The plight of PIA
What PIA needs right now is not another spending splurge; rather it should tighten its belt and cut losses.
The national carrier, Pakistan International Airways (PIA), has recently come up with a five-year plan to revive its flagging fortunes. Unfortunately, the plan seems to involve little more than borrowing and spending more money. The management of PIA has told the Public Accounts Committee that it needs billions of rupees to add 16 new aircraft to its fleet and also needs its debt, which is over Rs100 billion rupees, to be restructured. The plan, if accepted, is extremely foolhardy and will do little to stem the bleeding. What PIA needs right now is not another spending splurge; rather it should tighten its belt and cut losses.
As long as the international price of oil remains at stratospheric levels, PIA, and indeed every other airline, will find it hard to maintain profitability, as the price of crude oil is nearly $100 a barrel. What PIA should do, however, is run more efficiently. This will mean taking on the unions and their political connections. Right now, PIA has more employees per aircraft than any other airline in the world. Layoffs are inevitable if PIA wants to become profitable but it will require a chairman and management willing to face the political consequences of such a decision.
PIA also needs to make better use of those profitable assets which it possesses, such as the landing rights at international airports which it has already paid for. This, too, will require overcoming stiff union resistance. When PIA came to a deal with Turkish Airlines, where the national carrier would have been paid for allowing Turkish Airlines to use some of its routes, the unions erupted since any such deal would have meant flying fewer PIA international flights and a subsequent reduction in the workforce. The management was not able to withstand union pressure then, and it does not seem to have the gumption to do so now. Without that courage, any plans to reduce losses will have a minimal effect at best.
Published in The Express Tribune, June 27th, 2011.
As long as the international price of oil remains at stratospheric levels, PIA, and indeed every other airline, will find it hard to maintain profitability, as the price of crude oil is nearly $100 a barrel. What PIA should do, however, is run more efficiently. This will mean taking on the unions and their political connections. Right now, PIA has more employees per aircraft than any other airline in the world. Layoffs are inevitable if PIA wants to become profitable but it will require a chairman and management willing to face the political consequences of such a decision.
PIA also needs to make better use of those profitable assets which it possesses, such as the landing rights at international airports which it has already paid for. This, too, will require overcoming stiff union resistance. When PIA came to a deal with Turkish Airlines, where the national carrier would have been paid for allowing Turkish Airlines to use some of its routes, the unions erupted since any such deal would have meant flying fewer PIA international flights and a subsequent reduction in the workforce. The management was not able to withstand union pressure then, and it does not seem to have the gumption to do so now. Without that courage, any plans to reduce losses will have a minimal effect at best.
Published in The Express Tribune, June 27th, 2011.