PIA MD said that the national carrier would not plead to the government for a bailout or financial aid. PHOTO: FILE
The Pakistan International Airlines (PIA) will not seek financial aid or a bailout from the government this year as induction of fuel-efficient aircraft and their proper utilisation has increased revenue, said Managing Director Junaid Yunus.
However, Yunus did not speak on the subject of PIA’s privatisation or the reported frustration of Privatisation Commission’s chairman that the airline is taking important decisions, even knowing that the selloff is imminent — the deadline for which has been set for December 2014.
“I have been tasked to run the management efficiently and that’s exactly what I am doing,” he said in an interview with The Express Tribune. “After spending day and night, we have prepared a five-year business plan. Now, it doesn’t matter who is at the helm. If the strategy is followed, PIA will become a profitable entity.”
However, the statement on a ‘five-year business plan’ is in stark contrast to the government’s plan to privatise the national carrier, but Yunus insisted that PIA was looking to make it.
Plans to raise money on its own is also a reversal from past practice when the national carrier pleaded to the government for funds that would enable it to pay salaries, bills and lease aircraft as well.
“We will use some of the money given to us last year but that’s all. Other than that, we will manage it all on our own.”
This means PIA will look to raise finance for the proposed lease of over a dozen planes on its own from financial institutions on basis of revenue streams.
In recent weeks, the management has taken drastic steps to fix its problems. It has advertised tenders for 18 aircraft, asked potential candidates to apply for the post of CFO and started a crackdown against corruption at breakneck speed.
“Results have started to show. We recorded Rs9.5 billion revenue in January 2014. That is unprecedented for the month. Our last Umrah season was very profitable as well.”
PIA has not released financial statements for last year but it posted a loss of Rs31.9 billion in the nine months ended September 2013. Its highest year-end loss was Rs35.8 billion recorded in 2008.
“We couldn’t do anything about it because we didn’t have the aircraft. The first tender to lease the plane was given in February 2013 but it lapsed because of the change in government.”
Last year, the airline even operated with only 17 aircraft at one time, often flying Boeing-777s, which were bought for international flights, on domestic routes, he said.
“Then rupee depreciated sharply and we booked losses. Previous Umrah operation suffered massively as over a million passports were held up. These factors were beyond us.”
Flying forward
PIA has 19,300 employees, with 8,000 workers falling in the lowest grade of 1 to 4. There are 550 pilots, 2,300 cabin crew and 700 aircraft engineers. It has the world’s highest employees-to-aircraft ratio.
“Around 3,000 workers will retire in a few years,” said Yunus, who is also a senior pilot. “Since there is a moratorium on new appointments we expect the ratio to go down.”
He also believes that the airline has to separate all non-core businesses from that of booking passengers. “Speedex, maintenance, repair and overhaul facility, training centres, flight kitchen and ground handling department should be run independently.”
As strategic business units, these sections will have their own profit and loss accounts, not dependent on the airline’s main income, he said.
The management is also open to the idea of selling some of its spare assets but that would depend on the direction of the government.
PIA has accumulated losses of Rs179 billion and long-term debt of over Rs75 billion. A large part of the debt includes the remaining cost of nine B-777s, which were leased between 2004 and 2007.
“That’s a major drain on our finances but it will ease as we pay off the debt in a few years. Things will be better for us,” he said.
A difficult takeoff
Domestic and international carriers have also eaten into PIA’s market share, which dropped to 39% in 2012-13 from 43% in 2007-08. A bitter price war with domestic airlines complicated the situation.
“Ultimately everything depends on the service. We already have a big captive market but now we are offering things like movies, WiFi, phone service to make sure they travel with us,” Yunus said.
Other officials justified the high number of employees. They point out the fact that PIA caters to traffic, which does not always generates from metropolitan cities.
For instance, a worker hailing from Gwadar and travelling back home from Oslo would only prefer PIA if he gets a discount on a domestic ticket and knows there is a connection to his city.
“And for that we need to have a station officer in small cities. Catering service should be available as well. Ground handling staff is also needed. Staff to check the aircraft would be there as well. Tell me the way we can get rid of all these people without affecting our business?” asked a dejected executive.
Published in The Express Tribune, February 19th, 2014.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (8)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
Probably the worst airline on the planet right now. Mis managed to the point of no return like any other government department. They are leaving luggage behind indiscriminately because they dont have enough space or Fuel in the newly rented turkish busses with wings( they are even smaller). And while returning the luggage they dont pick up your phones, nor give you a date of return for the baggage. They dont talk to you properly and feel that they are doing you a favor by returning you "your" luggage 4 days late. Please avoid travelling by PIA. Starve them for passengers, and push them till they close while stopping the leakage of the tax payer's money.
And I hate air India. Lol
i hope not at the same time!
You have the highest labor cost of any airline on the planet yet your "Fix" is to borrow more money to buy new planes --- doesn't make any sense to me and it won't make any sense to the banks when PIA tries to borrow more money. The reality is that your going to have a tough time selling this chronic loser and it may be cheaper in the long run to just cut your strings and let this die like any other failed business.
PIA MD should also talk about returning all the bail money they have been getting from the government. Otherwise in a year or two we will hear the same requests for more bail out as targets were not met due to market conditions etc.
The most obvious solution is privatisation. The current plan is a red herring as PIA management and employees do not have a god given right to hold the country to ransom and neither to their jobs. If you don't work efficiently, you reap the consequences.
just set Emirates or Qatar as barometer against manpower at each level and fire the white elephants like Mobilink and other telcos
Plz plz plz ... Any one from management we are waiting to become operational since last 6 yrs. We are getting only Rs. 5000 stipend from PIA. No one is giving us any other job. Some of us are married and supporting our families financially. Most of us have completed basic and aircraft type technical. Plz do something for us as it is very hard to survive on just Rs. 5000. We wish u can understand our situation.
thanks.
On behalf of all cadet Pilots.
PIA has over 600 operational pilots and another 200 waiting for past two years on its payroll to be operational. The MD is not stating facts. PIA present management, all 16 of its directors and DMD are part of the problem, for it is they who are responsible for mismanagement, pilferage, corruption and shady procurement deals, not the other employees.