Flying a green elephant

On 31 Dec 2012, the Financial Times newspaper posted a list of 2012 by numbers, both positive and negative. Pakistan finds one mention in this list. Our national airline - PIA has the highest employee to aircraft ratio in the world: 485 employees per aircraft.

This figure is based upon the existing total strength of 42 aircraft. The serviceable aircraft on an average for the past three years is only 32. The figure of 485 does not include contract pilots, flight engineers and aircraft engineers who have been rehired after retirement and other contractual staff, although PIA fleet and pilot utilization is almost half of other regional carriers like Emirates, Etihad and Turkish Airlines.

Now some more facts. Almost every pilot and flight engineer who retired after 2009 has been rehired on contract. In addition, PIA has recruited over the past five years another 3,500 employees in violation of merit, which includes 250 pilots who are on payroll, but waiting for over three years to be operational.

In 2008, thousands of PIA employees who were sacked earlier by the Nawaz Sharif government were reinstated and given back their old jobs with back pay and promotions. This cost the airlines hundreds of millions. The airline has also not been purged of those employees who submitted fake degrees.  They are not sacked allegedly because of pressure from unions, political parties and important members of the ruling elite.

During a presentation in 2009, then prime minister Gilani had observed that the problems faced by PIA “could not be resolved through periodic injections of financial dole outs.” At the time, PIA was already in technical insolvency, with debts, liabilities and losses exceeding its assets, and accumulated losses exceeding Rs146 billion. But since then, the government has been doing nothing else.

PIA has been reduced to an organization which, in spite of massive revenue pilferage, losses, reduction in frequency of flights and grounding of its fleet, has become hostage to its employees, who demand higher salaries.

This election year, as if one cue, the government rewarded PIA employees by announcing a Rs5 billion salary package at a time when the airline was making an annual Rs30 billion loss. As reported in the national press, a senior director of the airline expressed his reservations at this decision but was overruled. The government accepted the PIA CBA’s charter of demands and increased the salaries of Group 1 to 4 employees by 45 per cent.

Following this, the PM has also approved a fresh Rs100 billion special bailout for the national flag carrier and instructed the release of $4.5 million on priority for leasing of aircraft on dry lease. Reviewing the four year long spiral of the airline, the government decided to increase the number of aircraft not reduce the number of employees. The PM also said that a Rs8 billion loan by the federal government would be converted into equity and a plan put into place for rescheduling loans of Rs147 billion owed to different banks.

Today a PIA senior pilot flying a B777 earns in excess of Rs1 million per month in salaries and allowances, which is five times more than what a PhD gets in Pakistan. How long will we continue to bailout this green elephant? It is no coincidence that whenever PIA wants new aircraft, services suddenly deteriorate. Flights are delayed or cancelled and a huge hue and cry is made over old aircraft and outdated technology. The media plays its part in this as well.

PIA can be a case study for management students on how an airline should not be run. The national carrier has given away its natural advantage on ethnic traffic to regional carriers like Emirates, Etihad and Qatar Airways who now operate a maximum number of flights to Pakistan.

The unions seem to run the show. Every flight that is operated is understaffed because most of the cabin crew are not on board, citing one reason or another. No action is taken against them. The quality of food is poor and facilities are deteriorating. People remember the golden days of the airline when it was pleasurable experience to fly. Now most of the travelers fly with PIA out of compulsion. One wonders how long we will bail out this operation.

Published in The Express Tribune, March 4^th, 2013.