An “obsolete” business plan has been presented to Prime Minister Raja Pervez Ashraf as a solution to all the ills of Pakistan International Airlines (PIA) – the state owned entity running in the red since 2005 and is not expected to achieve this year’s revenue target of Rs154 billion.
In a meeting of the National Assembly Standing Committee on Finance, Ministry of Finance Director General (Debt) Masroor Qureshi termed PIA’s business plan as “obsolete and outdated” that did not carry value anymore. He said the plan was prepared by BMA Capital in October 2010.
The plan envisages more government direct and indirect injections to revive the bleeding entity. But Qureshi said that PIA wants to put good money to chase bad money. Unless the national carrier’s management gets serious, the problems will not be resolved, he added.
PIA Deputy Managing Director Air Vice Marshal Qasim Masood Khan claimed that government injection could save the airline from collapse.
Khan claimed that PIA had found solutions to its problems in the business plan, which was presented to the premier in the first week of August. The PIA’s General Manager of Funds went on to say that the prime minister had asked for implementation of the plan.
The committee also showed its concerns over appointment of technical people of armed forces at senior managerial positions in the PIA, citing it one of the reasons of not making workable business plans. The committee was of the view that the deputy managing director Khan may be a good engineer and a pilot but not a good corporate head.
In his presentation, Khan said that the entity’s accumulative losses since 2005 had touched Rs142 billion, with fresh losses of Rs22.3 billion during first nine months of 2012. Without citing any rationale, Khan said this year’s revenue target of Rs154 billion cannot be achieved. Moreover, against the annual budgeted loss of Rs12.1 billion, the national carrier incurred Rs22.3 billion in losses in nine months. Revenues remained Rs82.3 billion against expenditures of Rs104.3 billion, during the period under review.
The reasons for losses given by Khan were rejected outright by both the committee and the finance ministry. Khan said phenomenal rise in fuel prices was one of the reasons behind losses in successive years. The fuel cost accounted to 54% of revenues, which could be reduced by more than half if new aircrafts were added in the fleet, he said. However, the committee argued that other airlines were also operating under similar conditions and were also subjected to fuel price hike.
The PIA officials argued that geopolitical factors were forcing the foreign travelers not to fly with PIA- a reason rejected by the committee while saying that on its international routes the service is always full to the capacity.
Khan also held open skies policy a cause for losses. Closing skies for foreign airlines may save PIA, he added. He said due to the policy Rs59 billion annual revenues have gone only to airlines from the Gulf. However, despite the policy PIA enjoys 76% market share domestically and 39% share in international market.
Khan said out of a fleet of 38 aircrafts, only 28 were operational. He said that the business plan relied heavily on induction of new aircraft.
Replying to Khan’s statement, Qureshi said that with only 28 planes, PIA has to decide whether it was a domestic airline, regional or international. PIA’s marketing policies are totally flawed, he added.
Published in The Express Tribune, November 28th, 2012.