PIA Invites Bids for Strategic Partnership to Establish Flight Kitchen at New Islamabad International Airport

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Abbas Ali
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PIA Invites Bids for Strategic Partnership to Establish Flight Kitchen at New Islamabad International Airport

Post by Abbas Ali »

In July 5 newspaper:

Invitation for Strategic Partnership to Establish Flight Kitchen at New Islamabad International Airport (NIIAP) as Joint Venture Company

Pakistan International Airlines Corporation Limited (PIACL) is looking for an experienced strategic partner to establish a Flight Kitchen at NIIAP as Joint Venture company, equipped with state-of-the-art airline catering facilities and capable to meet the demands of PIACL in an effective manner.

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Abbas Ali
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Re: PIA Invites Bids for Strategic Partnership to Establish Flight Kitchen at New Islamabad International Airport

Post by Abbas Ali »

Terms of Reference (TOR) for the Establishment of Joint Venture Company (JVC) for the Development of Flight Kitchen at New Islamabad International Air Port (NIIAP)

PIA Intends to establish a JV Company in partnership with an experienced and reputable airline caterer as Strategic Partner for the development of Flight Kitchen of international standard at New Islamabad Airport.

JV Company Structure:

Following are the basic attributes that forms Terms of Reference (TOR) for the Joint Venture Company (JVC):

1. Share Holding

a. PIA, in any case, will be the majority shareholder in the JV Company having shareholding of 51% or more.
b. ''Strategic Partner'' can hold shares up to maximum of 49%.
c. Equity participation of PIACL and Strategic Partner will be Rs 100 Million, as per their shareholding.

2. Composition of Board of Directors (BoD)

a. The JV Company will be governed by the Board of Directors.
b. There may be total 7 board members (including Chairman). 4 members shall be from PIA and 3 from the Strategic Partner.

3. Management Control

a. The management control of JV Company shall rest with the JV Company. However, appointment of CEO of JV Company will be with the consent of ''Strategic Partner''.

4. Legal Structure of JV Company

a. The JV Company will be registered and operated as per laws & regulations of Pakistan

5. Scope of the JV Company

a. The JV Company will be responsible for the production of meals as per PIA requirement.
b. The JV Company will be responsible for all activities, ensuring Meal carts are completely ready for the aircraft. This includes production of meals, Tray Set Up (TSU) and dish washing.
c. PIA will ensure availability of centrally procured allied items, i.e. crockery, cutlery, meal carts etc.
d. The JV Company to ensure meeting space, stores, transport and other operational requirement for PIA as PIA will be responsible for the uplifting of meal carts to aircraft and back.

6. Business Model

a. As a part of PIA's share, PIA will guarantee its meal purchase for ground feeding and meals uplift for aircraft business from NIIAP from JV Company for all its flights for the period of 05 years from the start of production.
b. After 05 years, PIA reserve the right to buy out Shareholding of the strategic partner at the prevailing open market value after accessing the value of the company with the help of International/National evaluator. The selection of International/National evaluator shall be made with the approval of 75% of the board members. However, PIA also reserves first right of refusal in case Strategic Partner decides to divest its investment in JV Company during this period.
c. PIA will arrange all that land from Pakistan Civil Aviation Authority (PCAA) for which payable amount will be paid by the Strategic Partner.
d. As a part of Strategic Partner‟s share, Strategic Partner will pay to the JV Company for 100% of NIIAP Project cost that includes infrastructure of flight kitchen building, entire equipment, furniture/fixture and vehicles if any. Investment by the Strategic Partner will be treated as ''Loan'' to the JV Company.
e. The cost of construction and equipment shall be agreed between the parties to the JV contract prior incurring the expenditure.
f. Strategic Partner to quote mark-up rate for its investment.
g. Profit sharing will be as per the share holding.

7. Capacity of Infrastructure

a. Infrastructure should be State of Art having premium quality equipment of international repute to ensure quality, hygiene and HACCP/ISO standards.
b. Infrastructure and equipment must have a capacity to handle 20,000 meals a day, with an expansion plan of another 10,000 meals a day.

8. Pricing Formula

a. Pricing formula to be decided by PIACL and the JV Company for PIACL supplies. For rest of the supplies, the JV Board shall be the sole authority to fix the price.

9. Customer base

a. PIA is to be the prime customer of the JV Company. However, with the approval of BoD, JV Company may acquire business from other airlines.
b. If the Strategic Partner is associated with airline business, then Strategic Partner shall also buy meals for its airline from the JV Company.

10. Distribution of Dividend

a. Dividend to be paid out on of annual net profit after provision for repayment of loan, taxes or available cash flow, after having made sufficient and prudent provisions and reserves for intended future expansion.
b. Payment of dividend to be made after approval from BoD.

11. Future Investment

a. All future investments and/or Capital injection will be responsibility of JV Company.

12. Governing Law

a. Governing Law will be the Laws of Pakistan.
b. JV Company to adhere all laws/regulations imposed by PCAA and any other regulatory authority

13. HR Requirement

a. JV Company to accommodate PIA staff working at ISB Flight Kitchen on need basis, meeting the merit criteria.

Source: PIA

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