Despite the privatisation of Pakistan International Airlines (PIA), the government’s financial obligations tied to the airline remain significant, said economist Atif Mian.
Atif Mian, a Pakistani-American economist and Princeton University professor, clarified that privatising PIA does not automatically stop fiscal losses. He highlighted that many commentators have misunderstood the impact of the sale.
The recent transaction involved a consortium led by AHCL, which acquired a 75% stake in PIA for Rs135 billion. This bid exceeded the government’s minimum price of Rs100 billion and the starting price of Rs115 billion.
Although the government receives around Rs55 billion from the sale, it still retains roughly Rs650 billion in legacy liabilities. “Netting these values leaves a balance-sheet hole of approximately –Rs600 billion,” Mian noted. He added that servicing this debt at a conservative 10% cost of capital will cost roughly Rs60 billion per year.
However, Mian emphasized that the privatisation is a positive step. Stripping PIA of legacy debt allows the airline to operate under new management with incentives to improve efficiency and performance. “The deal removes the debt-overhang problem from the operating airline,” he said.
He also noted that the government remains a shareholder in the broader economy. A healthier PIA can increase payrolls, sales, and profits, ultimately boosting government revenues over time. Privatisation can help the aviation sector grow, even if it does not erase past obligations.
Mian cautioned that structural risks remain. Past privatisations, such as in the banking sector, did not automatically ensure sustained growth. “Ownership changes are not a substitute for a broader environment that rewards investment, competition, and productivity,” he said.
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In conclusion, while PIA’s privatisation marks a step forward, the government will continue to manage legacy debts. Long-term success depends on creating a supportive ecosystem for the airline and the broader economy.
