After nearly two decades of failed attempts, Pakistan has finally privatised its national airline. The Rs135 billion sale of a 75 percent stake in Pakistan International Airlines to the Arif Habib consortium is being described as a historic breakthrough. In reality, the deal succeeded because the government fundamentally changed what it was selling.
Rather than offloading PIA with decades of accumulated losses, the state absorbed most of the airline’s historic liabilities. More than Rs650 billion in debt was shifted to a separate holding company, while additional obligations — including at least Rs33 billion — were removed from PIA’s balance sheet. Only after this clean-up did serious investor interest emerge.
Cleaning the balance sheet, not rewriting history
This step marked a shift from political messaging to financial realism. Earlier privatisation attempts failed because investors were unwilling to inherit insolvency. This time, bidders were offered a functioning airline stripped of its worst financial burdens.
The result was competition. Arif Habib’s opening bid of Rs115 billion immediately set the pace, forcing Lucky Cement into a bidding contest that eventually pushed the price to Rs135 billion — above most internal valuations.
What the buyer is actually betting on
Arif Habib has framed the acquisition as an investment-led revival rather than a cost-cutting exercise. He described PIA as a national institution that once ranked among the world’s best and argued that its workforce remains competent but starved of capital.
The consortium plans to expand the fleet from 18 aircraft to 38 in the first phase, with a longer-term ambition of reaching 65 aircraft, depending on demand. In aviation, scale determines survival. More aircraft mean higher frequencies, better aircraft utilisation and improved unit economics.
Jobs, expansion and foreign partnerships
Unlike previous restructuring narratives, the buyer has publicly emphasised job creation. Expansion, Habib argues, will increase employment rather than shrink it, while restoring confidence among existing staff.
He has also signalled openness to bringing foreign airlines and additional investors into PIA once the transaction receives cabinet approval. The consortium has around 90 days to negotiate such partnerships, potentially integrating PIA into global aviation networks and improving operational standards.
Paying a premium for control
The final bid was not accidental. Habib acknowledged paying an entry premium of Rs4 billion above his adviser’s valuation of Rs131 billion. The presence of a financially strong rival bidder, Lucky Cement, pushed the price higher.
The structure of the deal remains phased. While 75 percent has been sold, the buyer has the option to acquire the remaining 25 percent within 90 days. That stake can be paid for within a year at a 12 percent annual premium, allowing full control once due diligence is complete.
The economist’s reality check
Economist Khaqan Najeeb has described the privatisation as a “very good start” and a long-overdue microeconomic reform. But his assessment comes with caveats.
He notes that the sale only succeeded after extensive sweeteners, including tax concessions, deferred credits and liability transfers. Nearly 92.5 percent of the proceeds from the sold stake will be reinvested into PIA, leaving limited immediate fiscal relief for the state.
What taxpayers are still paying for
Privatisation stops future losses — once estimated at Rs50 to Rs100 billion annually — but it does not erase historical costs. Taxpayers will continue servicing the Rs650 billion debt parked outside PIA, at an estimated annual cost of around Rs30 billion.
The government has capped future damage, but the price of past mismanagement remains firmly public.
The real test ahead
PIA currently carries around four million passengers annually and operates just 18 aircraft — far below the scale needed for sustainable profitability, despite valuable landing rights and air service agreements.
The success of this deal will be measured not by the auction price but by execution: fleet expansion, regulatory stability, operational efficiency and insulation from political interference.
This privatisation proves one thing clearly: meaningful reform in Pakistan requires the state to first acknowledge — and pay for — its own failures. Whether that lesson is applied across other state-owned enterprises will define the future of economic reform.
