What about business?
The Rs13.6 billion bailout package was approved by the Economic Coordination Committee (ECC) of the cabinet on Wednesday (1 Nov 2017). Prime Minister Shahid Khaqan Abbasi, while heading the ECC, approved the increase in guarantees limit in order to enable the loss-stricken organisation to manage its expenses
The CEO of PIA, Dr Musharraf Rasool Cyan who took charge of the office back in September 2017, has already been assigned by the cabinet with the task of converting the loss-stricken airline into a profitable organisation
The national flag carrier of Pakistan, which might be the best option to fly with for many, may not be as a good option when it comes to doing business. Suffering from long running financial constraints, PIA time and again asserted its image as a no good burden on the government, with the latter considering privatisation as a last resort. The government, while having presented PIA on its active list of privatisation before the International Monetary Fund (IMF), has approved a bailout package for the ailing airline for a third time this year since the previous ones later proved insufficient to pull PIA out of its abysmal crisis. The airline has been a consistent recipient of such bailout packages in the past as well either in the form of capital injections or commercial loans from banks in an attempt to cover its losses.
The Rs13.6 billion bailout package was approved by the Economic Coordination Committee (ECC) of the cabinet on Wednesday (1 Nov, 2017). Prime Minister Shahid Khaqan Abbasi, while heading the ECC, approved the increase in guarantees limit in order to enable the loss-stricken organisation to manage its expenses. The ministry of finance had earlier cut down the request of aviation division to Rs13.6 billion from Rs16 billion. With the bailout package, the sovereign guarantees limit was increased by Rs175 billion from Rs161.5 billion which was previously enhanced from Rs151 billion back in January this year. Of the total amount of Rs13.6 billion, Rs5.3 billion have been allocated for payment of interest on previous loans, Rs5.4 billion for construction of PIA hangers at the new Islamabad International Airport, Rs2 billion for undergoing an engineering project, and remaining Rs1 billion for ground support equipment.
The accumulated losses of PIA have surged up to Rs316 billion with a loss of Rs40 billion in the year 2016 alone. The airlines primary monthly expenses include loan and markup repayments, fuel purchase, and disbursement of salaries to employees. PIA’s debts have risen up to Rs186.5 billion. Back in January 2017, the PIA’s management informed a three member Senate committee comprising of Syed Muzaffar Hussain Shah (PML – Functional) in the form of head, Lt Gen (R) Abdul Qayoom (PML – N), and Farhat Ullah Babar (PPP), that the airline earned approximately Rs7.5 billion whereas its monthly expenses mounted up to Rs13.14 billion, almost the double of the earning.
From its current financial position, it is difficult to say that even with this bailout package PIA will be able to meet its over-grown expenses, and bounce back from its poor financial situation, as similar heavy weight bailout packages in the past hardly made any difference to the hapless financial standing of the national carrier.
From master to jack of aviation
The story of PIA’s decline from once being a symbol of national pride to a burden on the national treasure today is indeed saddening, however, factual. For a long time, PIA remained a success story, and a trend setter in the global aviation industry. The airline initiated its flight operations with the then modern Boeing 707 aircraft, connecting Pakistan with the rest of the world. In addition, PIA also holds the distinction of being the first to operate pure freight oriented flights in Asia.
The million dollar questions are, how is it that PIA managed to achieve the heights of greatness with little finances, and resources, and today with such heavy bailouts, the airline is struggling even to meet its expenses? Being a national carrier, and the pioneer in the business, why is PIA losing ground at home? With over 10 million Pakistanis settled abroad in the Middle East, Europe, and US, why is PIA flights abroad a source of continuous loss to the organisation?
The nose-dive journey of PIA from being one of the leading airlines in the world, and enabling airlines of other friendly countries, Emirates to name one example, to reach maturity stems from not one, to be precise, but many reasons.
While most of the aviation experts blame the current state of PIA on the aircraft to employee ratio, which unfortunately ranks amongst the top in the world, however in case of PIA the employee payroll takes roughly 16 to 17 percent of the total revenues of the airline, while the standard is 25 percent worldwide, putting that of PIA in the safe zone. Thanks to cheap workforce availability. Collective Bargaining Agents (CBAs), commonly known as the Worker Unions too exist all around the world, and are not a PIA specific dilemma.
So, there can be no other reason to account for PIA’s current state than something being fundamentally wrong with the ruling government’s aviation policies, procedures, and the very top management of the airline, as there is a gap between the skills and the requirements. Defiance of merit, and political favoritism influencing decision making are also major draw backs.
Is there a revival for the national carrier?
Where the revival of PIA seems an impossible task and many business experts suggest privatisation to be the only workable option, the government is determined to revive the national carrier to its once lost glory, and make it an airline of choice for the people.
Structural reforms in PIA, along with a well-envisioned business plan are the keys to becoming a profitable organisation.
The CEO of PIA, Dr Musharraf Rasool Cyan who took charge of the office back in September 2017, has already been assigned by the cabinet with the task of converting the loss-stricken airline into a profitable organisation.
Whether this tough ask is achieved or not, only time will tell. Till then, all fingers are crossed!
