PIA privatization enters decisive phase after two decades

After nearly 20 years of delays and false starts, Pakistan International Airlines (PIA) is set to enter the final and decisive phase of privatization.

The national carrier’s sale represents a major test for the state, with transparency measures in place, including a live broadcast of the bidding process scheduled for December 23. Following privatization, the government will have no role in PIA’s affairs, having decided to sell all of its shares.

In the latest episode of On My Radar, Kamran Khan highlighted that PIA’s privatization is a critical “test case” for the government and the country, noting the historical importance of the airline and the scale of the investment involved. He emphasized that the move could reshape the aviation sector and restore PIA’s lost prominence on the international stage.

Four qualified bidders have emerged to acquire PIA. The leading consortium includes Lucky Cement, Hub Power, Kohat Cement and Metro Ventures. The second group comprises Arif Habib, Fatima Fertilizer, AKD Group, City School, and Lake City Holdings. Air Blue represents the third bidder, while the fourth is Fauji Fertilizer Company. All are Pakistani investors, indicating that the privatization will not bring in foreign direct investment, a key expectation for some analysts.

Only 7.5 percent of the bidding amount will be collected in cash, with the remaining 92.5 percent reinvested directly into PIA rather than deposited in the national treasury. This reinvestment is intended to restore the airline to its former status, including induction of new aircraft into the fleet.

Once counted among the world’s top airlines from the 1950s through the 1980s, PIA currently operates a fleet of 34 aircraft, only 18 of which are airworthy. Its most valuable assets, however, remain its air service agreements with 97 countries and landing slots at over 170 premium international destinations, including critical airports in New York, London, and Paris.

According to the Finance Division, losses from 15 state-owned enterprises (SOEs) had reached 5,890 billion rupees by December 2024. Even using slightly outdated figures, these losses represent roughly one-third of Pakistan’s annual budget of 17.6 trillion rupees and about 5 percent of GDP.

Leading contributors include steel mills, Pakistan Railways, WAPDA, utility stores, and power generation and distribution companies, collectively draining billions of rupees annually.

This privatization follows previous attempts over the past two decades. Between 1991 and 2005, entities such as MC Bank, Habib Bank, United Bank, PTCL, and K-Electric were privatized. A 2006 effort to sell steel mills was nullified by then-Chief Justice Iftikhar Muhammad Chaudhry.

More recently, the First Women Bank was sold to a UAE-based company for just $14 million (4.1 billion rupees). Two prior attempts to privatize PIA failed: in 2023, the caretaker government completed all arrangements but did not proceed, while another bid under the current government fell short when BlueWorld City offered only PKR10 billion against a base price of PKR85 billion.

This year, PIA’s financial position has improved substantially. Net profits of 11 billion rupees and settlement of previous losses have raised the airline’s equity to 30 billion rupees. Tax relief measures include the addition of 35 billion rupees in deferred tax credits and removal of 18 percent sales tax on leased aircraft. Pensions for retired employees will not be the responsibility of the purchasing entity. Moreover, several international routes have already been restored, increasing PIA’s attractiveness and the potential value of the bid.