Despite a failed attempt to sell off the Pakistan International Airlines (PIA), the government has expressed a willingness to complete the process—after “reviewing” the process.
The government’s urgency is understandable, as privatization has been touted as essential for economic survival. Achieving it, though, seems a tall ask as the previous bidding process came to a halt when five prospective buyers pulled out at the last minute. The sole remaining buyer, Blue World City consortium, bid a paltry Rs. 10 billion against the minimum reserve price of Rs. 85 billion. The disastrous bidding process reflects the fall from grace of PIA, which has progressively lost its luster over the past 25 years, and is now on the verge of collapse.
The PIA’s problems stem, primarily, from incompetence and vested interests. The PTI-led government erred in declaring a majority of pilots had fake licenses, leading to the national flag carrier losing profitable international routes, which remain suspended to-date. Previously, between 2008 and 2014, the PIA inducted fake degree-holders in administrative roles, further boosting its poor performance. To overcome this, the airline requires good management, with a focus on customer satisfaction, especially with regards to efficient communication of flight delays and other issues.
Unfortunately, PIA as it stands today lacks a proper capital structure or accountability, compounded by years of inefficient policies. The government’s offer of a majority stake to potential buyers, but not the authority to downsize, also hampered the bidding process. This shows the folly of retaining any government role, as its needs are in direct conflict with the lean efficiency required of the private sector. A key concern among critics of privatization, meanwhile, is the risk of increased inequality and loss of public assets. To successfully sell off PIA, Islamabad must not only offer an attractive package to buyers, but also ensure it doesn’t cause any further harm to the national exchequer. This is far easier said than done.