Pakistan International Airlines has long been more than an airline. It has been a floating metaphor for the Pakistani state itself, born as a symbol of national ambition and technical prowess that gradually became a fiscal albatross, circling the public balance sheet year after year, consuming subsidies, eroding credibility and defying reforms.
That is why the recent auction that awarded a 75% stake in Pakistan International Airlines to a Pakistani consortium led by Arif Habib for about Rs 135 billion seems momentous. Not because a sale has finally occurred, but because it forces a more difficult question to be asked. Is this the end of a long failure or just the beginning of a more subtle one?
The transaction, concluded after years of failed attempts, comes amid IMF-backed stabilization efforts and shortly after PIA resumed European and British routes. These events have been celebrated as signs of renewal. However, privatization, like accounting, is relentless. It rewards precision and punishes narrative excess.
To judge this deal, we must look beyond the headlines and examine what has really changed, what hasn’t, and what needs to follow now for it to become a genuine change and not a cosmetic milestone.
At the heart of the agreement is simple but awkward arithmetic. The government has sold 75% of PIA’s operating airline for an enterprise value of Rs 135 billion. Of this, only a small portion is cash that flows directly to the State. Most of it is structured as fresh capital injected into the airline to stabilize operations, fund fleet needs and restart growth. The state also retains a 25% shareholding, implicitly valued at around Rs 45 billion.
Set against this is the much broader reality that the majority of PIA’s historical liabilities, approximately Rs 650 billion, have been parked in a separate holding company and remain with the government. When you compare the immediate fiscal value received, the cash plus retained capital, with these inherited obligations, the State still has to bear a burden of over Rs 600 billion.
This distinction is important because it exposes the fallacy of celebrating privatization as a fiscal salvation. The sale improves incentives at the operational level, but does not erase the cost of decades of bad governance. Several economists have rightly pointed out that this is a necessary structuring option to make the airline investable, not a magic wand for the public balance sheet.
PIA’s decline is neither sudden nor mysterious. In the 1960s and 1970s, he was a regional leader, advising and even helping to establish airlines in Asia and the Middle East. Over time, political interference replaced commercial logic.
Overstaffing increased costs, procurement became opaque, and routes were chosen for clientelism rather than profitability, while management turnover eroded accountability. Repeated restructuring plans promised a revival but delivered little more than temporary cash injections.
The result was an airline that could not compete on cost, reliability or quality of service, even as its regional peers professionalized and globalized. Losses became structural, not cyclical. Subsidies became common, not exceptional. By the time security concerns forced the suspension of international routes, PIA had already become a case study in how state ownership, without institutional discipline, corrodes operational capacity.
Current privatization follows a familiar model. Good assets and operations are divided into an OpCo, leaving bad debts and liabilities in a HoldCo. This approach is defensible and quite inevitable, since no investor would take on decades of accumulated liabilities. However, the success of such structures depends on what follows.
First, the process has raised questions about the transparency and depth of strategic engagement. The absence of top-tier global air operators in the bidding process suggests the opportunity may have been framed more as a bailout than an aviation strategy.
Second, generous tax concessions and liability protection reduce the disadvantages for new owners, but transfer the risk decisively to taxpayers. Without rigorous performance covenants, this can entrench moral hazard rather than eliminate it.
International precedents are instructive. Airline privatizations in Argentina ranged from private control to renationalization due to weak regulation and politicized oversight. Egypt’s reforms stalled when ownership changes were not accompanied by governance reforms. These examples show that privatization without institutional redesign often recycles failure under a different label.
If Pakistan wants this privatization to mark a break with the past, it must think beyond the binary between state ownership and private ownership. The issue is not who owns PIA, but how capital, labor and governance are used.
One approach is to incorporate incremental, performance-linked share buybacks. Institutional investors could be offered the option to take additional stakes in predefined operational milestones such as load factors, on-time performance and unit cost reductions. This aligns capital deepening with execution rather than optimism.
Secondly, as things stand, PIA needs strategic air partners, not just financial backers. Code sharing, fleet pooling and joint procurement with top-tier global operators can unlock network synergies that balance sheet repair alone cannot achieve. Aviation is a scale business. Insularity is expensive. Perhaps an avenue for the government to discuss with the United Arab Emirates, whose airline industry was once defended by Pakistan.
Third, labor reform must be intelligent, not forceful. Widespread layoffs would destroy morale and provoke a political backlash. A better model is skills-based redeployment linked to airline-wide productivity metrics, supported by retraining funds funded through future profit-sharing instruments. Workers then become stakeholders in the recovery, not victims of it.
Fourth, PIA should reposition itself within a regional aviation hub strategy. Pakistan’s geography is an asset, not a footnote. If properly harnessed, PIA can serve trade corridors, tourism flows and a vast diaspora market in Europe, the Gulf and East Asia. Connectivity is economic infrastructure. Treated strategically, it multiplies value beyond the airline itself.
Finally, governance must be modern and public. Independent boards with proven experience in airline turnarounds should be mandatory. Quarterly performance scorecards should be published, comparing PIA with regional peers in terms of costs, timeliness and quality of service. Sunlight is not punitive. It is preventive.
IMF involvement guarantees short-term discipline, but cannot build institutional capacity. That must be built at the national level. As financial news media reported, markets are watching not only the sale price but also the depth of the reform that follows.
Privatization of PIA is not a verdict. It’s a test. He wonders whether Pakistan can turn ownership change into institutional change, whether it can deploy capital toward productivity rather than clientelism, and whether it can finally treat its national airline as an economic instrument rather than a political ornament.
If this moment is approached seriously and imaginatively, PIA can once again become a connector of people, markets and ideas. Otherwise, it will simply fly under a different flag and carry the same weight as always. The difference will not be measured in press releases, but in balance sheets, flight schedules and, ultimately, public trust.
The author is a chartered accountant based in the United Kingdom. he can be reached in: [email protected]
Disclaimer: The views expressed in this article are those of the writer and do not necessarily reflect the editorial policy of PakGazette.tv.
Originally published in The News
