Pakistan is moving forward with plans to sell its flagship carrier, Pakistan International Airlines (PIA), as a key component of a wider strategy to reform its economically distressed state-owned enterprises. This decision aligns with the requirements of an agreement with the International Monetary Fund (IMF) for a $3 billion financial rescue package.

A report from Reuters indicates that a privatization strategy is set for cabinet approval before the end of the current government’s tenure post-election. The cabinet will decide on the method of sale, choosing between a public tender or a direct sale to another government. Although the report did not provide extensive details, it suggested that the plan would offer a 51% stake in the airline, granting full managerial control to the buyer, subsequent to segregating the airline’s debt into a different entity.

This privatization initiative is part of a continued effort by the government to address the challenges faced by PIA. The airline has encountered numerous difficulties, prompting the privatization move. Notably, PIA’s operations in Europe and the UK were halted in 2020 after the European Union Aviation Safety Agency (EASA) revoked its authorization following a controversy over fraudulent pilot licenses.

Amid these developments, a significant tax controversy with Pakistan’s Federal Board of Revenue (FBR) emerged in 2023, resulting in the frequent seizure of the airline’s bank accounts. PIA’s financial difficulties were exacerbated by mismanagement of funds and rising fuel prices.

By the fall of 2023, PIA found itself unable to afford jet fuel, leading to a reduction in flight services. The situation nearly drove the airline to cessation of operations. As of October 16, 2023, PIA’s debt to Pakistan State Oil (PSO) amounted to Rs26.8 billion ($96 million). Nonetheless, PIA managed to restart its operations after receiving a Rs. 500 million ($1.7 million) credit line from PSO.

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Currently, PIA operates a fleet of 31 aircraft with an average age of 16.2 years, as reported by Planespotters.net. This fleet includes 16 Airbus A320s, 12 Boeing 777s, and three ATR 42 turboprops.

The airline’s workforce has expressed dissatisfaction with the changes, particularly in August 2023, when employees protested against the privatization efforts due to unaddressed salary increments. While PIA invited its staff for discussions on salary adjustments, it did not guarantee any concessions with respect to the privatization initiative.

Since 2012, PIA has been experiencing financial losses, with its situation worsening due to safety issues that led to restrictions from crucial markets, including the European Union and the UK. Privatizing the airline is considered a viable strategy to restore its financial health.

Sources:

• Simple Flying
• Reuters
• Featured Image by Eliyahu Parypa | iStock