Pakistan International Airlines has long been more than just an airline. It is a free-floating metaphor for the Pakistani state itself, born as a symbol of national ambition and technical prowess, which has gradually transformed into a fiscal albatross, hogging the public balance sheet year after year, consuming subsidies, eroding its credibility and defying reforms.
This is why the recent auction awarding a 75% stake in Pakistan International Airlines to a Pakistani consortium led by Arif Habib for around 135 billion rupees seems momentous. Not because a sale finally happened, but because it raises a more difficult question. Is this the end of a long failure, or simply the beginning of a more subtle failure?
The transaction, concluded after years of failed attempts, comes as part of IMF-backed stabilization efforts and shortly after PIA’s takeover of European and British routes. These developments were celebrated as signs of renewal. Yet privatization, like accounting, is ruthless. It rewards precision and punishes narrative excesses.
To judge this deal, we need to look beyond the headlines and examine what has actually changed, what has not changed, and what must now follow if this is to become a true turnaround and not a cosmetic step.
At the heart of the deal is simple but uncomfortable arithmetic. The government sold 75% of PIA’s operational airline for an estimated enterprise value of Rs 135 billion. Of this amount, only a small part is paid directly to the State. Most of it is structured as new capital injected into the airline to stabilize operations, fund fleet needs and restart growth. The State also retains a 25% stake, implicitly valued at around Rs45 billion.
Added to this is a much larger reality: most of PIA’s historic debts, around 650 billion rupees, have been deposited in a separate holding company and remain with the government. If one compares the immediate tax value received, cash plus retained equity, with these inherited bonds, the state is still left with a burden in excess of Rs600 billion.
This distinction is important because it reveals the error of celebrating privatization as a fiscal salvation. The sale improves incentives at the operational level, but it does not erase the cost of decades of poor governance. Several economists have rightly emphasized that this was a structuring choice necessary to make the airline investable, and not a magic wand for the public balance sheet.
PIA’s decline is neither sudden nor mysterious. In the 1960s and 1970s, it 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 drove up costs, procurement became opaque, and paths were chosen for cronyism rather than profitability, while staff turnover eroded accountability. Repeated restructuring plans promised recovery but delivered little other 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. The losses have become structural and not cyclical. Subsidies have become usual and not exceptional. By the time security concerns forced the suspension of international routes, PIA had already become a case study of how state ownership, without institutional discipline, corrodes operational capacity.
Current privatization follows a familiar pattern. Good assets and operations are rolled into an OpCo, leaving bad debts and liabilities in a HoldCo. This approach is defensible and rather inevitable, as no investor would take on decades of accumulated liabilities. Yet the success of such structures depends on what happens next.
First, the process raised questions about transparency and the extent of strategic participation. The absence of leading global airline operators in the bidding process suggests the opportunity may have been presented more as a financial bailout than an aviation strategy.
Second, generous tax breaks and liability protection reduce the downside for new owners, but decisively shift the risks onto taxpayers. Without rigorous performance clauses, this can entrench moral hazard rather than eliminate it.
International precedents are instructive. Argentina’s airline privatizations have oscillated between private control and renationalization due to weak regulation and politicized oversight. Egyptian reforms were blocked when ownership changes were not accompanied by governance reforms. These examples show that privatization without institutional overhaul often recycles failure under another label.
If Pakistan wants this privatization to mark a break with the past, it must think beyond the binary logic between the state and private property. The question is not who owns PIA, but how capital, labor and governance are deployed.
One approach is to incorporate progressive, performance-related share buybacks. Institutional investors could be offered the opportunity to acquire additional stakes at predefined operational milestones such as load factors, on-time performance and unit cost reductions. This aligns capital deepening with execution rather than optimism.
Second, as things stand, PIA needs strategic airline partners, not just financial sponsors. Code sharing, fleet pooling and joint purchasing with leading global carriers can unlock network synergies that balance sheet repair alone cannot deliver. Aviation is a large-scale business. Insularity is expensive. Perhaps a possibility for the government to discuss with the United Arab Emirates, whose aviation sector was once supported by Pakistan.
Third, labor reform must be smart, not brutal. Widespread layoffs would destroy morale and provoke political backlash. A better model would be skills-based redeployment, linked to airline-wide productivity measures, supported by reskilling funds funded by future profit-sharing instruments. Workers then become actors in recovery, not victims.
Fourth, the PIA should be repositioned as part of a regional aeronautical hub strategy. Pakistan’s geography is an asset and not a footnote. Properly leveraged, the PIA can serve trade corridors, tourism flows and a vast diaspora market across 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 dashboards are expected to be published, comparing PIA to its regional peers in terms of costs, on-time performance and quality of service. Sunlight is not punishing. It’s preventive.
IMF participation guarantees short-term discipline, but it cannot build institutional capacity. This must be built at the national level. As financial media report, markets are monitoring not only the sale price, but also the scale of the reform that follows.
The privatization of PIA is not a verdict. It’s a test. He questions whether Pakistan can turn ownership change into institutional change, whether it can devote its capital to productivity rather than cronyism, and whether it can finally treat its national airline as an economic instrument rather than a political ornament.
If this moment is managed seriously and imaginatively, PIA can once again become a connector between people, markets and ideas. Otherwise, it will simply fly under a different flag, carrying the same weight. The difference will not be measured in press releases, but in reports, flight programs and, ultimately, in public confidence.
The author is a chartered accountant based in the United Kingdom. He is reachable has: [email protected]
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the editorial policies of PK Press Club.tv.
Originally published in The News
