PIA sale constructive signal for Pakistan's privatization drive: analysts

Analysts said the commencement of Pakistan’s privatization program — with the sale of Pakistan International Airlines (PIA) — sends a constructive signal for the government’s reform drive and could act as a precursor to successful International Monetary Fund reviews in the coming year, even though the near-term fiscal impact is likely to remain limited.

Pakistan’s government said on Tuesday it sold a majority stake in PIA, meeting a key condition set by the IMF and signaling momentum in its broader reform agenda.

In a televised event, the government divested 75% of its stake in the debt-ridden national carrier for PKR 135 billion (about $482 million), subject to cabinet approval. The sale followed 13 rounds of bidding and marked a turnaround from a failed privatization attempt in October 2024, when only a single PKR 10 billion bid was received against a reserve price of PKR 85 billion.

The winning consortium, led by the Arif Habib Group and including Fatima Group, AKD Group, Lake View Developers and the City School Group, agreed to pay a 35% premium to the government’s revised reserve price of PKR 100 billion. The group also has an option to acquire the remaining 25% stake at a 12% premium to the final price, with payment deferred by up to one year.

Out of four pre-qualified bidders, Fauji Fertilizer Company did not submit a bid, while three groups — led by Lucky Cement, Arif Habib Group and Air Blue — participated in the auction. Fauji Fertilizer Company may later partner with the winning consortium to acquire an additional 15% to 25% stake.

'PIA sale could enhance credibility'

Analysts said successful completion of the PIA sale could enhance the credibility of Pakistan’s broader privatization drive, with potential spillover effects for other state assets, including housing finance firms, airports and power generation companies.

An analyst from Intermarket Securities told Nukta the commencement of the privatization program is a constructive signal for the government’s reforms drive and a pre-cursor to successful IMF reviews in the upcoming year.

The importance of the program — emphasized various times by multilaterals such as the IMF and WB — is expected to support the government’s medium-term fiscal targets by reducing quasi-fiscal losses and limiting potential crowding-out of private sector credit, he said.

"Additionally, we believe that this transaction may enhance the credibility of the overall reforms agenda, with positive spillovers likely for other high-priority privatization targets including HBFC, airports and GENCOs, among others. That said, the near-term fiscal impact is likely to be limited, as the government will retain a fraction of the proceeds, i.e. 7.5% (PKR 10 billion/$36 million), while the remainder will be earmarked for reinvestments into the company (PIA)."

"We believe the bid value has significantly surpassed the market expectations of PKR 80 billion to PKR 100 billion," Shankar Talreja, head of research at Topline Securities, said.

The potential of turnaround in PIA is quite significant due to its landing rights over 78 destinations and 170 slots. Furthermore, this is a national airline of world’s 5th most populous nation, he noted.

"We also mentioned privatization of PIA in our annual strategy 2026 as one of the triggers for market touching 203,000 index level by Dec 2026. In our view, successful privatization of PIAA will boost morale of the privatization ministry and set the tone for next companies up for privatization i.e. DISCOS," he added.

Support for medium-term targets

Officials and analysts said the transaction is expected to support Pakistan’s medium-term fiscal targets by reducing quasi-fiscal losses and easing pressure on public finances. PIA has posted billions of rupees in losses over more than a decade, placing a heavy burden on the state.

The government will retain about 7.5% of the proceeds — roughly PKR 10 billion — while the remainder will be reinvested in the airline, limiting the deal’s immediate fiscal impact. Still, the move is seen as a positive signal ahead of upcoming IMF reviews and could bolster confidence in the government’s reform program.

The privatization remains subject to cabinet approval and faces post-sale challenges, including regulatory and competition hurdles and execution of a business plan that aims to double PIA’s fleet from 18 aircraft. Reports also suggest the new owners may commit about PKR 80 billion over five years for balance sheet repair and modernization.

Despite its long-running losses, PIA’s core operations showed improvement in 2023 and 2024, posting operating profits of PKR 3.3 billion and PKR 9.3 billion, respectively. The airline has launched new routes, including to the United Kingdom, and is seeking to reopen access to the U.S. market, steps that could further improve profitability.