Labour leaders say buyout preferable to all-out privatisation. CREATIVE COMMONS
KARACHI:
Pakistan International Airlines’ (PIA) strongest union has thrown its weight behind an employee buyout of the cash-strapped carrier, which has become a burden for the current government.
“The government should give us the first right of refusal of whatever market prices the shares get,” stated the Joint Action Committee of PIA Employees (JACPIAE).”Even if the employees have to beg from door-to-door, we won’t allow a national asset to be gifted to someone.” They added.
JACPIAE has already approached local and foreign investors to back its bid, and PIA’s Collective Bargaining Agent, which is controlled by Pakistan People’s Party-backed labour union, agrees with them.
Earlier this week, the government announced its decision to privatise 26% of the total shares of PIA along with management control. The airline and officials of the Privatisation Commission are working on a detailed plan.
“Our foremost priority is to stop this (privatisation). But then we already own part of the airline. We have an advantage.” stated President of Society of Aircraft Engineers Shaukat Jamshed, and insisted that workers first try to stop privatisation before considering the buyout option.
The last government had distributed 12% of PIA’s shares among the staff under the Benazir Employees Stock Option Scheme.
Pakistan has previously witnessed two successful employee-buyouts. First in 1991, when Exxon decided to exit the market, its employees arranged financers and bought 75% equity in what later became Engro Corporation.
And consecutively a year later, employees collectively bought out Millat Tractors, which is now one of the most competitive companies in the country.
“Letting the employees have a stake is preferable to a private investor taking control. A private investor would fire people and that create no economic value” said Asad Umar, who was among the workers of Exxon who opted for the buyout.
At the moment, analysts and industry officials can only guess the terms which will be offered to the investor.
“Accumulated losses is not the big issue, it’s the long term debt that matters. And if the government picks that up then this transaction does not make much sense,” said Umar.
PIA has a negative equity of over Rs125 billion. Its long term debt exceeds Rs80 billion. Starting from the first quarter to March 2013, PIA’s loss increased 10% to Rs8.62 billion.
Investor Arif Habib, who is also on the board of directors at PIA, said “It is yet to be decided how the government proceeds with the privatisation but it’s possible that the government will take ownership of the liabilities. It is not unusual, it has happened before.”
PIA saw a decline of 10,000 flights to 45,000 in 2012. The number of revenue passengers - who pay for their seats - declined to a six-year low of 5.2 million, and available seat kilometres at 19.84 million remains at a four year low.
“Selling just 26% shares won’t absolve the government from bearing the airline’s liabilities but it’s needed to make the transaction seem attractive to the investor,” stated an analyst.
Former CEOs including Tariq Kirmani and Zafar A Khan have argued that PIA is in dire need of a layoff. PIA is over staffed with 19,000 employees, placing it at the bottom in the league of all airlines when it comes to worker-to-aircraft ratio.
Salaries, wages, allowances, welfare, social security cost, retirement benefit and compensated absences amounted to over Rs25 billion in 2012.
On the other hand, the money spent on repairing the flying machines, cost of replacing spare parts including expensive engine parts, the overhauls, all put together amount to approximately Rs8.9 billion. Fuel cost which make up 35% of operational cost of an average airlines, is over 47% in the case of PIA.
Published in The Express Tribune, September 15th, 2013.
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COMMENTS (12)
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They should be allowed to participate in the privatization process (my fingers are crossed that they don't obtain control). Using "Millat Tractors" as an example of a successful employee-buyout is inappropriate as Millat Tractors is in the manufacturing sector while PIA is in the services sector. Without internationally competitive experience, I don't see how PIA will improve its services. Management privitisation is the only recourse. Refer to Srilankan Airlines.
PIA employees are rude, incompetent and dishonest. Now they are just employees, God forbids if they become owners, they will treat passengers like the Karachi wagon drivers and conductors treat passengers. You will hear quite often at airports and in planes, "Yeh Hamara Hawai Jahaz hai, Tumharay Baap ka nahin, Utro Neechay".
so for there is no plan for the employees of pia in the process if privatization . it is the responsibility of govt to create jobs not to deprive the income of poor people of pakistan.
Let the employees buy PIA and let them manage the mess they have created themselves. With the employees as owners and no further government support, the airline will collapse within one year. The only people who will travel with PIA would be the employees and their families and that too for free.
Poor Pakistani tax payers are being planned to be robbed off by national carrier CORRUPT unions. their leaders and INEPT management ( where most of them can not write a proper draft),in past supported by CORRUPT PPP government of Mr.10%, distributed 12% public funds to corrupt unions, plague infested management. These looters of national airline and exchequre are again in actions. How can a mega- corrupt complex network of Ministry of Defense,CAA and PIA management improve the bankrupt airline???? AGAIN ROB OFF POOR PAKISTANIS TAX PAYERS!!!!This is a big question to be answered.
The last time I teavelled with PIA was 6 years ago. And it was more than enough for me not to choose PIA again. Rediclous service and they way management operate the airline no answer to describe.
I am sure We should done this long time ago.
When our cotton, sugar & petrol prices move with international prices, PIA also needs to tightened their belts, hire competitive, young & well trained people. if you cannot compete (which you clearly cannot) you should be out of the door giving way to younger and better people. They will protest and closed down airports but please continue and fix this problem once and for all. We are already seeing good results at KESC. Privatization is the way forward.
Quetta- Lahore route discontinued by PIA ?
The 26% shares of PIA should be sold to local investors in Pakistan and that too through ballotting of each share.
The Government will get the required amount.
Even Government can consider to completely privatized PIA through the above-mentioned process and citizens of Pakistan will be able to buy out the National carrier to become the owners of PIA.
Sure, let them participate in the bidding and let them buy the share with option of buying 100% shares of PIA. This would be the best lesson to the over staffed employees of PIA
The culprit for PIA today's state of affairs is both Unions and its management and neither one deserve any mercy. People of Pakistan been rolling their salaries whereas majority of them should have been fired - yes simply fired - long time ago.
Few weeks ago my wife traveled on a PIA flight from Lahore to Manchester to New York. Food was pathetic but was more shocking was that soon after flight left from Lahore passengers were told that two of the bathrooms don't work. Up to Manchester there were long lines of people to use bathroom. Now if this is not criminal negligence then what it is and why those who are responsible not fired?
At Manchester, the plane door will not open due to mechanical malfunction. Again poor maintenance and why those responsible are not fired.
Neither PIA's management, nor its unions deserve any mercy and tax payers of Pakistan be happy to see the airline either closed, or streamline it affairs so that it is competitive with other airlines around the world. There is simply no excuse to keep paying salaries of those employees who don't perform and/or political appointees.
Captive, at least Pakistani passengers. Almost non existent competition from quality carriers. The only reasonable carriers who have rights to Pakistani cities, arrive and depart at unearthly hours and take almost after 50 percent longer times than the PIA flights take. You book 6 months in advance, Business class, and still the class is already substantially booked. Same is true for the Economy class. Still the airline is accumulating massive debt on daily basis. What is going on?
PIA can't be turned around easily but we, Pakistanis want to see work on it and a good reliable PIA as before as soon as possible.