Punjab, KP Governments Eye PIA Acquisition Amid Privatization Challenges

On November 3, 2024, the ongoing saga of Pakistan International Airline (PIA) took another twist as the provincial governments of Khyber Pakhtunkhwa (KP) and Punjab expressed interest in acquiring the struggling national carrier. This development comes in the wake of a failed privatization attempt, which has raised eyebrows and sparked debate among political figures and the public alike.

Former finance minister Miftah Ismail was quick to respond to the news, stating, "No government in the world operates airlines." His remarks highlight a significant point: state-run airlines are becoming increasingly rare globally. Miftah's comments were made during a discussion on the Geo News program 'Naya Pakistan,' where he criticized the provincial governments' proposals to take over PIA.

The federal government’s latest effort to privatize PIA fell short when the only bidder, Blue World City, offered a mere Rs10 billion for a 60% stake in the airline, far below the minimum asking price of Rs85 billion. This failure marks the second time in a decade that Pakistan has attempted to divest its national flag carrier, with a similar effort collapsing in 2015.

In light of the failed bid, the KP government expressed its "earnest interest" in participating in the bidding process, indicating a willingness to offer a bid that would exceed the current highest offer. Following this, the Punjab government, led by Maryam Nawaz, also showed interest in acquiring PIA. Nawaz Sharif, the former prime minister, mentioned that his daughter suggested rebranding the airline as "Air Punjab."

Miftah Ismail further emphasized that provinces should focus on their core responsibilities, such as providing education and healthcare, rather than venturing into the airline business. He lamented that provinces often do not contribute to tax revenues but still seek financial assistance from the federal government.

Addressing the privatization fiasco, Miftah pointed out that the process was laden with "such pre-requisitions" that deterred potential buyers. He also mentioned that four groups had shown interest in participating in the bidding process, indicating that there is still some hope for PIA's future.

The collapse of PIA’s privatization comes at a time when Pakistan is under increasing pressure from the International Monetary Fund (IMF) to reform its fiscal policies. As part of an IMF loan program, Pakistan committed to divesting loss-making state-owned enterprises like PIA to stabilize its economy. Despite the IMF's expectations for the sale to be finalized by September, the government has repeatedly delayed the auction deadline, reflecting a lack of investor interest.

The future of PIA remains uncertain as the provincial governments vie for control, and the federal government grapples with the challenges of privatization. The situation serves as a reminder of the complexities involved in managing state-owned enterprises and the need for a clear strategy to ensure their viability. As discussions continue, it is crucial for all stakeholders to consider the long-term implications of their decisions on the airline and the broader economy.