Why is the sale of Pakistan’s national airline stirring a political storm? | Aviation News

Islamabad, Pakistan – After seven decades as Pakistan’s state airline, the government sold a majority stake in Pakistan International Airlines (PIA) earlier this week for $482m in a publicly televised auction, ending years of failed privatisation attempts.

Arif Habib Limited (AHL), a Karachi-based securities brokerage, led the winning consortium, which includes AKD Group Holdings Limited, fertiliser manufacturer Fatima Fertilizer, private school network City Schools, and real estate firm Lake City Holdings Limited.

Following the successful bid, Fauji Fertilizer Company Limited (FFC), a military-owned and publicly listed company, also joined the consortium. The group faced competition from a rival consortium led by Lucky Cement, as well as Air Blue, a private airline.

The auction, widely publicised and broadcast live by the government, marked the second formal attempt to privatise PIA. A previous effort in October 2024 collapsed when a single bid of $36m from a private real estate firm fell far short of the government’s $305m floor price.

The privatisation of PIA followed pressure from the International Monetary Fund (IMF), which urged Islamabad to offload loss-making state-owned enterprises. Pakistan, currently under a $7bn IMF loan programme, had committed to completing the airline’s privatisation by the end of this year.

Here is what is known so far about the sale, the winning consortium, and why the deal has drawn criticism from opposition parties and other quarters.

What do we know about the winning bid?

On Tuesday, bidding took place in a packed five-star hotel in Islamabad and lasted about 90 minutes, with several breaks. Three parties submitted initial bids for a 75 percent stake in the national carrier.

To attract investors, the government restructured PIA last year by hiving off long-term liabilities worth more than $2.3bn into a separate entity. It also offered policy continuity guarantees and tax relief, measures approved by the IMF.

In the first round, Air Blue was disqualified from open bidding after offering $94.59m, well below the government’s minimum price of $356.9m.

Once the two remaining consortia cleared the floor price, open bidding began. The AHL-led group emerged victorious with a final offer of $482m for the 75 percent stake.

At a news conference a day later, Muhammad Ali, the government’s adviser on privatisation, said 92.5 percent of the winning bid, amounting to about $446m, would be reinvested into PIA itself. The remaining $36m would go to the government, which will also retain a 25 percent share valued at roughly $160.6m.

Arif Habib later told a private television channel that the consortium intends to buy the remaining 25 percent stake as well, with the aim of relaunching the airline by April next year.

Under the terms of the deal, the consortium must pay two-thirds of the purchase price within three months, with the remaining one-third due within a year. A decision on acquiring the remaining 25 percent stake must also be made within three months.

Why did the need to privatise PIA arise?

Once regarded as Pakistan’s most prestigious brand, PIA operated flights across the world and even boasted uniforms designed by Pierre Cardin. Founded in 1955 with a fleet of 13 aircraft, the airline quickly expanded its footprint.

PIA operated its first international flight to London via Cairo and Rome and went on to achieve several milestones. It became the first Asian airline to acquire a jet aircraft, the Boeing 707, opened new international routes, and is credited with helping launch Emirates, the Dubai-based carrier, in the 1980s.

More than two decades later, however, the airline is widely viewed as a debt-ridden burden on the state. Successive governments attempted to offload PIA but failed amid resistance from opposition parties and protests by employee unions.

According to Ali, PIA accumulated more than $1.7bn in liabilities between 2015 and 2024, while long-term liabilities exceeded $2.3bn.

“This time, the process was carried forward with lessons from the past and completed with extensive preparation and accountability,” he said at Wednesday’s news conference.

Ali said PIA once operated about 50 aircraft and served nearly 40 international destinations. Today, only 18 aircraft are operational out of a fleet of 33.

He added that the airline currently serves about 30 destinations, operates roughly 240 weekly round-trip flights, and holds more than 30 percent of the domestic market. That share has fallen sharply from at least 60 percent in earlier decades with the rise of private carriers.

PIA also holds landing rights for at least 78 destinations and has access to more than 170 airport slots.

In 2014, the airline employed more than 19,000 people, including at least 16,000 permanent staff. Over the years, that number gradually reduced to fewer than 7,000 employees.

PIA was also barred from flying to the United Kingdom and Europe in June 2020, a month after one of its aircraft plunged into a Karachi street, killing 97 people. The disaster was attributed to human error by the pilots and air traffic control, and was followed by allegations that nearly a third of the licences for its pilots were fake or dubious.

However, the four-year ban from Europe was lifted in December 2024 by the European Union Aviation Safety Agency, and the Pakistani state-owned carrier resumed flights to the continent in January. Then, in July, the UK, too, lifted its ban.

What is the criticism against the auction and how do analysts view the sale?

While the government hailed the transaction as the “best possible outcome” with “great symbolic value”, opposition parties condemned the deal.

The Tehreek Tahafuz Ayeen-i-Pakistan (TTAP), an opposition alliance led by the Pakistan Tehreek-e-Insaf (PTI) of former Prime Minister Imran Khan, rejected the privatisation, warning that disposing of a national asset without public mandate, parliamentary oversight, transparency and constitutional legitimacy would be unacceptable.

Other commentators questioned the bidding process, describing it as an act of “obfuscation” that raised more questions than answers. Some accused the government of effectively selling the 75 percent stake for just $36m — since the rest is to be invested back into an airline that its new, private owners will now benefit from.

Ali dismissed those claims.

“Our structuring was such that we get 10 billion rupees ($36m) in cash, and the value of our equities is 45 billion rupees ($160m). So, the government will get a value of 55 billion rupees ($196m) in total, and 125 billion rupees ($446m) will flow back into the airline,” he said.

Several economists and aviation analysts argue that the outcome was the best deal possible, regardless of which government was in power.

Fahd Ali, an economist and assistant professor at the Lahore University of Management Sciences (LUMS), described the agreement as watertight.

“Critics have also been talking about the lucrative landing rights and routes that it holds and how the new owner may sell these to recover its costs. But people fail to understand that PIA’s destinations are the geese that lay the golden eggs,” he told Al Jazeera.

The airline was unable to capitalise on those routes because it required additional investment that the state could not provide, he said, adding that selling them would hurt future earnings.

“Given these constraints, the deal seems all right,” he said.

Karachi-based economic commentator Khurram Husain said the transaction was unconventional, driven less by profit than by the need to stem losses.

“You can cut your losses two ways. Either you shut it all down, denotify and delist the company, with PIA ceasing to exist. Or the other was to hand it over to private sector, and have them run it,” he told Al Jazeera.

Husain, a former fellow at the Woodrow Wilson Center, said PIA’s long-term liabilities of $2.3bn would have continued to grow had the government not acted.

“At what point does one stop? That was the government’s calculus. They were not looking to bring down losses, but to control it,” he said.

Who is part of the consortium and why is the military’s inclusion raising questions?

The consortium is led by Arif Habib, whose business interests span brokerage services, fertilisers, steel and real estate. He has previously served as a member of the Privatisation Commission.

Other partners include Fatima Fertilizer, part of the Fatima Group and Arif Habib Group, City Schools, founded in the late 1970s and now operating more than 500 campuses with at least 150,000 students, and Lake City Pakistan, a Lahore-based real estate developer. AKD Holdings, led by businessman Aqeel Karim Dhedhi, is also part of the group.

But the post-sale decision by the Fauji Fertilizer Company Limited (FFC) to join the consortium has triggered debate. FFC, which is listed on the Pakistan Stock Exchange, is a subsidiary of the military-run Fauji Foundation, which owns more than 40 percent of its shares.

As Pakistan’s largest fertiliser producer with interests in energy, food and finance, FFC’s move is seen by some as an expansion of the military’s footprint into the aviation sector.

Pakistan’s military remains the country’s most powerful institution, having directly ruled for more than three decades and retaining deep influence over political, social, and economic affairs.

Critics point to the Special Investment Facilitation Council (SIFC) as an example of the military’s growing role in economic decision-making. Established in June 2023 during Prime Minister Shehbaz Sharif’s first term, the SIFC is a high-powered body of civilian and military leaders tasked with promoting investment by cutting through bureaucracy. It has faced sustained criticism over transparency.

Husain said FFC’s presence in the consortium could prove “very significant” over the long term.

“It’s possible that under this deal, what has really happened is that PIA has moved from one arm of the state to another,” he said.

Ali Khizar, a Karachi-based economic analyst, said FFC’s inclusion could provide long-term security assurances for private investors.

“Historically, we have seen in Pakistan with policies taking 180-degree turn with changing government, so perhaps they needed to ensure to have military presence for providing investor security. But if FFC ends up with more shares than AHL, then that could change their influence and decision-making,” he told Al Jazeera.

Fahd Ali said military-run businesses tend to operate differently from other state-owned enterprises (SoEs).

“They remain shielded from the political interference that besets other SoEs. However, those who think that the state will now be able to wash its hands of PIA might be mistaken,” he said.

Khizar added that while the transaction marks a breakthrough after two decades of failed attempts at privatising the carrier, concerns will persist if one airline — now backed by significant private capital and the military’s clout — ends up controlling the aviation market.

“There is a fear for other domestic airlines,” he acknowledged. “But then there is a lot of potential. PIA’s main opportunity is the international market and that is where it must compete,” he said.