The PIA privatisation efforts are back, and the chances of the deal moving forward this time are high. The previous round was spearheaded by the political leadership of the ruling party, PML-N, but now the establishment is in control. In the failed attempt, multiple conditions were demanded by potential bidders, and a few of them are now being addressed. These, along with the opening of the European route, are encouraging investors to seriously consider buying an ailing airline.
The political leadership of coalition partners was more focused on saving their dwindling political capital, which undermined the commitment to privatize PIA. This is one reason they ignored the genuine demands of serious bidders, leaving only a sole real estate player to bid—a player who lacked the financial strength to qualify.
In the last round, the overall atmosphere was unfavorable. Investors were disgruntled, and trust between them and the authorities was eroded, partly due to contentious negotiations with IPPs (independent power producers). Now, the IPPs (1994 and 2002 policies) issue has been resolved, and their owners appear to have moved on, with some even participating in one of the consortiums bidding for PIA.
The success of PIA’s privatization hinges on the financial structure of the deal. The government should not prioritize generating immediate revenue through the sale but rather focus on long-term cash flows. The goal is to offload a bleeding asset so the fiscally strained government no longer has to subsidise it. If the privatized entity becomes profitable or expands its business, the government will benefit through tax revenues. Additionally, there could be forex savings if PIA captures business from foreign airlines.
From an investor’s perspective, the challenge lies in turning the organization around. Airlines are a tricky business, and profitability is hard to achieve in the short to medium term; it’s a long-term game. The buyer must inject equity to elevate the airline to international standards, requiring an estimated $500 million over the next few years.
The deal should be structured so the buyer commits to a specified equity injection, with the government diluting its shareholding proportionally. The buyer’s profile is critical—it must have financial strength and a firm commitment to reviving PIA’s former glory.
No foreign airline players have expressed interest in acquiring PIA, which was once a global star. The responsibility falls on local business groups. Since the required equity injection is substantial and the risks of reviving the airline are significant, no single local group has the financial capacity to assume the entire risk. Consequently, corporate consortiums are being formed.
At present, two consortiums of reputable local business groups are showing strong interest. One consists of several IPP owners, including those who faced tough negotiations recently. Most of this consortium’s members are from Karachi and have already conducted due diligence on the company. A key player within the group estimates that PIA requires a USD 500 million equity investment, with an ideal arrangement involving five investors contributing $100 million each.
The other group, referred to as the Pakistan Corporate Consortium, comprises members from across the country, including top exporters who did not participate in the previous round. This consortium is led by Bashir Janmohammad, with Arif Habib also playing a role.
The inclusion of the Fauji Foundation brings diversification and versatility, which are essential. Additionally, some business groups from Lahore are part of this consortium. One member of the group suggested that the airline requires $500 million in equity to become profitable within 2–3 years, and their goal is to assemble twelve investors contributing $40 million each.
Active members in both groups are working to secure commitments from like-minded individuals, creating a buzz. Both sides are displaying enthusiasm, and the competition is intensifying—a positive sign that may help the government secure the best deal. Interestingly, a member of the first group, a previously reluctant IPP owner, appears more likely to participate now after observing the formation of a strong competing consortium.
The match is on. The PIA privatization has a real chance of materializing. This case could serve as a litmus test for the broader privatization agenda. The government must focus on closing this deal to restore confidence in the privatization process and encourage both private players and the government to pursue similar efforts for other entities — particularly in the energy sector.
Copyright Business Recorder, 2025
Ali Khizar is the Director of Research at Business Recorder. His Twitter handle is @AliKhizar
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