Pakistan's Securities and Exchange Commission has approved a scheme of arrangement between Pakistan International Airlines Corporation Limited, doing business as PIA - Pakistan International Airlines (PK, Islamabad International), and PIA Holding Company Limited, it announced on May 6. The move provides for the legal separation of PIA’s core aviation business from its "non-core" activities.

"The approval of the scheme paves the way for PIA Holding Company to own a 100% shareholding in PIA and simultaneously issue and allot shares to the qualifying shareholders of PIA," the accompanying statement reads. Two days earlier, the Competition Commission of Pakistan approved the same scheme of arrangement.

The approvals are part of a maze of red tape and bureaucratic approvals the Pakistani government and state-owned carrier must secure to sell a majority stake in PIA. Central to the process is the establishment of PIA Holding Company and the shifting of USD2.26 billion in non-core liabilities off PIA's balance sheet and over to the holding company. The government argues this will make the airline a more attractive proposition to potential buyers. The government wants to sell 51-100% of PIA's share capital and hand over management control of the loss-making airline.

Under the scheme of arrangement, shares in Pakistan International Airlines Corporation Limited will be swapped for shares in PIA Holding Company Limited. The latter entity will assume 100% ownership of Pakistan International Airlines Corporation Limited. In addition to the non-core liabilities, around USD89.3 million in non-core assets will also be transferred to the holding company, which will be 100% owned by the Pakistani government. PIA will retain approximately USD526 million in core assets and USD726 million in core liabilities.

Pakistan's finance minister, Muhammad Aurangzeb, told an investment conference in Saudi Arabia earlier this week that the government hopes to complete the privatisation by early July. The deadline for initial EOIs was recently extended until mid-May and reports are emerging of some interest in PIA. The government is keen for a foreign investor with hard currency and aviation experience to step in and take over the carrier. However, early reports have said it is mostly local companies that are keen to take a stab at running it.