PAKISTAN International Airlines, once a globally respected carrier, is now burdened with severe financial and operational troubles.

Established in 1955, PIA led many aviation innovations but has since faltered due to political interference, financial mismanagement, an ageing fleet, and an excessively large workforce currently with 500 employees per aircraft, which far exceeds global norms. Consequently, PIA`s liabilities have surged to Rs830 billion, and it posted an annual loss of Rs112bn in FY 2023-24.

Despite these difficulties, PIA still holds valuable assets, including the Roosevelt Hotel in New York, Sofitel Hotel in Paris, and prime domestic real estate. It also retains international landing rights and an expansive route network. However, efforts by the Privatisation Commission to sell a 60 per cent stake in PIA, valued at Rs85bn, failed due to the complex nature of the airline`s financial condition. While the commission values the airline`s assets at Rs163bn, independent evaluations estimate that this figure could reach Rs343bn with proper restructuring.

To revive PIA, a robust and modern strategy is needed one that is based on financial overhaul, operational efficiency and a public-private partnership (PPP) model to address debt. The revitalisation plan should focus on profitable routes, upgradation to fuel-efficient aircraft, and the streamlining of administrative costs.

Enhanced customer service via modernised ticketing, improved in-flight experience, and strategic marketing would also play a vital role in regaining consumer trust.

A central element of this strategy is fleet renewal adding 15 Boeing 777-200 aircraft through operational lease, and five Bombardier CRJ1000 aircraft via financial lease every 10 years. Alongside, the current fleet of 30 aircraft would be rehabilitated. A workforce reduction plan would provide golden handshakes to 7,000 employees at a cost of $191 million in severance.

Altogether, fleet modernisation and organisational restructuring require an estimated investment of $500m, with projected revenues of $2,912m, using credible aviation benchmarks of Capex, Opex and Revenue streams.

A novel acquisition model: clean-swipe with circular debt crowdfunding: To manage its mounting financial pressure, PIA requires a cre-ative solution combining debt relief with investment incentives. The model proposed involves a clean-swipe mechanism supported by circular debt crowdfunding. Circular debt which is crippling the energy sector has reached Rs2.39 trillion, with state firms like OGDCL and PPL owed large sums. These companies, registered on the PSX, could form a Special Purpose Vehicle (SPV) to acquire PIA under a rehabilitate, operate and transfer model.Under this plan, the SPV would buy 60pc of PIA shares and raise Rs137.5bn for restructuring. Simultaneously, Rs202bn in PIA liabilities would be eliminated. The government would offset these debts against what it owes to energy companies, thereby reducing circular debt and avoiding interest expenses. This swap would make PIA financially viable and debt-light.

To finance the acquisition and modernisation, the model introduces a `Public Service Development Fund` (PSDF), based on successful examples from Canada, Australia and New Zealand. This fund would be established through legislation and structured on a 70:30 debt-toequity ratio. Public participation would be encouraged via the sale ofinfrastructure bonds (IBs) and preferred shares (PS), creating broad ownership and capital inflow.

Crowdfunding and financing mechanism: The `PSDF Act` would be implemented with broad public and institutional participation, as follows: • NIC cardholders (122m): Required to purchase at least one IB worth Rs500, offering 18pc annual interest for three years. These bonds would be tradable on PSX, targeting 30pc participation.

• Active taxpayers (5.67m): Required to buy atleast five PS shares at Rs500 each, with 17pc annual return, also tradable on PSX, targeting 20pc participation.

• AOP companies (0.5m): Required to purchase a minimum of 50 PS shares under the same terms, aiming for 25pc participation.

• Top 100 index companies: Obligated to invest in at least 50m payment-in-kind shares, to be traded on PSX, with 25pc participation targeted.

• Public representatives: Members of the national and provincial assemblies and the Senate would donate one month`s salary, aiming for 75pc participation.

This crowdfunding model aims to raise up to Rs100bn, enough to purchase the 60pc stake in PIA valued at Rs85bn. With liabilities cleared via the clean-swipe method, the SPV would then seek bridge financing of Rs137.5bn through a consortium of banks and financial institutions to support fleet renewal and operations.

Return on investment and long-term sustainability: With an internal rate of return of 26.77pc and an equity IRR of 42.2pc, the plan provides strong fiscal incentives. The payback period is expected within six years, over a 25-year concession term, making it highly attractive for investors. This could spur domestic and overseas Pakistani investors, as well as large corporations, to participate in reviving national infrastructure and public enterprises. However, under IMF pressure the Privatisation Commission recently proposed unrealistic terms for investors: Sale of 51-100pc shares, including full management control. Parking of Rs202bn in partial legacy debt under the PIA holding company. Waiving 18pc goods and sales tax on new aircraft purchases.

Exclusion of non-core assets, such as the Roosevelt Hotel, from the core airline privatisation.

The first two conditions contradict the proposed PPP model and risk damaging the process by undervaluing the airline`s potential.

The PPP approach, built around the innovative clean-swipe model and the PSDF Act, offers a sustainable solution to PIA`s chronic challenges. By tapping into domestic savings, offsetting circular debt, and adopting smart financial tools, Pakistan can restore PIA`s global standing and support broader economic revival.

The writer is a public-private paMnership exped.