The cumulative losses of Pakistan International Airlines (PIA) have now increased to Rs144.6 billion and the authorities have ruled out its revival without injecting more money.
In a briefing to the Public Accounts Committee, the airline’s managing director, Ijaz Haroon, conceded that during the first half of this calendar year, the national flag carrier suffered Rs6.9 billion more losses.
“Losses are refinanced through loans, which is a killer. Until equity injection is done, no one can turn around the PIA,” said Haroon.
“Over the years, political patronage has brought the PIA to its knees,” said Chaudhry Nisar Ali Khan. “PIA is a national asset and hardly anything is left of it.”
The MD said that PIA has an average of 430 employees per plane while the airline industry’s per plane employee average is 225. The airline’s losses stood at Rs40 billion in 2009. Its revenue stood at Rs94.4 billion and expenditures at Rs134 billion. Only on account of interest on loans the authorities paid Rs9.3 billion. Owing to currency devaluation, the corporation suffered losses of Rs 6.7 billion, he said.
Between January and June this year, PIA earned Rs49.3 billion, but its expenditure exceeded Rs56 billion. In six months, the management paid Rs4.7 billion interest on loans. Rupee depreciation caused a loss of Rs1.6 billion.
“PIA revenues increased due to increase in fares instead of efficiency improvement”, said Sardar Ayaz Sadiq of the PML-N.
The new management claims that faulty aviation policy, the influence exerted by the government, the volatile oil prices and rupee depreciation and inefficiencies within the airline have brought the company to near collapse.
The management has been working on a business plan since January this year, which still requires the vetting of the prime minister and the ministry of finance.
The plan focuses on strengthening the culture of ethics and compliance, revision of the regulatory regime to provide a level playing field to the national carrier, aggressive marketing plans for revenue enhancement, envisaging a doubling of revenue in five years.
The plan also proposes operational restructuring and cost cutting steps to improve efficiency, which are expected to save Rs14.3 billion. The most crucial part is the replacement of the aging fleet and the addition of new planes, which require money, which the finance ministry is reluctant to allocate because of fiscal constraints.
Published in The Express Tribune, September 28th, 2010.
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