The clashes led to the disruption and then suspension of many domestic and international flights around the country's main airports.
The incident took place near the Jinnah International Airport here after the joint action committee which represents all unions of PIA gave a complete strike call for today despite the government enforcing Essential Services Maintenance Act (ESMA) under which all union activities were suspended and employees told to report on duty.
Kamran Afzal, the Deputy Inspector General (East Zone), has denied that the police backed by paramilitary rangers had opened fire on the protesting employees including women.
"The police fired tear gas shells and used water cannons but no shots were fired. Police officials on duty say gun fire was opened from within the crowd. We are investigating and will find out the truth after examining the two submachine gun shells that were found from the site," he said.
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Pakistan yesterday enforced ESMA against PIA as the employees of the ailing national carrier announced an indefinite strike from today following the failure of talks with the government on the proposed privatisation move.
A heavy contingent of Rangers and police personnel were deployed at the site to prevent protesters from entering the cargo gate and moving onto Jinnah Avenue.
Two employees including a member of PIA's engineering department have died in the incident. At least 12 persons were injured, Sohail Baloch, who heads the joint action committee of the PIA employees, said.
As soon as the news of two employees' death was broadcast, PIA's flight operations across the country began shutting down in solidarity with the protesters, he said.
(Reopens FGN 15)
Last week, the government postponed the planned privatisation of its national flag carrier after ongoing protests by PIA employees. It, however, has said that it will go ahead with the privatisation plans of the national airlines which at present has total losses and debts of around 254 and 300 billion Pakistani Rupees (USD 2.8 billion).
According to sources, Pakistan has already decided to offload several big organisations running into losses, including the PIA, under an agreement with the IMF and will ultimately sell it. Though, the government is giving the impression that with sale of limited shares, it was not going to privatise PIA.
"Since all staff of the airlines is on a complete strike, there is no one to load or offload the baggage of passengers at different airports," one passenger said from Lahore.
PIA, which was launched in 1955, presently has a workforce of around 14,700 employees with a ratio of around 390 employees for one aircraft, the biggest number in any airline.
Officials and analysts said the airlines, which was once a source of pride and profits for Pakistan, has been bleeding losses and has accumulated debts, as in the last six years alone around 5,700 employees were hired afresh in the tenures of the Pakistan Peoples Party and PML-N parties.