Mayday, Mayday!: PIA’s business plan termed obsolete by NA committee
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on Finance, Ministry of Finance Director General (Debt) Masroor Qureshi termed PIA’s business plan as “obsolete and outdated” that did not carry value anymore.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.
COMMENTS (21)
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@Baby ka Husband: Janab, I am witnessed to a fake medical test conducted for a pilot to be selected in PIA. He was discharged on medical grounds from PAF. In order to get through passed his cousion appeared instead of him. Those days PIA medical centre used to be on Tipu Sultan Road, Karachi. Ha Ha Ha Ha Ha merit in PIA....
Banker footprint is quite obvious in all the reported GOP~PIA hallucinating talk. You are witnessing the shill show.
Hats off to Mr.Masroor Qureshi who has the guts to say it publicaly that the AVM or the MD (last three at least) may be good pilots or good engineers, but they are definately not "corporate Heads",. To those who are mad at him I say, you dont have to be an airline man to run a corporation. you have to be a trained, educated, visionary to manage any corporation regardless of their business. Open skies, old airplanes, fuel costs :( have we not been hearing all this for many decades now? while the other Asian airlines are doing a booming business and expanding many hundred percent?. We have been appoint senior management on whims and our relationships or reccomendations and not on their skills. A person may be Director Marketing today and head another department tomorrow that he knows nothing about. I suppose the AVM would like to revoke permission of other airline's rights to fly in Pakistan, shut down the railways and all the busses so that all passengers fly PIA only. Has he ever thought of justifying his own job in a 28 aircrafts airline? How many MD's and DMD's and Chairman do we need to run this bankrupt airline? There are probably more managers in PIA than the workers they supervise. I currently work for a business in USA whose revenues are more than PIA, is global in nature, with 20% work force, the CEO and his eight top managers share two administrative assistants, we make our own coffee, write our own letters and meet the staff on a regular basis to keep ourselves aware of what the issues are or might be coming up. Last three PIA MD's did not even have a college degree in Business, forget any experience required in Management. Mansoor Qureshi must reccomend to his "BOSS" that the airline be shut down and reorganized and jobs should be offered only to deserving qualified people from top to bottom..... perhaps the decline would then stop.
Same arguments & commentaries by armchair experts have been made over decades. Revamp, restructure, old vs new planes, too many bad employees & the rest. Notice how all remedies translate to additional staggering expenditures, odious debts/liabilities on those who had nothing to do with it, asset stripping & loss of ownership etc - All that no sane person would acquiesce to.
All PIA managements in the past two & a half decades have repeated the same mantra as solution. S K Abbasi leadership got you into B743 with RR engines. Cathay made out like a bandit from the deal/scam, and wet leasing etc. SABRE was given PIA management.
Ahmed Saeed, on basis of some vision (no feasibility), indebted you with a lot more than $3.5 billion of interest bearing loans. In order for B777 fleet to break even it had to operate an average of 18 hours per day. Did the B777 acquisition turn around the A/L as envisioned and promised, or break even? To add fuel to the inferno A310s were acquired on lease/purchase basis via Airbus, as a replacement for the A300 - Is A310 replacement for A300? The six A310s with PW engines, mis matched configurations with the A310s you already had and with atrocious mod status, became PIA ownership a year back. How many of them are grounded currently & why. Now they want to sell/replace them. Wet leasing was made fashionable by Ahmed Saeed making a fortune for Turkish 'brothers'. While perfectly airworthy B742s were sold with valid certificates of airworthiness, similar a/c of older vintage were wet leased.
Tariq Kirmani came along and got you more toys i.e. ATR fleet to destroy. And of course it was all via loans.
Ejaz Haroon converted one of the only two B742 Combis (frieghter/pax) to all pax, at great cost for Haj ops, after trying very hard to sell both for about a million each. The sole remaining Combi isn't being operated, but PIA pays crores to other freighter operators to transport its engine all over for maintenance. Now they want to procure cargo a/c. Some B742s and a B743 was scrapped quietly.
Galloping Rao was brilliant and got approvals for more aircraft. He made personnel changes which to date no one is able to fathom. Who benefits from all of the continuous debauchery? Who nourishes it? And who in their right mind allows employees the authority for such activities?
All supposed technical issues for the entire current fleet can be fixed in 90 days without having to sell out the country in the process.
@ nadir
typical military tripe indeed
whats even more typically military is the suggestion to end the open skies policy and make PIA the only means in or out of Pakistan!
PIA need to Restructure, Reorganize, Revamp, Reduce employee, Induct new planes, and make Karachi Internatonal Hub. Seriously political interfrenences stop, close down the airline for short time to relive unwanted and unwilling employee. PIA need is serious Hair Cutting.
As per our financial analyst, PIA suffered a great loss was due to increase in Fuel prices, as far fuel prices are concerned, prices of the fares are adjusted accordingly. These losses are only because of illegal induction of illiterate resources by the govt on high position.
People need to open there eyes
PIA is bankers' delight. Nothing is by accident.
How long tax payers have to keep pouring money in this dinosaur called PIA? It is PIA's management and Unions that has brought PIA to this point. Let it be sold and let the new entrepreneur hire and fire as he deems necessary to run it as a viable business. Many will loose jobs but so be it - they deserve it.
@Karachiwala: @Usman S.: You are both right. professional managers is the answer. Plus no Government interference on who is selected or promoted.
Last July or August I happened to run into some people in Lahore who were on the Selection Committee hiring new cabin crew. I asked them how it was going and that they were selecting the right men and women - meaning in terms of education and health. Their answer was no one cares what we say. From PM, Ministers, NA, Senators and the bureaucrats, they were getting 24/7 supporting their own candidate. There was so much lobbying that the well deserving would never be selected. Then how can they run an airline??? People comment how good Emirates is. But they should also know that Dubai Sheiks support the airline but don't interfere with their British managers. That's the answer.
Angels in green still sooooaaaaring!
PIA should have been shut long before, it will never recover from its present condition. The organistaion has become a graveyard for retired PAF/Army beggers (aka officers) to enjoy after retirement on public taxes. The remaining lot too is capable of nothing and should be sent home to save valuable resources which may be put to better use such as public education and health. Commercial aviation is not our cup of tea anymore.
"Desperate times need desperate measures". Both the government and the top management share equal blame for the inept handling of the airline. Unless and untill, strong, meaninful actions are not taken, there is no way to reverse the nose-dive. After hiring "professional" managers and saying goodbye to the armed-forces retirees, the airline will still need to let go of thousands of parasite employees who have been politically inducted by various governments, before it could start imagining coming off the respirator. Time is not on the side of this "dying patient"!! That's the bitter truth. Period!!
My my Finance Ministry has woken up and ask pertinent questions. Instead of asking BMA Capital, Allah knows who they are, PIA has or used to have a Long Range Planning and Finance Department that used to make a Fleet Plan based on marketing and sales department projections on each route. Finance then used to determine load factor, revenue per seat mile, average cost per seat mile,. yield in cents per Pax etc., etc., Then this plan was mirrored against the Fleet and the right aircraft deployed on each route. One can determine right down to cents and dollars, both the revenue and expense in each route. Now with airlines use computer models to determine, the revenue, i.e,, price per seat sold against the cost of each seat sold on every route giving pax seat yield. Khan does not know what he is talking about because he never had to determine fuel-burn in the Air Force etc., etc., Commercial Airlines account every penny. There needs to be a total revamp of airline management. Then only right questions will be asked and answered. But Open Skies have done tremendous damage to PIA and spawned all these carriers in the Gulf, eating away PIA's Lunch.
Below is 1962 photo showing Jacqueline Kennedy, wife of American President John F. Kennedy, disembarking from a Pakistan International Airlines (PIA) plane at London’s Heathrow Airport and being greeted by the plane’s flying and cabin crew. Ms. Kennedy went on record saying that PIA was one her favourite airlines. Those were also the days when Pakistani's managed and flew a great airline.
http://dawncompk.files.wordpress.com/2012/11/tumblrm2b94m4eie1qze1fwo11280.jpg?w=462&h=322
A better question to ask is why PIA needs to be in business at all if constant government support is needed to keep the airline alive. Depending on Gulf country airlines to fill the gap would probably greatly improve flight service and eliminate all Pakistani government costs related to the current arrangement!
3 Months before the NA becomes obsolete.
And ofcourse when the DG Ministry of Finance complains about non professionals presenting business plans, he is infact himself a non professional and is assuming he knows better.
"Deputy Managing Director Air Vice Marshal Qasim Masood Khan claimed that government injection could save the airline from collapse." Typical military solution to everything, throw more money at it.
No matter what, I don't expect any good from our inept politicians who are ruining my beloved motherland.
I find it amusing that people who don't know anything about commercial aviation put forth such strident views. Who is this gentleman that is being quoted who thinks he knows about the airline industry? What is his background and experience in the field?
Fuel costs are a huge issue for PIA; not wage costs despite over-manning. The world over, fuel costs are causing airlines to crumble (see the state of private airlines in India and the huge losses being incurred by Air India) and the only solution lies in modernizing their fleet.
This is a conundrum. PIA will have to spend money to acquire modern fuel-efficient aircraft. The old Boeing 737-300, the 747-200/300 Jumbo and the Airbus A 310 need to be retired gracefully. They have all served PIA well for decades but PIA cannot afford to fly these old gas-guzzlers and high-maintenance aircraft any longer.
Of course, bringing back PIA to its former glory is not only a matter of flying a modern, fuel-efficient fleet. We know there are other issues. But it is an important pre-requisite.
Even before reading the article, I knew that it'll be full of cliches and blame-game on why the airline is failing. And sorry to report that I was right! For some reason, it seems everything that was working before circa 2006 is now under an invisible magic spell of failure. And no one seems to do anything about it.