The Pakistani government has decided to sell the Precession Engineering Complex (PEC), a business unit of Pakistan International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs2.5 billion in cash. This price is a quarter of what a sole bidder had offered to acquire 60% of PIA shares in an earlier unsuccessful privatization attempt. The total sale value of PEC is Rs6.5 billion, which includes Rs4 billion in liabilities related to pensions for its current and retired employees.
PEC, which manufactures high-precision parts for the aerospace industry and other sectors, had already been separated from PIA’s core operations. It is one of the non-core assets parked under a holding company that includes Rs623 billion in PIA’s liabilities. As of December last year, PEC had Rs1.2 billion in assets and Rs2.9 billion in liabilities, resulting in a net negative equity of Rs1.73 billion.
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Under the deal, PAF will pay Rs2.5 billion in cash over five years and assume responsibility for Rs3 billion in pension liabilities for 259 retired employees over 10 years. PAF will also take on Rs1.1 billion in pension and provident fund liabilities for the existing 251 employees. A ministerial committee, led by Finance Minister Muhammad Aurangzeb, approved the transaction structure, and the federal cabinet is expected to approve it next.
The deal was finalized after the government’s failed attempt in October to privatize PIA. The sale attempt saw five out of six shortlisted bidders withdraw, leaving one real estate developer who offered Rs10 billion, significantly below the Rs85.03 billion reserve price. Bidders had also requested the government to write off tax liabilities and other financial burdens, but these demands were not met, leading to the deal’s failure.
Despite the Rs1.73 billion negative equity, the government secured a Rs2.5 billion cash deal. PEC’s assets include property, equipment, and trade receivables, while its liabilities mainly consist of employee obligations and trade payables.
