Decades of losses, billions in bailouts: Why Pakistan is selling 100% of PIA and why buyers want the state out | Explained

File image used for representational purpose.

Pakistan has decided to sell its entire 100 percent stake in Pakistan International Airlines, a move that underlines the depth of the crisis facing the country’s once-proud national carrier. The decision comes after all prospective bidders made it clear that they want full managerial control with zero government involvement once the airline is privatised, according to local media reports on Wednesday.

Bidding for PIA is scheduled for December 23 and will begin with the sale of a 75 percent stake. The winning bidder will then be allowed to purchase the remaining 25 percent within a month at a 12 percent premium. Officials said the premium reflects the flexibility granted to buyers, who will be allowed to defer payment for up to a year instead of paying the full amount upfront.

In another sign of Pakistan’s weak negotiating position, the government will receive only 7.5 percent of the bid amount in cash. The remaining 92.5 percent will be injected directly into PIA to keep the airline afloat. According to officials quoted by The Express Tribune, the arrangement is meant to support the airline’s revival but also highlights how little immediate fiscal relief the state will get from the sale.

Privatisation Commission officials said the decision to sell the entire stake was taken after all four bidders demanded that the government have no role in PIA after the sale. The major bidders include the Lucky Cement Consortium, Arif Habib Consortium, Fauji Fertiliser, which is owned by the Fauji Foundation, and private airline Air Blue.

Prime Minister’s Adviser on Privatisation Muhammad Ali confirmed the shift in strategy, saying bidders were seeking at least 75 percent ownership to ensure operational control, with some insisting on 100 percent ownership. He said reviving PIA would require heavy investment, especially for fleet modernisation and aircraft acquisition.

Earlier, Prime Minister Shehbaz Sharif had proposed selling only a 60 percent stake, but the plan failed to attract serious interest in 2024. To make the airline more attractive, the government transferred PKR 654 billion of PIA’s debt to a holding company, leaving the airline with a reported positive equity of PKR 30 billion.

Despite this cleanup, the burden on the state continues. This year, PIA is set to receive PKR 34.7 billion from the federal budget to cover debt servicing, pensions and medical expenses. Even after restructuring, the new owners will still have to deal with around PKR 26 billion in outstanding taxes and airport charges.

PIA currently owns 34 aircraft, but only 18 are airworthy. What still draws interest from buyers are its valuable landing slots and air service agreements with 97 countries. The government has also assured bidders of continued support, legal protection and indemnity against certain liabilities to push the deal through.

The decision to exit PIA entirely is the result of years of failure, political interference and poor governance. The airline has remained a chronic loss maker due to overstaffing, weak management and an ageing fleet, forcing repeated government bailouts that drained public money.

PIA’s debt had crossed PKR 650 billion, making continued state ownership impossible. Under pressure to deliver fiscal reforms and meet commitments under its IMF programme, Pakistan has been left with little choice but to offload one of its most visible state-owned enterprises.

Earlier attempts to sell a partial stake collapsed because investors refused to operate under government control. Only after removing most of the debt and offering near-total freedom to buyers did interest return, exposing how deeply damaged the airline and the system running it have become.

Once regarded as one of Asia’s most respected airlines, PIA even played a role in the early formation of Emirates by providing aircraft, training and technical expertise. Its fall from that position to a distressed asset being sold with state guarantees is a telling symbol of Pakistan’s broader economic and governance failures.