On June 12, 2026 — the same day Finance Minister Muhammad Aurangzeb presented Pakistan’s federal budget — President Asif Ali Zardari signed the bill, completing the last legal requirement for the privatisation of Pakistan’s national airline. In the budget itself, the finance minister announced the elimination of federal excise duty on international business-class travel and signalled that airports would be next in the privatisation queue, following the national airline’s model.
The aviation industry was resetting after Covid-19, having crossed $1 trillion in revenues. The year 2026 was expected to be a record year for the aviation industry. But then the Middle East crisis erupted. Not only were many major airlines forced to ground their planes for safety, but the blocking of the Strait of Hormuz massively increased jet fuel prices, forcing some weaker carriers out of business.
Since hostilities erupted in the Middle East, Pakistan’s aviation sector has also been facing both supply- and demand-side challenges. Despite the fact that Pakistan produces all its jet fuel, Pakistan’s airlines were severely impacted due to the substantial increase in crude oil prices required for jet fuel production.
While such steep increases in cost momentarily threw feasibility out the window, challenging economic conditions and rising poverty meant the national poverty headcount increased from 21.9 per cent in 2018-19 to almost 29pc in 2024-25. Deeply eroded overall purchasing power, in turn, has dented demand for air travel.
The government has removed FED on international business-class tickets and indicated airports will follow in the privatisation pipeline
The summer of 2026 presents Pakistan’s aviation sector with a paradox. Domestic tourists, ground down, will think carefully before opting for air travel. And yet the opportunity on the other side of the ledger is larger than it has ever been. The Middle East, which had remained a top destination for international tourists for years, has effectively emptied out.
International tourists looking for alternatives are turning towards Pakistan’s North with genuine curiosity. So, where local tourism contracts, foreign tourism is positioned to expand. Is Pakistan’s aviation sector capable of capturing this opportunity?
It depends almost entirely on the quality of decision-making. Given severe cash flow pressures, every airline operating in Pakistan today needs a crisis management strategy that tracks cash flow daily, reads the revenue situation in real time, and triggers responses before a liquidity problem becomes a liquidity crisis.
Some carriers were already facing a cash crunch before this summer began. The combination of higher jet fuel prices, disrupted regional routes, and compressed domestic demand has not created fragility in Pakistan’s aviation sector. It has simply made pre-existing fragility impossible to ignore.
On the revenue side, the arithmetic is unforgiving. No aircraft should be flying at less than 95pc seat occupancy.
The periodic rerouting of international airlines away from Middle East airspace has created both a disruption and an opportunity — longer routes for some, new traffic patterns for others. Pakistani airlines that read this shift intelligently and position themselves on routes that international tourists now prefer will find revenue that was not there a year ago.
On the cost side, one variable that deserves more attention: on-time performance. McKinsey’s State of Aviation 2025 report puts the cost of each additional minute of aircraft delay at $100. Pakistan’s airlines, where a one-hour delay is considered routine and a four-hour delay is considered merely inconvenient, are haemorrhaging money through a wound that is self-inflicted yet fixable.
The writer is a Fulbright scholar with a PhD in Economics. He writes on political economy, public policy and the structural challenges facing Pakistan’s key industries. Email: aqdas.afzal@gmail.com.
Published in Dawn, The Business and Finance Weekly, June 15th, 2026