Despite the privatisation of Pakistan International Airlines (PIA), the transaction does not mark an end to the fiscal burden associated with the national carrier, said Atif Mian, a noted Pakistani-American economist and currently a professor of Economics at Princeton University.
“Some commentators have celebrated the sale as if privatising PIA automatically stops the fiscal bleeding. It does not,” wrote Atif on his website atifmian.com on Saturday.
The comments come days after a consortium led by AHCL emerged as the winning bidder for the acquisition of a 75% stake in Pakistan International Airlines (PIA), submitting a top bid of Rs135 billion, which was well above the government’s initial minimum price of Rs100 billion and the base price of Rs115 billion, at which the auction began.
The economist noted that the government state still retains the holding company, and with it roughly Rs650 billion in legacy net liabilities.
“Put differently, the government walks away with about Rs55 billion in value from the transaction, but it also keeps roughly Rs650 billion of legacy obligations. Netting the two leaves a balance-sheet hole of about –Rs600 billion.
“The minus sign matters. And even at a conservative 10% average cost of capital, servicing that legacy burden implies roughly Rs60bn a year in financing costs. The government will continue to pay for the dysfunctions of the past – privatisation or not,” said Atif.
However, Atif Mian noted that the transaction should not be dismissed as merely cosmetic.
“A cynic might look at these numbers and conclude that privatisation is just rearranging the deckchairs. But that is too harsh. This deal is a step in the right direction: it removes the debt-overhang problem from the operating airline, and puts it under new management with an incentive to perform,” said the economist.
“What about the roughly Rs600 billion of liabilities the government is still carrying? The first lesson is to avoid the sunk-cost fallacy: past mistakes should not prevent better choices today. Stripping the airline of legacy debt and letting it operate in a more normal market environment was the right move—even if it does not erase the old bill.
“The second lesson is that the government remains, in effect, a shareholder in the broader economy. When firms expand, the government participates through the tax system: higher payrolls, more sales, and—eventually—profits translate into higher revenues.
“The best case after privatisation is therefore not that the Rs600 billion vanishes, but that a healthier aviation sector grows fast enough to help pay it off over time,” he said.
Atif Mian highlighted that despite the efforts, structural risks remain a key concern.
“Pakistan has privatised before—banking is the obvious example—yet growth has steadily slowed in the years since.
“That does not mean privatisation failed, but it does underscore a harder point: ownership changes are not a substitute for a broader environment that rewards investment, competition, and productivity.
“Without that ecosystem, privatisation becomes a transaction, not a transformation,” he said.
