Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) has demanded the cancellation of the ‘dubious deal’ for the purchase of five 777 Boeing aircraft for $1.5 billion.
“The sordid tale of corruption in PIA should have been stopped, but it continues with the signing of the agreement to purchase five 777 Boeing aircraft for $1.5 billion,” said PTI Information Secretary Shafqat Mahmood, urging the Supreme Court (SC) to take suo motu notice.
The entire process, he said, has been correctly questioned by the Transparency International Pakistan, which believes that $500 million in kickbacks are involved. “This is about 50 per cent higher than the market price,” he added.
Corruption by the PIA management with the support of their political masters, according to Mahmood, is also visible from the fact that this deal was never advertised and the rules of the Public Procurement Regulatory Authority (PPRA) were not followed. An excessive hurry in finalising the purchase was apparent. The entire deal was finalised in 21 days, which is unprecedented in aviation history.
The purchase of new aircraft is subject to a lengthy process of approvals that includes working out configuration details, testing under extreme weather conditions particularly summer temperatures in Pakistan, and compatibility with the existing repair and maintenance facilities. In particular, special attention has to be paid to issues like conformity with the existing fleet to minimise overhead costs. None of these have been undertaken, he said, which in itself is a testimony to the corruption involved.
Published in The Express Tribune, February 26th, 2012.
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@Sheryar farooqui: When the majority of expatriate Pakistanis prefer PIA over any foreign airline and PIA aircraft are nearly always full, why should we worry about whether PIA will exist? I hope PIA proves you wrong but PIA has to definitely improve its efficiency and dump its unecessary staff and the silly perks.
An airline that has toilet water running down the alleys, is buying 5 new planes. I guess they need spare parts lol.
@John B: Dear John, The U.S. have thousands of administrative rules and regulations, but somehow the authorities have a bad habit of only enforcing them if it is convenient. One only has to look at the derivatives fiasco of two or three years ago, where totally dishonest U.S. business men manipulated the financial market, and virtually brought the world financial markets crashing down. Now I am not an expert on Boeing 777s, but tend to agree with Imran Khan, and if in doubt do not trust U.S. business men, because their record shows that they will take you down if they get half a chance, and Washington quite often lets them get away with it and even rewards them with massive subsides.
PIA needs to explain what happened to Business Plan for induction of B777 and ATR. This is the same management which projected the Transworld FZE deal for procurement of technical spares as a breakthrough achievement and than we saw PIA aircrafts being grounded for lack of spares. It is the same management which took 2 B747 on lease for Haj, but never used them for that purpose. Why is this management in such haste to buy new aircrafts while it is already cutting routes like Chicago flight?.
PTI isn't known for it's in depth thinking -- this is probably one of the better examples where someone who spends 15 minutes looking at the deal knows that their accusations are grossly distorted.
TIP, Ansar Abassi and Imran Khan went over board. Boeing press release clearly states 'Valued at nearly $1.5 billion at LIST PRICES, the order also includes purchase rights to Pakistan International Airlines for five additional 777-300ERs.
http://boeing.mediaroom.com/index.php?s=43&item=2137
@WoW:
The question you should be asking is why would Boeing risk it's integrity over 5 777s when they get orders of over 60 from the likes of Lufthansa, Emirates, Etihad and others.
@Farz: Your quotation is based on its pricelist. Anyone who does pay at its pricelist is surely daft.
The prices of these planes are so competitive and known that it is not possible to get 50% commission. This is like saying that somebody got 50% commission in buying a certain BMW. I am not saying there is no corruption but these prices are not secret and well known and published. In fact if it were the true story about this Boeing deal then the Air Bus would have "flown" with it.
Discounts of 25-30% are 'extremely common' on the sale of commercial aircrafts, a figure which rises up to 45-50% for much larger orders.
As such, 75% of $300m = $225m x 5 = $1.125 billion. Thus, there is around $375m missing somewhere.
I follow aviation quite closely, and I have never heard such a high quote for 5 B777-300ERs.
The question is "If IK is using chartered planes, who is footing the bill?". Can any PTI admirer care to name the individuals or organisation that is paying the charter bills???. I will be most obliged. Thanks.
When govt. decides to purchase any thing then they should ask some PCO judge to all purchases. Infact this should be inserted in constitution that SC judge will be purchasing officer of Pakistan.
@Farz:
I agree with you. This is the usual hysteria that accompanies such an event. Not that all such events are fully transparent and not that there are no kickbacks.
Someone above said the plane has to be tested. He must be joking. PIA already operates this aircraft and these same aircraft are simply adding to their existing fleet. The interior configuration is most likely also the same.
Since this is a propriety items, I don't think PPR applies; there is only one company that makes the Boeing 777. It is called "Boeing"! There was no point in ordering Airbus or asking for bids. PIA is not big enough to operate multiple aircraft types. That is bad economics.
Now they need to turn to replacing the ageing fleet of Boeing 737-300's. There they should be open competition between Airbus and Boeing and PPR will apply.
@ayesha azeem: "only PTI has the Guts to do something for this Nation."-------Guts? ------this is our main problem here-----they might have Guts------but we need BRAINS, Ayesha, we need BRAIN to think and plan to sort out things.
ET has outdone their previous play on words in that story about Whales. Kudos to brilliant journalism.
@John B: Sir PTI has just picked up on allegations levelled by the Transparency International Pakistan. Transparency International, as you will know is a Germany based organization with some credibility. Even foreign donor organizations like USAID have agreements with them to watch into any possible misuse of aid money. So its not unrealistic that Pakistanis sensitive about corruption in government, which include PTI members should want these allegations to be looked into.
What could be more serious than the fact that at a time ET has rightly published a possible tale of corruption of the incumbent govt, our genious citizens are busy making comments as to what the correct spellnig of planes are !!!! hats off to my Pakistani brethren for believeing that correct english is the solution to all their problems. the slave mentality never seems to end for us. Great job ET in highlighting yet another possible corruption episode.
@sam: It's called a play on words...look it up.
@sashayub: i didnt know flying a charter aircraft was illegal. is it?
In 1994 I had gone on a tour of Boeing's Everett plant. As we were watching a 747 being assembled, the tour guide told us that this baby costs $200 million dollars. Now the 777 is a comparable aircraft in size. And this is 18 years after 1994. So I can accept the statement that 777 today costs $300 million.
Even if this deal was good for PIA and fully transparent, the perception of corruption and mismanagement of the government and PIA is so palpable and strong that defending it is next to impossible.
Good word play with "plane" and "plain". Sadly not appreciated by many.
@sashayub is it illegal flying around in chartered planes !!!! those chartered planes are atleast not bought from the public money stick to the topic.
The taxpayer money must be recovered from the looters.
@Observer:
Prior to elections PIA had planned to modernize it's fleet extensively to be competitive with other airlines stealing the show such as Emirates (Pakistan). The 2007 deal with ALAFCO - Kuwait aircraft leasing company for 7 factory built A320s to complement the 777s bought at the time was scrapped post elections which cost PIA dearly. The current revival of modernization by the same PPP is a good step. Better late than never.
I agree with Farz. Choice of 777-300Er is the right choice and will help reduce PIA cost on its long haul routes. 777-300ER is currently the most popular wide body aircraft in the world with a huge number of them in service with world,s leading airlines. Emirates has 60+ of these in service with many more on order. pIA already has these in it's fleet and hence will be compatible with existing maintenance facilities.
Pricing seem to be on a higher end the price quoted of usd298mln is prob the list price and not the 'mkt price'. Airlines tend to get a discount fom the manufacturers if they order in large quantities but I guess ordering only 5 does not make it a large quantity and hence discount on pricing is minimal for PIA. Just wondering how PIA plans to pay for these?
@Farz, I think someone should tell you that PIA is not going to exist by 2020. PPP government does not care about any vision my friend.
While on the topic of planes, can Mr. Shafqat Mahmood also name the private individuals, whose chartered planes Imran Khan has been riding around in
@Farz: Who revived Vision 2020 after PPP scrapped it?
@Farz: If even 1/10th of this money was spent on re-structuring of PIA so that capable and experienced people based on merit can replace the current top tier of management (which by the way I was shocked at by looking at their positions vs. experience and skill sets in a recent TV documentary), we can get the PIA off the ground. Right human resources for the job is the first tenet of strategy, rest are operations and less significant in the bigger scheme of things.
PTI should know Kick backs are illegal under US law in any transaction for any Company foreign or domestic operating in US. If I remember correctly, Mercedes Benz (German division) paid huge fines in NY federal court for irregular sales (no kick backs but improper business practices) in India not long ago.
As such, boeing will be investigated by US federal prosecutors. If PTI has any evidence they should forward it to US attorney's office in Chicago where Boeing HQ is and save the PAK tax payers (or shall I say US?) money.
Otherwise, they should not be spreading rumors.
$500million in kick backs in 1.5 billion deal? Allegations are preposterous, let alone the proportion of kick backs. One can tell a "lie itself is bogus" by the stupidity of the figures involved.
May be Boeing got them a lunch or dinner or beer.! Technically still illegal but may be considered business.
PTI will soon loose credibility among the well informed young overseas and domestic voters with allegations like this.
Very timely caught up by the PTI vigilance team i believe. Its perfectly fine to look up into details of this deal. As rightly said by the author that things take time when it comes to purchasing a whole new plane!
The TI report is completely flawed and incorrect. The current market price of Boeing 777-300 ER (extended range) is 298.3 million USD not HALF of 300 mil as being proclaimed. As soon as I read this is coming from Ansar Abbasi I knew something was made up. The decision to go with 777-300ER was probably a right one. I don't know why they didn't opt for 787. However, the likely reason may have been that 787 has a huge production list for orders by other airlines and may have delayed PIA's plan to modernize it's fleet by 2020. Another reason may have been seating capacity as the 787-8 only accommodates 210 passengers where as 777-300ER is 393. Airbus or any new type would have required additional training and etc.
298.3 x 5 = 1491.5 million USD.
http://www.boeing.com/commercial/prices/
Someone should tell Imran Khan PIA always had Vision 2020 feasibility studies on aircraft's since 2005. PPP government scrapped it post elections. However, the revival of Vision 2020 much needed and a good step.
English language skills at at Express Tribune are "plain".
well there is no harm in checking it up. every body knows the condition of pia. now days even the toilet in the planes are being used as passenger seats...
janab>> plain or plane??