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 20th, 2010.
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