The sole solution

October 15, 2023

With privatisation plans under way, the debt-ridden PIA’s fate hangs in the balance

The sole solution


akistan International Airlines Corporation is a public sector entity that has been bleeding losses for longer than two decades.

The World Bank, in its latest communication with the government of Pakistan, pointed out that the profitability of state-owned enterprises has been declining.

The situation has reached a point where “the profitability of Pakistan’s federal SOEs is the lowest in the South Asian Region.” Their aggregate profit at 0.8 per cent of the GDP in 2014 turned into losses worth 0.4 per cent of the GDP in 2020 and is growing. It is becoming a major driver of fiscal deficit and a source of substantial fiscal risk.

PIA’s performance over the years has been worrying. PIA’s golden era was characterised by top-notch service, innovative initiatives and a reputation for safety and reliability. However, this has changed dramatically over the years.

MA Ispahani set up an airline in 1946 that later became the PIA. Among other things it provided the most efficient link between the East and West Pakistan.

In 1962, the airline broke the record for the fastest flight from Karachi to London with a time of 6 hours, 43 minutes and 51 seconds. To this day, the record remains unbroken.

In April 1964, PIA became the first airline belonging to a non-communist country to enter the airspace of the People’s Republic of China. It also provided technical services to other airlines such as Philippines Air and Air Malta. In 1970s and 1980s it leased two of its carriers to Emirates Airline.

The decline started in the 1990s and has been blamed on political appointments by successive governments. It is alleged that most of the appointments were made without regard to merit.

PIA has had the distinction of having the highest number of employees per aircraft. However, it failed to upgrade its fleet. It kept the fares high, losing most of the domestic market to private airlines. It also lost landing rights at foreign airports because of its inability to maintain its fleet according to the global standards. For instance, flights to and from Iceland were stopped due to the requirement for technology needed to ensure safe flights over a volcanic region.

privatisation of PIA before the end of this financial year. Its outstanding debt remains a problem. In fact, its assets are far less than its liabilities. The fate of its employees is also a concern.

Meanwhile, private airlines, such as Air Blue, invested in buying carriers that fulfilled safety and customer satisfaction needs.

This caused Pakistan International Airlines to be deemed an unreliable aviation brand.

The PDM government made a commitment to the International Monetary Fund to get rid of all loss-making SOEs. The caretaker government is making efforts to fulfil this commitment. PIA is on a priority list along with power distribution companies and the Pakistan Steel Mills. Sources say the financial affairs of Pakistan International Airlines are likely to be handed over to the Privatisation Commission to enhance transparency.

The commission will presumably help reduce the airlines’ losses and improve its balance sheet. However, the administrative control of the institution will remain with the current management.

Under the latest arrangement, the Privatisation Commission is expected to make the institution’s accounts ‘transparent’ by December 31. While this revamping is going on, the process for the appointment of a financial advisor for the privatisation of the corporation has also begun. Other institutions affiliated with the national airline will not be privatised. Privatisation Minister Fawad Hassan Fawad has reiterated the government’s resolve to divest major loss-making state-owned enterprises to end the financial drain and to make them more efficient.

In a meeting with World Bank Resident Director Najy Benhassine, the minister also discussed the privatisation agenda with a specific focus on the divestment of PIA and other state-owned entities for optimising the performance of electricity distribution companies. Fawad explained the outline of the PIA sell-off plan, expressing the government’s intention to engage the World Bank and other financial institutions in the initial phase. He also highlighted the intention to develop a comprehensive model for PIA, with the World Bank remaining a key partner.

The plan seems to be to ensure the privatisation of PIA before the end of this financial year. Its outstanding debt remains a problem. In fact, its assets are far less than its liabilities. The fate of its employees is also a concern. The government may be able generate enough money from the sale of PIA’s affiliated institution to pay parting compensation to the employees.

The writer is a senior Lahore-based economic reporter at The News International The plan seems to be to ensure the

The sole solution