, Roosevelt Hotel in New York and energy utility companies. The government has failed to privatize the airline in previous attempts because of protests by labor unions and political parties. 

The airline’s shares rose 3.9% after the initial bid was submitted around 1:30 p.m. local time before falling sharply near the end of the trading session to close down by 5.5%.

Revival

The winning bidder will need to invest $500 million in five years into the loss making carrier, Bajwa said in August. The airline has not made a profit in almost two decades and had to scale back operations in May last year after running short of funds to pay for fuel. It is only able to operate because of regular bailouts from the government.

Blue World has plans to revive the airline by getting aircraft on lease, Chairman Saad Nazir told reporters before the bid was opened. The group plans to bring in Chinese and Turkish investors that have expertise in aviation, Nazir told Bloomberg by phone earlier this week. The group will bid for a 60% stake in the airline, while the government has decided to retain the remaining stake, he said.

The five groups that did not bid included businessman Arif Habib’s company, one of the country’s largest business groups Lucky’s Y.B. Holdings Pvt., Air Arabia’s Fly Jinnah, domestic airline Airblue Ltd., and Pak Ethanol Pvt.

Pakistan moved about three-fourths of the airline’s total debt of 830 billion rupees ($3 billion) to government books to make the sale more attractive.

--With assistance from Abhay Singh.

(Updates with details in second paragraph and onwards)

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