Pakistan's PIA dilemma

PIA privatisation shifts risks to the public while potential gains flow to private owners

The privatisation of PIA illustrates a fundamental dynamic in which public resources are transferred to private ownership under the guise of reform and efficiency. While the government portrays the sale as a decisive break from decades of losses and inefficiency, a closer examination reveals that the transaction primarily shifts the burden of risk to the public while concentrating potential benefits in the hands of a few private actors.

By splitting PIA into a holding company carrying Rs650 billion in legacy liabilities and a "clean" operating entity sold to a consortium led by Arif Habib Corporation, the government created a superficially attractive asset for private investors. The transaction allowed the state to claim progress while retaining most of the financial burden.

Only about Rs10 billion of the Rs135 billion headline value accrued as cash to the state. The remainder was injected into the airline as equity. The government also retained a 25% stake, valued at roughly Rs45 billion. Against the Rs650 billion of retained debt, the net fiscal position remains heavily negative, leaving taxpayers exposed to decades of financing costs. In effect, public funds have absorbed past losses, while private ownership stands to gain from potential operational improvements.

PIA's decline was not an inevitable consequence of public ownership. Chronic political interference, patronage-based hiring, inconsistent policy direction and the erosion of professional management shaped decades of dysfunction. Privatisation addresses ownership but not these underlying failures. Without reforms to governance structures, regulatory oversight and management practices, the airline may continue to struggle under a new banner, with inefficiency and mismanagement potentially re-emerging in less visible forms. In this sense, privatisation transfers responsibility without necessarily resolving systemic issues.

The valuation and transfer of PIA's strategic assets further illustrate the inequities inherent in the process. The airline's fleet, international routes and landing rights, developed over decades with public investment, were sold at prices critics argue are below replacement value. Combined with the state absorbing past liabilities and recapitalising the airline, the transaction represents a net transfer of wealth from the public to private hands. This pattern mirrors broader economic trends, where profits are privatised while losses are socialised.

Labour considerations complicate the picture. Government assurances of job protection and preserved benefits are limited in scope and duration. Past cases of privatisation suggest these guarantees are often temporary. Once initial protections expire, private owners face strong incentives to reduce costs through layoffs, outsourcing or contractual arrangements, undermining long-term job security and collective bargaining. Unlike state-run enterprises, private companies are accountable primarily to shareholders, not the public, diminishing their obligations to social welfare or workforce stability.

The broader context underscores the selective nature of reform. While aviation and banking sectors have been opened to private profit, other areas, such as energy, remain inefficient but insulated, with costs passed to consumers rather than recognised on the public balance sheet. Privatisation thus reflects a calculated redistribution of resources, where private actors capture future gains while the public bears the accumulated cost of weak governance and systemic inefficiency.

PIA's privatisation is less a resolution of its structural problems than a redistribution of responsibility. The airline's historic debt and operational challenges remain, but the visibility of public oversight is diminished. While private management may improve performance at the margin, the risk is that failures once visible in the public sector will now persist quietly under private control, still funded indirectly by taxpayers. The sale highlights that without institutional reform, strengthened regulation and professional management, changing ownership alone cannot rectify decades of dysfunction. The public continues to pay for the past, while private actors are positioned to benefit from a potentially improved future.