Pakistan government has announced to sale a business unit of Pakistan International Airlines (PIA), the Precision Engineering Complex (PEC), to the Pakistan Air Force (PAF) with the first installment of Rs2.5 billion in cash.
PEC is a PIA business unit that manufactures high-precision components for the aerospace and other industries. A senior government official stated that the total valuation of PEC is Rs6.5 billion, which includes Rs4 billion in pension-related liabilities for current and retired employees.
Earlier a four-member ministerial committee, chaired by Finance Minister Muhammad Aurangzeb, has approved the structure for transferring PEC to PAF. However, a formal summary will soon be presented to the federal cabinet for final approval.
PEC has already been separated from PIA’s core operations and is classified as one of the non-core assets now held by the PIA holding company, which also carries Rs623 billion in liabilities.
As of December last year, PEC’s total assets were valued at Rs1.2 billion, while its liabilities stood at Rs2.9 billion, resulting in a negative net equity of Rs1.73 billion at the time the sale price was set.
The PAF will acquire PEC for Rs6.5 billion, with Rs2.5 billion to be paid in cash over the next five years. Additionally, PAF will take on Rs3 billion in pension and provident fund liabilities for 259 retired employees, a responsibility to be met over the next decade. Another Rs1.1 billion in pension and provident fund liabilities for the remaining 251 employees will also be assumed by PAF.
PAF will set up a special purpose vehicle to manage the transaction. Employee contracts will remain unchanged, and current workers will retain their pay, allowances, medical services, air travel perks, pension, and provident fund benefits.
Additionally, the PAF will be responsible for securing the necessary funds to continue PEC’s operations.
