Curbing losses: Government kicks off privatisation of PIA

Decides to put up 26% of airline’s shares for sale in initial stage.

ISLAMABAD/ KARACHI:

The federal government on Thursday decided to initiate privatisation of Pakistan International Airlines (PIA) by putting up 26% of the national flag carrier’s shares for sale.

Chairing a high-level meeting on PIA affairs at the Prime Minister’s Office, Prime Minister Nawaz Sharif directed the Ministry of Privatisation and the Civil Aviation Division to begin the process of privatising PIA ‘with immediate effect’.

He consented to selling 26% of the airline’s shares in the initial stage of privatisation and directed concerned officials to ensure the procedure was carried out in an ‘open and transparent manner’. The premier also directed the PIA management to scale back the airline’s losses in the short term in order to make it a viable entity for privatisation.

“The government is fully committed to the reform and restructure of all ailing state enterprises, including PIA,” an official statement from the PM’s Office cited the prime minister as saying.

Earlier in the meeting, while reviewing the PIA’s performance, Premier Nawaz expressed deep concern over mismanagement in the airline’s affairs and was saddened to observe that it had not come up to the public’s expectations. He was briefed on the issues confronting the national flag carrier, which include declining service standards, lack of reliability and punctuality, pilferage and theft, lack of quality manpower, training and job rotation, an ageing fleet, overstaffing and high loans resulting in high finance cost.



Finance Minister Ishaq Dar, Planning and Development Minister Ahsan Iqbal, Information Minister Pervez Rashid and Petroleum Minister Shahid Khaqan Abbasi were among the senior officials who attended the meeting.

According to sources privy to the development, the planning and development minister had done much of the engineering to convince Prime Minister Nawaz to privatise PIA.

“Upon his return from China, Ahsan Iqbal monitored PIA’s performance closely and witnessed the chaos and mismanagement that is generating a massive number of complaints from passengers,” a source told The Express Tribune. He added that the minister warned PIA of dire consequences if it failed to improve its services.

According to officials of the PM office, state-run entities, such as PIA, Pakistan Steel Mills and Pakistan Railways, have placed a massive burden on the country’s economy. These unprofitable corporations are inflicting losses of up to Rs500 billion per annum on the national exchequer.

According to PIA’s own report, the airline has suffered losses worth Rs119.84 billion over the last ten years, which is not acceptable for a commercial entity and shows the extent of its bad performance. Flight delays and cancellation has become the norm in PIA – as many as 35% of the national flag carrier’s flights end up delayed or cancelled, prompting passengers to board other airlines. In addition to that, only 24 of PIA’s 34 aircraft are currently serviceable, while the employee-to-aircraft ratio stands at 552 personnel per aircraft, compared to the global average of 120.

Reactions

While former PIA bosses were quick to hail the government’s decision to privatise PIA, the airline’s union condemned the move and threatened to derail the process.

“It’s a good decision. Something needs to be done about PIA,” said Tariq Kirmani, former chairman and CEO of the national flag carrier. “Now, the government should ensure the privatisation process is transparent and the highest bidder gets the airline.”

Zafar A Khan, another former PIA Chairman, said due credit must be given to Prime Minister Nawaz Sharif for taking time to find the solution to the airline’s affairs despite being confronted by other pressing issues.

“We all know about [PIA’s] problems. There needs to be strong political will … if he fails then he must remember people won’t forget. It was the decaying economy that led to last government’s downfall.”

Talking about hurdles ahead of the government’s plans, Kirmani said the toughest challenge for PIA bosses had always been confronting employees’ unions. He minced no words while suggesting massive layoffs were necessary to scale back losses.

“Staff strength must be slashed to 10,000 personnel… It needs to be done to make the airline efficient,” said Kirmani. He insisted that PIA should only focus on core business and outsource operations like running the flight kitchen and handling cargo and luggage.

Zafar, too, said PIA must not be treated as an employment agency.”It won’t be easy fixing the airline. It can even turn bloody. But someone has to do it.”

The PIA union, meanwhile, threatened to derail the privatisation process owing to fears that the move would inevitably lead to the sacking of thousands of employees.

“We won’t let this happen. Right now my entire focus is towards approaching the Supreme Court,” said Hidayatullah Khan, the President of PIA’s Collective Bargaining Agent (CBA). “We will strike this deal down just like it happened in the case of Pakistan Steel Mills.”

Hidayatullah said the government should have considered an employee buyout instead. “PIA employees together hold 12% of the stake in the airline already.

No one will buy PIA until the government clears the accumulated losses… if it is doing that, then surely we can turn it around even faster.”

But former PIA chairman Kirmani believed a buyout in such a large organisation was unlikely. The new investor would also have to take share in the negative equity, he said.


Published in The Express Tribune, September 13^th, 2013.