PIA seeks state bail out to survive

Published: November 11, 2010
PIA promises to make cutbacks and better its fleet in a bid to improve fortunes, if treasury agrees to cancel debt.

PIA promises to make cutbacks and better its fleet in a bid to improve fortunes, if treasury agrees to cancel debt.

ISLAMABAD: Ailing state carrier Pakistan International Airlines (PIA) is asking the government, saddled with its own mounting debt, to write off losses of 1.7 billion dollars to save it from looming bankruptcy.

In a five-year survival plan submitted to the government, PIA has promised to make cutbacks and better its fleet in a bid to improve its fortunes, if the treasury agrees to cancel its debt and pay off other creditors.

Blaming “bad policies of the past” for accumulated losses of 80 billion rupees (936 million dollars) and liabilities of 144 billion rupees, PIA spokesman Sultan Hassan insisted the airline is capable of future success.

Defending the company against long-standing allegations of graft and staffing problems, he told AFP that operational profits show PIA can become self reliant. “We want to reform the airline. If the government helps us by taking on our previous losses and loans so that we can invest capital, we will be able to revamp the company for the future,” said Hassan.

But the burden would be a massive undertaking for a government dependent on US aid to survive.

“I don’t think it is viable,” said an international finance official in Islamabad on condition of anonymity.

“The Pakistani economy is already weak, the government is under billions of dollars in debt — if they accept PIA’s request to pay off their loans it would be an additional burden.”

A former financial adviser to the government, Ashfaq Hassan, said privatisation was the only long term solution for the airline, which has failed to turn a net profit since 2004 according to its last annual report.

“This is a plan that the Ministry of Finance should never accept. It would leave a huge impact on the national budget,” said Hassan, now dean of Islamabad’s National University of Sciences and Technology.

“If the government injects any money into PIA it would only help it to survive for another year and nothing more. The only solution for this corporation is privatization. Anything else is a waste of time and money.”

PIA was created out of private airline Orient Airways in 1955, just eight years after Pakistan came into existence, and today has a fleet of 40 planes, a combination of Boeing 747s, 777s, 737s, Airbuses and ATR aircraft.

Performing well until the 1970s when corruption and overstaffing hit company fortunes, PIA’s reputation was further battered in the 1980s as it failed to maintain its fleet, said economic expert Shahidur Rehman.

He said 1990 signalled further defeat for PIA, when legislation liberalised to allow more competition in the flight market. The state carrier remains the largest operator on Pakistan’s international and domestic routes. But union officials say years of corruption, nepotism, bad management and poor planning have pushed the corporation to its lowest ebb.

“Every PIA contract is awarded against kick-backs and commission to the relevant authorities. This is employees’ money being looted by corrupt officials,” said Ashraf Bilo, a PIA union leader. Relations between PIA management and its more than 18,000 employees in Pakistan and its global offices are in disarray.

“Merit has always been ignored,” said Bilo. Bilo said PIA’s 500 pilots each earn around 500,000 rupees (6,000 dollars) per month and can claim a pension of 4,000 rupees a month after 15 years of service — huge sums in Pakistan.

But the airline recently imposed new rules to force pilots to fly on its terms, after a row over working hours and pension benefits led pilots to adopt an unofficial “go slow” protest leading to flight delays, said spokesman Hassan.

Pilots said they were routinely forced to fly 12 hours per day, two hours more than the civil aviation rules allow, and occasionally for as long as 18 hours.

This “is impossible and a serious violation of airline safety conduct,” said PIA pilot Sohail Balouch, also the spokesman for Pakistan Airlines Pilots Association. “The management is unwilling to solve this crisis.”

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Reader Comments (17)

  • Aristo
    Nov 11, 2010 - 10:52AM

    It should be changed to PPPIA as Jiyalas have taken over the airline once known as PIA.Recommend

  • Arachnid
    Nov 11, 2010 - 10:52AM

    There are major issues with PIA’s management, but PIA also has the worst union in the country after WAPDA. Both have prevented any kind of reform from taking place in their respective organizations, which are now full of lazy, corrupt gits as a result. This mess of an enterprise should have been privatized eons ago, but for the power of the unions. The state should have no business running an airline.Recommend

  • Maximus
    Nov 11, 2010 - 11:58AM

    Once and for all please shut down PIA. Its a massive burden on the tax payer, and is completely unnecessary when viable alternatives already exist. For international routes, a variety of choices from Gulf based airlines (ranging from low cost to premium) are available from every major city. For the domestic route, Air Blue, Shaheen and the upcoming Air Indus can easily provide the services with no burden on the tax payer.

    In the name of sanity, please shutdown this giant behemoth that has amongst the highest employee to aircraft ratios on earth. The airline is not run like a normal airline nor will it ever be as long as its a hybrid private-public organization. Get rid of it once and for all, and see what comes out of it through privatization. Recommend

  • saad
    Nov 11, 2010 - 4:54PM

    i dont trust PIA to improve even after the debts are written off. this bursting at the seams corporation needs to do some major downsizing and adhere to professionalism and selection on merit. how long will sultan hassan last? and why take his word? on the other hand just privatize it. Recommend

  • Nael
    Nov 11, 2010 - 4:57PM

    Sell this liability and burden on country. The way it is run and over staffed with all the political appointees no one can make it succeed. Its a waste of tax payer money. A private company can change the fortunes overnight by fixing aircraft to employee ratio and running it purely on merit. Successive governments have used every national asset as their personal inheritance and PIA is no exception. Please stop fooling the nation. Oh God please help us get rid of these looters and uncouth thugs.Recommend

  • rasputin
    Nov 11, 2010 - 5:33PM

    As a frequent traveler, I must say that PIA is by far the worse airline I have ever been on. Its understandable how its loosing so much money as it completely lacks a culture of customer service.

    For the sake of Pakistan, this airline must be shutdown immediately. Lately its primary role has been (1) shuttle govt VIPs back and forth (2) shuttle laborers to the GCC (3) provide a horrible haj service that treats humans little more then cattle.

    Someone should seriously make a documentary of how PIA staff treats its customers. Particularly on flights to the Gulf in which majority of the customers are laborers, the air crew treats them with the utmost contempt as if they are not human. Its not just on one or two flights, its on every flight.Recommend

  • Ben
    Nov 11, 2010 - 5:50PM

    Beware taxpayers, your blood is again being transfused to PIA. Read more at: link textRecommend

  • Fardad
    Nov 11, 2010 - 6:17PM

    Maximus is on the dot. No amount of subsidization can help the PIA (Pain In A.s). It is so riddled with corruption that it has become a big liability for the country. The only cure for this cancer is to cut it off. Privatise it at whatever price it goes doesn’t matter. At least it will stop bleeding the national exchequer from then on.Recommend

  • Shahid
    Nov 11, 2010 - 7:44PM

    Which other institution in the country is doing better? Army? Judiciary? ISI? parliament? WAPDA? PTV? Universities? Police? Governors? Media? Think-tanks? Which of these is not sucking people’s blood? Tell me just one productive institution. PIA is part of Pakistan and nothing is going right in this unfortunate “islamic republic”. Dont talk about small things. Think about a major surgery. But I think one has to be out of Pakistan in order to think correctly. Tunnel vision is our enemy.Recommend

  • Ali
    Nov 11, 2010 - 8:52PM

    NOOOOOOOOOOOO…. dont give it any more money… how dare they ask for money, have they no shame, our govt. should pay 1.7 billion american dollars to save 18000 employees… and what about the 20 MILLION people affected by the floods… we should use the money for them not corrupt, useless officials and staff…

    our country is going thru a major crisis and they have the jurrat to ask for money, when our people have become homeless and need money to rebuld their houses…

    I am outraged!!! Shut it down or privatise it… but NO MORE taxpayers money to it…Recommend

  • Abdul Latif
    Nov 11, 2010 - 8:55PM

    @Shahid, You are right to say that all institutions are in a pathetic state (the present Supreme Court being an exception), but here the topic of discussion is the PIA, so lets focus on it and sort it out if possible. It will be a step towards reforming Pakistan.Recommend

  • Hassan
    Nov 11, 2010 - 10:41PM

    Agree with Maximus, Shut down this monster that is PIA, Perhaps then with an open and fair playing field for all those airlines who wish to ply there trade in and out of Pakistan will create an open market and reduce fares dramatically.Recommend

  • M.Ilyas
    Nov 12, 2010 - 3:40PM

    PIA is our National Airlines and has a potential to earn profit and serve Pakistanis.Its Management should be honest nd professional, Board members should be totally professional people and there should be no interference from the Government.
    Pakistani people perform excellant if given the chance to take independent decsions.
    See the people who are working overseas.
    People who have accummulated a huge debt shoud be held accountable.Recommend

  • F. Alam
    Nov 13, 2010 - 2:25AM

    I am tempted to join the bandwagon and say ‘shut down PIA’ BUT I WILL NOT SAY THAT.

    How many things we shut down because they are not being run properly? We need to mend our ways, not shut down things. If we want to shut down, then not just PIA alone. Start with any state department and the list will go on….Recommend

  • Nov 13, 2010 - 9:35AM

    PIA is a victim of a corrupt management, whose only objective is giving jobs to cronies, pilfering its revenues and getting kickbacks. It is an airline with abundance of clients and a passenger seat load in the range of 75%, yet it is going in a loss. Every government has abused PIA. PIA should be privatized and those involved in pilfering the state owned airline must be held accountable. Their ill-gotten assets located in Pakistan, UK, UAE, Canada, Germany and USA will reveal the extent of corruption that they have indulged in. Just imagine that in March 2008 total losses of PIA stood at Rs42.6 Billion which in Sept 2010 have jumped to Rs 88 Billion. Recommend

  • Abdul Latif
    Nov 13, 2010 - 12:15PM

    Mending our ways rightly means being sensible and shutting down perpetually loss making commercial enterprises, that too when we can easily afford it. As far as reforming the present PIA is concerned, it is impossible!!.Take my word on it.
    18000 employees against optimal 4000 according to strength of the fleet … Just observe while boarding a plane. The employees seen idling around the aircraft exceed the number of passengers. How many can you retrench. Can you dare do it in the face of the almighty PIA employees union displaying portraits of ruling political leaders. Flights plying almost empty while seats being refused to revenue passengers is regular feature! can you cure this mindset? Presence of substandard service shouts that they were employed against merit…. So many points can be quoted justifying scrapping the airline in its present form and starting a new airline purely on commercial and non governmental interference basis.
    Comparing PIA with other state departments is also not correct, don’t compare it with vital state institutions (not that they are too good but we are restricted with dealing with them). PIA is merely a taxi service. Please don’t make it a holy cow too. Slaughter it to gain sawaab. As it is, it is Qurbani time.Recommend

  • Shahid Khan
    Nov 16, 2010 - 5:04AM

    I agree with Abdul Latif. PIA is no institution .It is a transport service like Air blue, Shaheen Air or Daewoo bus service. Let us not make it a sacred cow. (we already have enough of them on our heads). Whenever we discuss PIA, we should look at it as a commercial enterprise which is supposed to make profit.from its business. If it is not doing that for any reason it should be wrapped up without a second thought. Recommend

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