Business

Officials say PIA on a crash course

After six months, PIA continues to wait for the new business plan that is expected to pull it out of financial ruin.

Faria Syed June 20, 2010

After six months, the Pakistan International Airlines continues to wait for the new business plan that the federal government promised would pull the state-owned air carrier out of financial ruin.

In January, the finance ministry proposed to restructure eight flailing businesses, including the PIA, but officials say no progress has been made so far.

The primary hurdle is a lack of funds, according to the Convener of the National Assembly’s sub-committee of the Standing Committee on Defence, Begum Ishrat Ashraf.

“It just does not have the money!” she said summing up the problems she faced in restructuring the institution which has been struggling with huge financial losses for years.

The committee is set to meet with officials from the PIA and finance ministry on June 22 in an attempt to get the plan back on track. On the agenda is a new scheme to introduce bonds which will allow the organisation to legitimise expenditures and rearrange funds to improve finances.

However, Ashraf warned that the proposal is not likely to revitalise the PIA which she said is on a “crash course.”

At Rs2.6 billion, losses in the first quarter of this year have surpassed the same time last year despite the airline’s attempts to recuperate.

The weakest link in PIA’s financial equation is the cost for fuel, according to experts. The airline has spent Rs8.5 billion on fuel this quarter, a cost which former CEO and chairman, Tariq Kirmani, said could be reduced by refurbishing the fleet.

“The average age of a PIA plane is 23 years,” he said. “Besides not being equipped with fuel-efficient engines, the older a plane is the more fuel it requires.”

According to him, the average age of a plane should not exceed 10 years. An unlikely proposal as Ashraf said the PIA has a history of purchasing second-hand airplanes.

She said the outer bodies of these planes have become rough with time, resulting in increased friction in the air and thus more fuel consumption.

However, PIA Managing Director Aijaz Haroon said that the decrease in losses that the company did see was because of the decline in fuel costs which went down to Rs31 billion in 2009 compared to Rs45 billion in 2008.

But it is not just the planes that are the problem. According to Kirmani, PIA’s poor human resources have resulted in weak infrastructure.

“There is no plan and no policy for placement,” he said. With up to nine per cent of expenditure on salaries, the much-awaited business plan is expected to introduce better strategies for management. One proposal to be discussed on Tuesday is a body to monitor corruption at upper levels.

Ashraf claimed that the downfall of PIA commenced with a corruption-filled deal when former prime minister Shaukat Aziz ordered eight airplanes to be bought.

Early last month, Federal Minister for Privatisation Waqar Ahmad Khan said that PIA would eventually be privatised, despite its 99 per cent share in The Roosevelt Hotel in New York because of which the government earns up to $17 million every year.

However, he said “this is not an appropriate time to sell precious national assets for small discounts.”

Published in The Express Tribune, June 20^th, 2010.

COMMENTS (2)

Meekal Ahmed | 14 years ago | Reply I remember when PIA was the best airline in Asia. So today's PIA is deeply painful to me. I don't see how the corruption-filled decision to buy the Triple Seven brought PIA down. They are at the leading-edge of technology and good with fuel economy ( but they will be surpassed by Boeing's much-delayed and troubled 787). It was time the venerable Jumbo was re-placed and gracefully retired from service. Some were, then the Flight Engineers went into a sulk and as far as I know the Jumbo is back either just sitting around or doing Hajj duty. They are monstrous gas-guzzlers. They need to all go to museums, parked in the Arizona desert or sold for scrap. PIA needs to cut labor costs. There should be a fair service-based "golden-handshake" and people let go. Maybe up to 40% of them. Instead I hear they just "regularized" 4000 workers. That is getting it backwards. They can be no meaningful restructuring without deep up-front cuts in labor costs. Of course other costs should be cut too as part of an overall plan of corporate restructuring. Issuing bonds is fine but it has to be a part of a plan that is credible and far-reaching. PIA's Board is filled with bureaucratic hacks who know little about the commercial aviation industry and enjoy free travel and other amenities. I don't know the managerial competence of the present MD but Mr. Tariq Kermani pontificating above was a very poor manager. He was a disaster. I think he came from the energy sector. So what did he know about aviation? It was plain to see very little.

Sharjeel Jawaid | 14 years ago | Reply Is PIA an assest or a liablity? For those of my friends who did not see the real PIA, it was a benchmark in international avaition. PIA could be proud of more than half a dozen world wide firsts to its credit. What brought PIA to its present state? The same drivers that brought dowm everything else in Pakistan. Incompetence & plunder!

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