PIA Privatization: Can it Bring Back Pakistan National Airline's Glory Days?

[Riaz Haq]

After decades of failed attempts, the Government of Pakistan has finally privatized the Pakistan International Airline (PIA) under intense pressure from the International Monetary Fund (IMF). Nonetheless, it is a deal that will give the national airline not only a chance to survive but to thrive in the long run. As part of structuring the sale for Rs. 135 billion, the government has assumed Rs. 654 billion in debt and pension obligations. The government gets only Rs. 10 billion in cash but it gives the new owners a clean balance sheet in return for a commitment to invest Rs. 125 billion of the Rs. 135 billion sale price in the carrier. 

PIA Privatization Deal Structure. Source: Standard Capital Securiti...

Pakistani politicians have used state-owned enterprises like the PIA as a vehicle for doling out political patronage. They have given jobs, including top jobs, to political cronies who have neither the experience nor the inclination to run these PSUs like businesses. Their focus has been on extracting as much financial gains as possible, and sharing some of these gains with their political patrons. 

Privatization will save Pakistan’s taxpayers tens of billions of rupees each year, and raise the prospect of the PIA becoming a contributor rather than a continuous drain on the national  treasury. Prior experience with privatizations of state-owned units like banks and the telecom company has shown that this is a realistic expectation. Taxpayer money saved can be used to fund education, healthcare and critical infrastructure. 

The PIA has a huge potential to succeed as an airline business. It has lucrative routes and landing rights which it is currently unable to fully utilize. It has a small aging fleet of 32 aircraft. Half of the fleet is out of service at any given time due to maintenance issues. 

Arif Habib, the head of the buying consortium, has committed to hiring a professional management team to run the PIA as a business to serve its customers and shareholders. He has announced plans to grow the PIA fleet from around 15-18 operational aircraft to 38 in the first phase, then potentially reaching 64-65 aircraft within a few years, essential for reclaiming international routes and improving service by adding more planes and restoring operational strength. 

Pakistan has the world's 6th largest diaspora. In addition, millions of Pakistanis travel for Hajj and Umrah pilgrimage to Saudi Arabia each year. Majority of the overseas Pakistanis and pilgrims would choose to travel by PIA if it offered convenient schedules and better service with direct flights to Pakistan. 

A successful national airline can make a significant contribution to the nation's economy by improving connectivity for tourism, trade and investment in the country. Business people, in particular, value their time.  Operating direct, non-stop flights to destinations in Pakistan from major international airports are essential for serving this customer base. 

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[Riaz Haq]

Why Pakistan sold PIA — and why the deal is controversial
By André Orban

https://www.aviation24.be/airlines/pakistan-international-airlines/...

Pakistan’s government sold a 75% stake in Pakistan International Airlines (PIA) for $482 million to a private consortium led by financier Arif Habib to halt mounting losses and meet conditions tied to a $7 billion IMF bailout.

Once a flagship national carrier, PIA had become a heavily indebted state-owned enterprise, burdened with more than $2.3 billion in long-term liabilities, a shrinking market share, an ageing fleet, and years of operational mismanagement. Repeated privatisation efforts had failed until the government restructured the airline by carving out its debts, offering tax relief and policy guarantees, and staging a transparent, live-broadcast auction to attract credible investors.

The winning consortium committed to reinvesting about 92.5% of the purchase price back into PIA to revive operations, while the government retained a 25% stake. Officials argue this approach was aimed less at maximising sale proceeds than at stopping further fiscal drain and restoring the airline’s viability under private management.

The controversy stems from both the structure of the deal and the participants involved. Opposition parties claim the airline was effectively sold too cheaply, arguing that only a small portion of the bid flows directly to the state, while most funds benefit the airline now controlled by private owners. More sensitive still is the post-auction entry of Fauji Fertilizer Company, a military-linked conglomerate, into the consortium. Critics see this as extending the military’s economic influence and question whether PIA has truly moved out of state control or merely shifted from civilian to military-associated ownership. Supporters counter that the military-linked partner offers stability and investor confidence in Pakistan’s volatile policy environment.