PIA’s management fights back privatisation

Says will add more international, domestic routes to steer the airline into the black.

In what appears to be a last ditch effort to ward off privatisation, the management of the Pakistan International Airlines (PIA) on Monday unveiled a plan to add international flights to boost revenue and achieve breakeven within a year.

PIA will add 16 weekly services to cities like Toronto, Manchester, Birmingham and Dubai as part of its initiative to use limited aircraft on profitable routes and rollback operations from loss-making destinations, PIA Managing Director Captain Junaid Yunus told a press conference.

It has also decided to give a tough time to domestic competitors as it starts operating nine additional flights between Karachi, Islamabad, Lahore and Quetta from next month.

Yunus, who remained composed throughout the press conference despite facing stringent questions, insisted PIA's main problem was lack of revenues.

"The entire PIA problem is that of (lower) revenues. If we are able to shore up sales, then we will breakeven in a year," he said. "We needed aircraft for that and unfortunately there have been delays."

About the high number of employees, he said salaries were not a substantial part of cost. "In the next five years, many of them will retire and we estimate the strength will reduce to 12,000 to 13,000."

Currently, PIA has 16,600 employees on its payroll with additional 2,700 working on contractual basis.

But the measure for the proposed turnaround of PIA comes at a time when the government has announced its intentions to privatise the national carrier.

In a speech broadcast last week, Prime Minister Nawaz Sharif described financially troubled state-owned enterprises including PIA as a drain on taxpayers' money.

"I am not challenging the government's decision in any way," said Yunus, who was appointed last year. "All I am saying is that we realise that PIA cannot continue to eat up Rs3 billion a month from national exchequer and we are trying to fix that problem on our own."

PIA has set a target to increase revenue by additional Rs1.5 billion from these additional flights. Out of the 38 aircraft in its fleet, it has 26 operational planes.

Yunus said the engineering department has been able to make eight A-310 aircraft serviceable while another one is being worked upon.

"We have fought really hard for the aircraft. As a matter of fact, the highest number of tenders have been issued in my tenure," he said.

In the last couple of months, the airline made nine attempts to lease aircraft that were all interrupted because of political or other reasons.

"Nevertheless, we are going ahead with our plans to induct 14 aircrafts by 2014. The government has given us only Rs3 billion for this. We are talking with banks to raise the rest," said Yunus.

Successive governments have dripped-fed PIA with funds from national coffers, which were siphoned off in payments to vendors and interest payments as soon as money came.

Last capital injection of $160 million came under the government of former president Pervez Musharraf that was used to lease B-777s and A-310s.

Yunus said the airline was looking at cutting cost and adopting zero-tolerance policy against indiscipline. From Rs45.27 per gallon in 2002, jet fuel price surged to Rs298 in 2012. Over 56% of PIA's revenues are eaten up in fuel cost.

Learning from Malaysia Airlines

The famed Idris Jala, the person responsible for the turnaround of Malaysia Airlines and the airliner’s CEO, who met PIA officials a few days back must have left an impression on Junaid Yunus.

"Jala used to evaluate profits of all the routes individually. The ones in loss were shut down. That's what we are doing now as we constantly analyse the network. Some stations have already been shut and staff called back."

PIA has stopped flights to Chicago, Frankfurt-Amsterdam, Kandahar and Zahedan, which were bleeding because of low passenger traffic. PIA operates to 33 international destinations.

Being the national airline, it operates to Chitral, Gilgit, Dera Ismail Khan and Turbat, which altogether cost it between Rs200 million and Rs300 million every year.