Conditions set down by increasingly assertive bidders have delayed the sale of a majority stake in PIA - Pakistan International Airlines (PK, Islamabad International), according to multiple Pakistani news outlets. After the latest pushback in the auction deadline from October 1 to 31, they report the Senate Standing Committee on Privatization was briefed on October 2 about why this occurred.

Officially, government personnel handling the privatisation say the six short-listed bidders requested additional time to do extra due diligence. But questioned by the standing committee last week, Privatisation Commission Secretary Usman Bajwa admitted that a requirement that the buyer retain PIA's 7,300+ employees for at least two years and remain fully compliant with the country's benefits and pensions regime during that time was not well-received by the bidders, some of whom maintain the airline is over-staffed and job cuts are needed.

The Pakistani government's quixotic quest to offload its perpetually loss-making national carrier resulted in the shortlisting of six potential buyers earlier this year, specifically Fly Jinnah (9P, Karachi International), AirBlue (PA, Karachi International), Arif Habib Corporation Limited, and three consortia led by YB Holdings (Private) Limited, Pak Ethanol, and Blue World City. However, holding the auction and finalising the privatisation is proving a harder task.

In addition to the employee issue, the bidders have also requested a one-year warranty for 18 aircraft and protection against ongoing litigation. The warranties relate to the aircraft's condition, record-keeping accuracy, and information about parts and maintenance.

The ch-aviation fleets module reveals PIA has 32 aircraft in its fleet. However, only 16 of those are in service, including ten A320-200s, one ATR42-500, three B777-200ERs, one B777-200LR, and one B777-300ER. Out of action are seven A320-200s, two ATR42-500s, three B777-200ERs, one B777-200LR, and three B777-300ERs.

There is also a lack of agreement among bidders about what stake to acquire, with some wanting to buy 65% while others wanted to buy all of PIA, saying that without 100% ownership, the risks outweigh the potential returns, especially as a sale condition requires the new majority shareholder to invest USD500 million in PIA over three years. The bidders also want guarantees from the government that they will be responsible for settling all outstanding tax liabilities

Appearing before the same standing committee on October 4, the Express Tribune newspaper cites an unnamed PIA official telling committee members that competition from foreign airlines and a European Union ban are why PIA is the country's number one loss-making state-owned enterprise.

"The bans on flights to Europe and the UK have caused substantial losses for PIA," he said. "The business of PIA and other Pakistani airlines has been negatively impacted by the approval of additional flights for foreign airlines to various Pakistani cities."

The official noted that PIA has been unable to induct new aircraft in a timely manner, and various restructuring plans developed over the years were never implemented.

However, Bajwa maintains the issues with the prospective bidders are being dealt with and says the agency is on track to hold the auction at the end of the month.