Parliamentary meeting Committee fails to develop consensus on PIA privatisation

Efforts to convince opposition remain fruitless during all meetings of National Assembly

ISLAMABAD:

A special parliamentary committee has failed to develop political consensus on the privatisation of Pakistan International Airlines (PIA), casting doubt over the government’s claim that it would not sell the national flag-carrier without building a consensus.

Efforts to convince the opposition to back the PIA privatisation plan remained fruitless and the opposition and the treasury members remained poles apart during all the meetings of the National Assembly Special Committee on PIA privatisation.



Things became murkier as data provided by the PIA management made the issue more confusing during the last meeting of the committee on Tuesday.

The data provided by PIA was about recruitments, increase in airline seating capacity after induction of new aircraft and acquisition of aircraft on lease contract.



The government had set up the committee to deliberate upon the implications of converting PIA from a state-owned corporation into a company aimed at removing the legal hindrance in its privatisation.

However, during the second last meeting of the PIA committee, the Finance Minister Ishaq Dar went a step further and announced that his ministry would not take a decision on PIA privatisation without achieving consensus.

The government has agreed with the International Monetary Fund (IMF) that it will sell at least 26% stake in PIA by June this year, which it is likely to miss.

Earlier this month, IMF Mission Chief to Pakistan Harald Finger had hoped that a consensus could be found in the Parliament regarding the next step with respect to PIA.

He has plans to discuss the issue with Dar during the upcoming review talks, starting later this month in Dubai.

“It appeared that the government wanted to show how bad PIA was to make the case for its privatisation but it was, at the end of the day, not an impressive effort,” said PPP’s Syed Naveed Qamar who remained in-charge of the airline during the last tenure of the PPP in his capacity as the Minister for Defense.

“The truth has not been told and it is now clear that the reasons given for PIA privatisation were more related to the government’s performance,” said Pakistan Tehreek-e-Insaf’s Asad Umar who vehemently opposes the PIA privatisation.

Special committee chairman, Zahid Hamid along with the Minister for Climate Change, said that the committee had recorded the viewpoints of all the members and a report would soon be laid down in the National Assembly.

Umar gave some solutions to turn around the loss making entity without privatising it. He suggested that the government should separate the legacy burden of liabilities of about Rs320 billion from the balance sheet.

The government’s privatisation plan also includes parking of Rs320 billion liabilities into a ‘loss-making’ PIA as to give a clean balance sheet to the new prospective investor.

Umar also proposed to increase the capacity utilisation by aggressively focusing on marketing instead of privatising the airline. During the last meeting, it was revealed that PIA’s market share drastically went down as the Civil Aviation Authority (CAA) granted landing rights to other airlines.

This led to a situation where despite 43% reduction in fuel costs and adding 20 new aircraft, PIA suffered Rs27.8 billion losses during 2015.

He also observed that PIA’s overstaffing was not an issue, as the core employees to seat ratio was just 176 against Europe’s best airlines ratio of 175. He said the government should improve the quality of the staff.



PPP’s Naveed Qamar wanted a structured roadmap for dealing with bad PIA, which includes employees related to non-core business and assets including Roosevelt Hotel of New York and Scribe Hotel in Paris.

“The government does not have any plans to sell these hotels,” said Privatisation Commission Chairman Mohammad Zubair, adding that a recent evaluation has suggested the net value of the two hotels to be not more than $700 million.

“The government has not yet worked out the financial cost required to pay for the turnaround. On average, PIA needs RS3.5 billion per month to pay and service the past debt,” he added.

Published in The Express Tribune, January 20^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.