Pakistan tried selling PIA twice in recent years:
The first recent major attempt was in October 2024, which failed because the government received only a single bid of about $36 million, far below the reserve price of approximately $305 million. This bid was rejected, and the attempt was considered unsuccessful due to concerns about PIA’s legacy debt and taxation issues raised by bidders.The second attempt also ended in failure, with the government planning to publish a new Expression of Interest (EoI) by the last week of April 2025 and aiming to complete the privatization by December 2025.
Pakistan fails to get buyer even after attractive offer
The government has sweetening the deal by offering several incentives for investors. These include an exemption from the 18% General Sales Tax on the lease or purchase of new aircraft, additional support to improve PIA’s balance sheet, and coverage against certain tax and litigation claims.
The government has introduced new eligibility criteria for bidders. Existing airlines can now bid for PIA, provided they meet a revised financial requirement. For non-airline businesses, the criteria include a minimum of Rs 200 billion in annual revenue, as evidenced by audited financials from December 2023 or later.
Previous Privatization Attempt and Restructuring of PIA
Last year’s attempt to privatize PIA fell short as the sole bid was Rs 75 billion below the government’s expectations. The Blue World City consortium offered Rs 10 billion, far below the minimum price of Rs 85.03 billion set by the Privatisation Commission. The government had pre-qualified six groups but only one group, a real estate development company, participated in the bidding.In response to this setback, the government has restructured PIA by transferring a significant portion of its legacy debt and non-aviation assets to a holding company. PIA’s liabilities, which had once stood at Rs 864 billion, have been reduced to approximately Rs 190 billion. This includes operational liabilities of Rs1 48 billion and employee-related liabilities of Rs 36 billion. Non-core assets valued at Rs 20 billion are now managed by the PIA Holding Company Limited.
Pakistan closes airspace to Indian airlines
Meanwhile, Pakistan has barred Indian airlines from using its airspace in response to the Pahalgam terror attack. The restriction affects all aircraft registered in India or owned or leased by Indian operators.
“Due to the announced restriction of Pakistan airspace for all Indian airlines, it is expected that some Air India flights to or from North America, UK, Europe, and Middle East will take an alternative extended route,” Air India posted on X. “Air India regrets the inconvenience caused to our passengers due to this unforeseen airspace closure that is outside our control. We would like to reiterate that at Air India, the safety of our customers and crew remains top priority.”
IndiGo also posted on X, saying, “Due to the sudden announcement of air space closure by Pakistan, a few of our international flights are being impacted. We understood the inconvenience this may cause and our teams are doing their best to help you reach your destination at the earliest.”
Flight times increase, costs rise
Senior airline officials and pilots said flights from northern Indian cities, including Delhi, Amritsar, Jaipur, Lucknow, and Varanasi, will now take longer routes over the Arabian Sea. This will increase fuel consumption and flight times—by 2 to 2.5 hours on average for flights to Europe and the US.
The changes will also affect airline operations. Aircraft will carry more fuel, which means they may need to reduce the number of passengers or cargo to manage payload limits. This could reduce revenue and raise operating costs.
Airfares likely to increase
A senior travel industry executive said international fares on Indian airlines may rise by 8% to 12% in the short term. If the airspace restriction continues, prices could increase further.
This is not the first time Pakistan has closed its airspace to Indian carriers. In 2019, it imposed similar restrictions after the Balakot air strikes.
