Global Politics Explainer

CWA # 1737
Global Politics Explainer
Pakistan International Airlines (PIA)
Why are they privatising their national carrier? And why is there a delay?

Merin Treesa Alex
4 July 2025

Photo Source: Dawn

Why is Pakistan privatising the PIA?
First, Pakistan International Airlines, for the past several decades, has been burdened by substantial debt resulting from financial, management and operational inefficiency. Despite numerous government bailouts and debt restructuring efforts, the financial outlook remained bleak, with the government unable to cover the increasing losses. The airlines accumulated a massive debt of USD 2.9 billion; the liabilities stand at approximately PKR 825 billion. However, the airlines do possess some assets which are valued at around PKR162 billion. 

Second, PIA’s operational inefficiencies stem from an ageing fleet, maintenance and fuel costs, and overstaffing. PIA operates a total of 33 aircraft, of which only 16 are operational; the remaining 17 are grounded due to technical issues and management negligence, with three out of nine Boeing 777 which are leased.  The aircraft-to-employee ratio is around 500 per aircraft, significantly higher than the international average of 150-250. 

Third, political interference has severely undermined PIA’s functioning, with governments using the airline as a means of rewarding loyalists rather than promoting staff based on merit. Despite promises of reform and downsizing, PML-N increased hiring, adding over a thousand employees just before introducing restructuring legislation. Influential individuals aided in securing high-paying jobs for relatives without accountability or qualifications. This has resulted in the appointment of underqualified staff, including hundreds found with fake degrees, which further damaged the airline's credibility and operational safety. In 2020, PIA was banned by EASA from operating in the EU following the Karachi flight crash, which led to numerous casualties. The ban was lifted in 2024, though not for all routes and would remain under surveillance till the end of 2025. A committee report suggested that the open sky policy caused PIA's shares to decline by 20 per cent, with more airlines from the Middle East dominating the market.

Fourth, the privatisation process is part of a broader IMF bailout package valued at USD 7 billion. PIA's privatisation aligns with Pakistan’s strategy to privatise loss-making state-owned enterprises to ensure fiscal discipline. Officials have agreed to complete the privatisation process by July 2025. Privatisation of the company would help stabilise the economy as the country faces inflation. 

Why did the previous efforts fail?
First, the government in 2016 decided to sell 26 per cent shares in PIA but labour and political opposition hindered these efforts. The Pakistan Muslim League-Nawaz (PML-N) government faced resistance from opposition parties, including the Pakistan People’s Party (PPP) and Pakistan Tehreek-e-Insaf (PTI), which blocked legislation in the Senate. The employees feared job losses and reduced benefits; they organised protests and strikes, including a violent demonstration in Karachi that resulted in two deaths. The government abandoned the attempt due to this backlash.

Second, the Pakistani government launched a privatisation effort in October 2024, aiming to sell a 51–100% stake in PIA as part of a USD 7 billion IMF program requiring the divestment of loss-making state-owned enterprises. Six companies were pre-qualified; however, the attempt failed when only one bid was received from Blue World City, which offered PKR 10 billion for a 60 per cent stake, far below the government’s minimum price of PKR 85.03 billion. Potential investors cited concerns over PIA’s legacy debt of over USD 2.9 billion, unresolved taxation issues, and operational challenges, including a European flight. The government rejected the bid, deeming it insufficient. 

Third, following the October 2024 failure, the government restructured PIA’s finances, transferring nearly 80 per cent of its debt to a holding company and abolishing an 18 per cent sales tax on aircraft purchases to make the airline more attractive. A second attempt was initiated, with a new Expression of Interest (EOI) planned for late April 2025. Despite these reforms, the effort also faltered, due to continued investor hesitancy over PIA’s remaining liabilities (approximately PKR 190 billion), high sector taxes, and concerns about the consistency of government policy. Only one bid was mentioned in earlier reports, and the process did not advance significantly, with the government failing to meet the IMF’s July 2025 deadline.

What efforts are being taken during the privatisation efforts?
First, the government hired Ernst &Young as the consulting firm to support the privatisation efforts. the firm faced criticism from the privatisation minister for handling the first bid poorly. Despite this, the firm was rehired for the second attempt at privatising the airlines. 

Second, the privatisation of the Roosevelt Hotel was presented with three options of outright sale, joint venture or a 99-year lease. Out of the three the privatisation committee preferred the sales to avoid any further complications. 
Third, the PIA established a holding company called PIA Holding Company Limited (PIAHCL), to which the truly insoluble debts were transferred, allowing the PIA to have a clean slate that would be attractive to potential sellers. The State Bank of Pakistan facilitated this process by treating the syndicate finance facility for the PIAHCL as a fresh loan, which would help stabilise its finances and prevent it from being excessively exposed to previous liabilities. The debt restructuring has made the situation manageable; otherwise, the debts could have become unsustainable. 

References
Second PIA privatisation effort moves ahead with five bidders,” The Express Tribune, 20 June 2025
Shahbaz Rana, “Govt rehires E&Y for PIA sell-off,” The Express Tribune, 10 January 2025
Aftab Khan, “Technical issues ground half of PIA's fleet,” The Express Tribune, 26 October 2024
Tahir SheraniGovt extends deadline for PIA expressions of interest till June 19, Dawn, 27 May 2025
Kunwar Khuldune Shahid, “Can Pakistan International Airlines Be Saved?,” The Diplomat, 23 June 2020
Ali Khizar, PIA privatization: taking off?, Business Recorder, 13 January 2025

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