Pakistan’s National Airline on Brink of Sale Amid IMF Conditions

Pakistan is poised to sell a majority stake in its national airline, Pakistan International Airlines (PIA), as the government seeks to address the economic challenges facing the country. Finance Minister Muhammad Aurangzeb confirmed that the privatisation process is in its final stages, a move that aligns with conditions set by the International Monetary Fund (IMF) for a US$7 billion bailout. The IMF has urged the Pakistani government to offload unprofitable state-owned enterprises to restore economic stability.

Once a symbol of national pride, PIA was celebrated as one of the premier airlines globally during the 1960s and 1970s, introducing innovations such as in-flight movies and bespoke cabin crew uniforms. However, the airline’s fortunes have sharply declined, burdened by approximately US$2.5 billion in accumulated losses over the past decade. Nearly a third of its 30 aircraft are currently grounded due to age and outdated technology.

The airline’s spokesperson, Abdullah Hafeez Khan, emphasized the need for significant investment in PIA’s fleet and overall business efficiency. He stated, “These things can actually come from the private sector if a good group or if there is a large investor who has the muscle to actually pull it off.” This statement reflects a growing sentiment that privatisation could be the solution to PIA’s longstanding financial troubles.

Signs of Improvement

Recent restructuring efforts appear to be yielding results, as PIA reported a pre-tax profit in the first half of this year, marking its first gain in two decades. The airline resumed flights to Europe in January 2023 after a four-year ban due to safety issues and is in the process of reapplying for flights to the United Kingdom, a key market.

The government aims to sell a 75 percent majority stake in the airline, with bids expected from four domestic groups, including a military-backed conglomerate. This follows a previous attempt at privatisation that attracted only a single lowball offer due to concerns about limited management control. In addition to PIA, the government plans to privatise airport operations, starting with Islamabad International Airport. Muhammad Ali, chairman of the Pakistan Privatisation Commission, stated, “Islamabad is the first one, and I am hoping after this, once we successfully bring the private sector to Islamabad, then we will have more airports go into the private sector hands.”

Concerns and Challenges

Despite the optimism surrounding privatisation, challenges remain. Muhammad Ali pointed out that PIA lacks a sufficient number of aircraft for a national carrier. “PIA has routes, but it doesn’t have the planes to fly. If it can get the planes either at the lease or whatever way it can invest in them, then profitability can improve tremendously,” he explained.

The prospect of privatisation has also sparked protests among PIA employees, who fear job losses. Hidayatullah Khan, president of the PIA employees union, expressed concerns that whoever takes over the airline is likely to suspend all existing employees, offering re-employment only on a contract basis.

The government hopes to finalise the sale of PIA by the end of 2023, aiming to bolster investor confidence and stabilise Pakistan’s debt-laden economy. While officials position privatisation as a critical step forward, experts caution that it will not resolve the broader economic issues facing the country.

According to Sajid Amin Javed, deputy executive director of the Sustainable Development Policy Institute, “Selling the PIA will not solve your IMF problem or all the economic problems.” He emphasized that attracting foreign direct investment and implementing comprehensive policy reforms are essential for long-term economic recovery.