THE deal under which Pakistan International Airlines (PIA) has just been privatised is good news and imparts much-needed momentum onto the structural reform efforts of the government, that were largely absent up till this point. It also signals a restart of the privatisation programme after nearly 20 years in the wilderness, since the Supreme Court halted sale of the steel mills back in 2005. There are two important questions to raise in connection with this deal. The less-important question is the one that asks whether the government fetched the best deal that it could under the circumstances. The answer here is yes. People who are asking after the “sale price” are missing the point. This is not a kilo of tomatoes or a plot of land that has just been sold. This is a business enterprise whose auditors said more than a decade ago that it is “no longer a going concern.” The company ran losses year after year, averaging around Rs50 billion per year and rising to as high as Rs105bn in recent years. By now its total accumulated losses have grown to beyond Rs650bn. Pakistan could have built a large dam or refurbished a large part of our railway network with this kind of money. There was no sense whatsoever in carrying this enterprise forward any longer. It should have been dumped over a decade ago when its losses were around half this level. But in privatising it there was a problem. Nobody wants to buy the losses. I had occasion to sit down and speak with former CEOs of PIA over the years, and one thing they all told me was how much of their time is consumed in simply managing the financial sinkhole the company had become. Every week some new loan would be maturing and they spent their time scrambling to arrange a rollover or try to pull money from any source they could to try and make the payment. A company whose senior management spends most of its time scrambling to meet its creditor obligations cannot be turned around. There was no sense in carrying this enterprise forward any longer. It should have been dumped over a decade ago. So the government undertook a corporate rearrangement in March 2024 to prepare the company for a sale. All the accumulated losses, which were sitting as debt on the company’s balance sheet, were separated into a holding company, called Holdco. Some of its “non-core properties” like the Scribe or Roosevelt hotels, were also separated. As a result of this rearrangement PIA reported its first net profit in almost two decades. From a loss of Rs 104bn in 2023, it went to a profit of Rs26bn in 2024. A number of factors were responsible for this sharp swing. Most important was a Rs70bn gain for the company on account of financing cost, since that component of its cost moved to the holding company. After this there was a reduction of Rs18bn in operating cost and a sharp reduction of Rs24bn in exchange rate loss, presumably because in 2023 the company bore the brunt of the devaluation while 2024 saw a more or less stable exchange rate. This is how the company was prepared for sale, by carving it into separate entities, taking the debts, liabilities and non-core assets and giving them to one, and the “operating assets” (planes, landing slots etc) to another. It was a smart move and there was no other way to do it. This means the government is still left with the debts of the company, while the investor receives a clean balance sheet upon which to build anew. What has actually been sold, therefore, is a running business with a clean balance sheet, and the prospect of running this business into profitability in the years to come. There is nothing the investor can do with what they have purchased, other than operate it as an airline. They cannot strip down its assets (it hardly has any). And to hold the buyer to their end of the bargain, the government has required that they take 92.5 per cent of the money they will be bidding for and invest it in the airline itself. So the government only receives 7.5pc of the total bid price, an amount just sufficient perhaps to cover the cost of the deal. This is how it’s supposed to work. No government can expect to make money out of selling PIA, not when the company has over Rs650bn of accumulated losses on its books. You can either shut the company down altogether, and still be left with all that debt to service and repay, because it was guaranteed by the government. Or you can try and salvage the airline by asking a private investor to take its intangible assets and bid over how much they can commit to invest in it to try and rebuild the airline anew. That’s the path the government opted to take, and it worked. The second, perhaps more important and certainly more interesting, question is the involvement of Fauji Fertiliser Company (FFC) in the consortium that is buying the airline. The day after the bidding FFC informed the stock exchange that it intends to join the consortium. The announcement made no mention of how much FFC will contribute towards the Rs135bn that the winning consortium had bid for the airline. That is interesting for the simple reason that FFC can also be considered a state-owned company, even though technically it’s not classified as such. Regardless of the size of its participation, its presence in the consortium is a sign that what has just happened with PIA is an unconventional privatisation given continuing state-owned stakes. The new consortium gearing up to take ownership of the airline could well usher in a new period of state and business partnerships in the years to come. The writer is a business and economy journalist. khurram.husain@gmail.com X: @khurramhusain Published in Dawn, December 25th, 2025