Fate of PIA’s US operation

• And the national carrier itself

PIA operation to USA was suspended after 50 years with the last flight to JFK NYC on 28 October. The reason cited for suspending these flights was annual loss of Rs1 billion on this route. During January to July 2017 direct operating cost on this sector exceeded revenues by Rs673 million, while from 14 August 2016 to February 2017 PIA lost over Rs1.7 billion just on premier service from Pakistan to UK. Except for six sectors PIA is losing money on every sector including its UK operation and urgent steps need to be taken to achieve break-even.

According to a CAA letter dated 10 November 2017, PIA will now be restricted to regional routes such as Pk-203 which originates from Pakistan to destinations in Gulf and back while Turkish route will operate on all flights originating from Pakistan to UK, USA, such as Pk-708, Pk-711, etc, via a Turkish airport with the sole exception of London. This does not fit the definition of code sharing on reciprocal basis but is more a surrendering of PIA slots and routes acquired over years of operation. What PIA needs is aggressive marketing to raise much needed cash-flow while taking concrete steps to reduce direct operating cost on every sector and curtailing total operating cost without compromising on passenger services and safety. PIA’s before tax losses in 2017 for Jan-March are Rs11.5 billion; April-June Rs11.37 billion and July-Sept Rs7.45 billion. Pakistan has an assured annual ethnic traffic of over 13 million passengers which was enough for PIA to survive and be profitable with space for foreign airlines to pick extra passengers over and above combined capacity of all Pakistan registered airlines.

Unfortunately, airlines owned and subsidised by their governments in the Gulf and Turkey, etc, with help of successive Pakistani governments who were slave to their conflicts of interest, allowed them to gain an edge and capture ethnic traffic. These countries lacked this potential passenger ethnic clientele within their own countries and were eager to gobble the whole pie, driving PIA to bankruptcy. Instead of reciprocal bilateral agreements giving traffic rights to foreign carriers, without compromising legitimate share of local industry, a surplus capacity was created under guise of open sky to disadvantage of local aviation industry.

The present PML-N government like its predecessor wants to oblige Turkish Airlines. With PIA and CAA headed by mediocre and corrupt cronies, nobody seems to be bothered about safeguarding the national airline and putting it back on track as was done by Noor Khan. The latest is CAA letter dated Nov10 2017, (HOCAA/1088/208/AT(NR) giving permission to PIA and Turkish Airline to operate their code-share Winter 2017-18 Landing Schedule to Pakistan.

Code sharing is a business arrangement between two or more airlines on reciprocal basis for specified advertised sectors where an airline does not operate presently while retaining its own existing schedule. For example PIA could have a code sharing agreement with Etihad operating three or more flights a week to JFK on days when it does not operate itself, with both airlines booking passengers through their respective interlinked reservation systems. Such code sharing flights are advertised by both airlines in their published flight schedules. Similarly, code sharing arrangements can be made with other airlines. However code sharing is different from surrendering routes or slots.

According to report published in The Times dated 16 July 2008, Deloitte, the financial services firm, valued peak time return slots at Heathrow, where almost 1,400 flights operate daily, at BP25 million to 30 million in 2008. BMI which was Britain’s third largest airline in 2008 flew near empty “ghost flights” to retain its coveted slots at Heathrow, which an airline acquires through “grandfather rights” on a use it or lose it basis. According to Beaumont & Son, a British law firm specialising in aviation, the law in Europe established grandfather rights where airlines can use existing slots until either law changes or they stop operating on route. Slot trading has existed for years where a valuable peak time slot is swapped by the selling airline for a worthless late night slot and money changes hands on the side, especially after High Court in London ruling approved slot deal between BA and KLM.

The national airline was operating flights to JFK via Manchester, which is an expensive transit stopover as compared to Shannon, etc, for security requirements of the US homeland. PIA must eliminate burden of almost 15-20pc on positioning of aircraft from Karachi to Islamabad and Lahore for onward international flights, from where 80pc of ethnic traffic originates. PIA maintenance no longer has capability or infrastructure, to overhaul any engine in use of its fleet at Karachi. Routine maintenance and Boroscopic Inspections can be carried out in Islamabad and Lahore. It must also curtail parking cost by reducing current 7-hour stopover at JFK. Airports such as Shannon will offer PIA advantage of lesser landing charges and maneuverability in case of delays because they are not overburdened by excess traffic.

PIA must embark on aggressive marketing strategy by offering passenger deals for on-line booking, but this cannot be achieved if every government that comes to power chooses to post its cronies to New York, London, Manchester, Birmingham, Jeddah, etc. For example this government posted a non-marketing officer to NYC who had served as Manager Passport just because he was brother of an MNS loyalist. Administrative costs need to be curtailed and excess staff purged through screening for irregularities such as fake degrees, financial irregularities and history of criminal charges.

For an airline with highest Total Accumulated Loss and lowest utilisation of fleet and crew, it is criminal that its flight crew and engineering is highest paid in region. Surplus staff is a burden on salary bill and also leads to inefficiency, especially when their recruitment process is dubious. But all this can be achieved if there is political will to revamp PIA, for which government must appoint best qualified team of executives, which I am afraid is not visible. Why should every government from 2002 onwards, with few exceptions, choose only to appoint executives who have never been to a college, have no security clearance and carry a history of financial, moral and administrative indiscipline? The latest is the choice of this controversial German CEO Hildenbrand.