The future of PIA and public expectations

The recent privatisation of Pakistan International Airlines (PIA) has sparked a great deal of public discussion. With the government selling 75 percent of the airline to the Arif Habib Consortium for 135 billion rupees, many are questioning the true value of the transaction.

While the government is set to receive only 10-11 billion rupees upfront, with the remainder to be reinvested into PIA for its revitalization, this deal has raised concerns about its long-term impact.

The sale has ignited debates about the structure and transparency of such a deal, particularly when compared to global privatisation practices. It is essential to understand that privatisation models, like this one, are not unique, although their outcomes depend significantly on how well they are executed.

Privatisation of state-owned enterprises (SOEs) typically involves selling a controlling stake in an underperforming entity to a private buyer.

The expectation is that the private buyer will not only assume operational management but will also inject capital to revamp the organization. The goal is to modernize and eventually make the enterprise profitable, easing the financial burden on the state. This model is common in sectors like aviation, energy, and transportation, where private sector expertise and investment can provide the improvements that the government may struggle to fund due to budget constraints.

To offer context, examples from around the world show both successes and failures with such privatization models. A notable success is the privatization of Air India, where Tata Group took control of the airline in 2021.

Tata Group has committed substantial investment to upgrade the fleet, improve operational efficiencies, and enhance services. These efforts have begun to show positive results, with improvements in service quality and operational performance, signaling a potential recovery for the airline.

In contrast, the privatisation of Olympic Airlines in Greece serves as a cautionary tale. In 2009, the Greek government sold the airline to a private investor, hoping to inject capital and improve operations.

However, the privatization faltered because the new owners did not fulfill their investment commitments. This failure led the Greek government to re-nationalize the airline in 2013.

The Olympic Airways case underscores the risks of privatization when private buyers fail to meet their financial and operational obligations, leaving the government to bear the consequences.

These examples highlight that privatization can be effective but its success largely depends on the buyer’s ability to follow through on the commitments made during the transaction. In the case of PIA, the Arif Habib Consortium has pledged to invest 125 billion rupees to turn the airline around.

However, questions remain about whether these funds will be allocated effectively to achieve the desired outcomes. One critical aspect of the deal that raises concerns is the 8 percent upfront payment.

While this is not unusual in large privatizations, it could be seen as insufficient, especially in light of the size of the asset being sold. A higher upfront payment might have made the deal appear more transparent and balanced to the public, instilling greater confidence in the process.

It is important for the public to understand that privatization is not a one-time transaction but a long-term commitment to improving services. To avoid the failures seen with Olympic Airlines, it is essential that the buyer’s investment be not just on paper but actually put to use in fleet upgrades, service improvements, and operational efficiencies.

The government must regularly monitor the progress of these investments, sharing public updates on how the funds are being used to ensure accountability and transparency. Public audits of the investment process and the financial health of PIA will help confirm that taxpayer money is being used wisely.

Another key factor is public engagement in the privatization process. Many citizens are wary of privatization, particularly in a country where privatized companies have sometimes failed to deliver on promises or led to increased costs for consumers.

The government should focus on effectively communicating the benefits of this privatization, emphasizing how it will improve services, reduce financial burdens, and help PIA become more competitive in the global aviation market. Transparent and accessible information can help dispel misconceptions and ensure the public is well-informed about the future of PIA.

The government must also consider the impact of privatization on ticket prices. Historically, privatized airlines have raised ticket prices as part of efforts to recover investments. It is essential that the Arif Habib Consortium ensures affordability for the public, particularly for those in the middle and lower-income brackets, so that air travel does not become a luxury reserved for the wealthy.

Safeguards should be put in place to prevent unwarranted price hikes that would harm citizens.

In conclusion, the privatization of PIA has the potential to transform the airline from a loss-making state-owned enterprise into a profitable and competitive entity.

However, it is crucial that both the government and the Arif Habib Consortium demonstrate full transparency and set clear investment milestones.

Regular progress updates are vital, ensuring that the funds are being used as promised and that the interests of the public are protected.

While the upfront payment of 8 percent appears low, a higher percentage could have made the transaction feel more balanced and reassuring to the public. By focusing on clear communication, accountability, and efficiency, the government can build trust in the privatization process and ensure that PIA’s future success benefits both the country and its people.

It is worth noting that Pakistan International Airlines (PIA) has faced daily losses of approximately Rs 500 million (Rs 50 crore), amounting to around 1.8 million USD.

Copyright Business Recorder, 2025