The government has announced its decision 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 amount represents just one-fourth of the price offered by a sole bidder for a 60% stake in the national carrier.
The total valuation of PEC is Rs6.5 billion, which includes Rs4 billion in pension-related liabilities for both current and retired employees, as reported by a senior government official to The Express Tribune. PEC specializes in manufacturing high-precision components for the aerospace sector and other industries.
Sources indicated that a ministerial committee has approved the transfer of PEC to PAF at the total price of Rs6.5 billion. A formal summary is now being prepared for the federal cabinet’s approval.
PEC has already been separated from the main PIA operations and is classified among non-core assets held by the PIA holding company, which carries Rs623 billion in liabilities. As of December last year, PEC’s total assets were valued at Rs1.2 billion, against total liabilities of Rs2.9 billion, resulting in a net negative equity of Rs1.73 billion.
Under the agreement, PAF will pay Rs2.5 billion in cash over five years and assume Rs3 billion in pension and provident fund liabilities for 259 retired employees over the next decade. Additionally, PAF will be responsible for Rs1.1 billion in estimated liabilities for 251 current employees.
A four-member ministerial committee, chaired by Finance Minister Muhammad Aurangzeb, has finalized the transaction structure. Committee members included the ministers for defense, aviation, and privatization, tasked with overseeing the transfer of assets, liabilities, and human resources to PAF.
A sub-committee led by the additional secretary of corporate finance assessed the assets and liabilities for the transition. The Rs6.5 billion sale price was determined using the discounted cash flow method and covers land, infrastructure, machinery, and personnel.
PAF plans to set up a special purpose vehicle to facilitate the transaction, ensuring that current employees retain their contract conditions, including pay, allowances, and benefits.
Despite efforts to privatize PIA earlier this year, only one bidder remained, offering Rs10 billion against a minimum reserve price of Rs85.03 billion. Challenges arose as bidders sought significant debt write-offs and adjustments to liabilities. Privatization Minister Abdul Aleem Khan cited lack of cooperation from the Ministry of Finance as a critical factor in the unsuccessful privatization attempts.
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The finance ministry has finalized the Rs2.5 billion cash deal for PEC, despite its negative equity. PEC’s assets include property, plant, and equipment valued at Rs199 million, spare parts worth Rs154 million, trade receivables of Rs742 million, and cash deposits of Rs93 million. Its liabilities consist of Rs1.1 billion in employee obligations and Rs1.8 billion in trade payables.
