Pakistan International Airlines (PIA) 

Lessons from PIA’s privatisation

Nadeem-ul-Haque | Shahid Kardar 

Published January 3, 2026

DAWN

THE transfer of Pakistan International Airlines (PIA) to private ownership is, on balance, a welcome development. Yet much of the public discussion has focused narrowly on the headline sale price and the promise of improved efficiency, obscuring more fundamental issues. In a recent podcast, we and two other analysts examined the transaction in detail and noted concerns about the post-sale ownership structure, which appears likely to be dominated by Fauji Fertiliser, raising questions about whether this represents genuine privatisation or a form of quasi-nationalisation.

This article steps back from the headlines to distil the broader lessons of the PIA episode. Four reform-related lessons stand out.

First, privatisation did not create the cost; it revealed it. The sale of PIA is being marketed as reform, yet little attention has been paid to the bill already paid by taxpayers to make the sale possible. Before privatisation, the state absorbed the airline’s accumulated debt and liabilities — over Rs670 billion (roughly $3bn) — so that a buyer could inherit a cleaner balance sheet.

PIA is not an isolated case. It is simply the most visible example of a systemic failure in how Pakistan governs its state-owned enterprises (SOEs). The common thread linking PIA, the previously privatised banks, and smaller cases such as First Women Bank is not bad luck or exogenous shocks. It is bureaucratic and patronage-protected control exercised through boards of directors that enjoy prestige and perks but face no personal or reputational downside when value is destroyed.

The central lesson from PIA is that the real reform is not the sale itself but fixing the governance structure.

In the private sector, directors pay a reputational price for failure. In Pakistan’s public sector, enterprises collapse, losses are socialised, and those who presided over the failure move on — often to another board. Responsibility is ceremonial; accountability is absent. The system signals clearly that oversight failures carry no consequences. In such an environment, delay becomes rational. Hard decisions are postponed because the costs can be shifted to successors, even as the eventual taxpayer bill grows.

This is why privatisation in Pakistan so often appears ‘expensive’. The state seeks privatisation not as a timely reform, but as a late-stage exit strategy, after years of misgovernance have already inflicted massive damage. The taxpayer then absorbs these losses to make the enterprise saleable. Privatisation merely exposes the cost; it does not cause it. This absence of reputational damage is not an accident; it is how the system is designed. The central lesson from PIA, therefore, is that the real reform is not the sale itself but fixing the governance structure that allows losses to accumulate without consequence. Without this, Pakistan will repeat the same cycle: failure, bailout, privatisation, amnesia.

Second, privatisation must mean exposure to competition. A genuine transfer to the private sector implies that the enterprise must survive on its ability to compete, without protection, preferential treatment, or recurring subsidies. If the post-privatisation environment continues to shield the firm from competition or quietly socialises losses, the reform is hollow. The test of PIA’s privatisation will lie less in ownership and more in whether it is allowed to operate — and fail — like a private firm. In some cases, this will pose a real challenge, for example, the privatisation of Discos.

Third, most SOEs are simply not privatisable! The vast majority of SOEs are not commercially viable, even if the state were to replicate PIA’s template by parking all debt and liabilities in holding companies. The years it took to privatise PIA, and the continuing inability to offload Pakistan Steel Mills, illustrate the point. Prolonged attempts to privatise non-viable entities merely allow losses to accumulate further, eventually to be borne by the taxpayer. For such enterprises, the least costly option is not privatisation but liquidation. Winding them up promptly would stem ongoing losses and avoid compounding the burden on citizens, especially the poor, who ultimately foot the bill.

Fourth, clarity of purpose is essential. Going forward, the state must be explicit about the objective of any privatisation. Is the goal to maximise immediate fiscal receipts, extracting as much money as the market can bear? If so, asset-by-asset disposal may, in some cases, yield higher revenues than selling a going concern. Or is the objective to transfer the enterprise as an operating entity to a buyer with sectoral expertise and a credible track record, which is an inherently more subjective and demanding exercise, particularly in Pakistan’s low-trust political economy? The failure to clearly articulate this choice breeds confusion, controversy and mistrust.

Beyond these substantive issues, the PIA privatisation also exposes serious procedural weaknesses. The process was marked by opacity, which is an all-too-familiar feature of our bureaucratic mindset, as well as an abysmally poor communication strategy. There was no publicly available information memorandum that explained the eligibility criteria for bidders; how the reserve price of Rs100bn was determined after cleaning up the balance sheet; the estimated valuation of each asset transferred; how the proceeds would be allocated between the government and the company; the payment schedule for the Rs135bn commitment (between the two-thirds of the amount to be paid earlier and the balance later); or the post-sale obligations and enforcement mechanisms.

Much of this information presumably exists in the sale agreement. If so, there is no justification for not placing it in the public domain. The lack of transparency unnecessarily fuelled speculation and distrust. This could easily have been avoided. A handful of slides published alongside the auction announcement in newspaper ads would have sufficed. These slides could even have been run imme­­diately after the auction results were announced.

Transparency is not a cosmetic add-on. It is essential for building trust in the process, protecting and promoting the credibility of the government and the Privatisation Commission, and supporting the development of capital markets. With­out it, even well-intentioned reforms will continue to be viewed with suspicion — often rightly so.

Nadeem-ul-Haque is former VC PIDE and deputy chair of the Planning Commission. He is currently director at the think tank Socioeconomic Insights and Analytics.

Shahid Kardar is a former governor of the State Bank of Pakistan.

Published in Dawn, January 3rd, 2026