It will be a bumpy ride implementing and getting positive results from the new plan
Financial losses have been bludgeoning the Pakistan International Airlines – that was once the fifth best in the world – for the past 12 years
The institution has liabilities totaling Rs300 billion and adds losses of Rs. 5.3 billion a month to its financial statements. In early 2017, the financial losses of the carrier amounted to Rs45 billion, which was 30% higher than the numbers reported in 2016.
As the losses don’t plan on catching a break, PIA is relying heavily on governmental assistance and financial aid to continue operating.
In a recent meeting, prominent MNAs like Rana Hayat, Asad Umar and Parveen Masood Bhatti unleashed a verbal assault on the poor state of affairs of the national flag carrier, citing the fact that the institution has failed to orchestrate a turnaround due to the blatant lack of an effective strategy.
Au contraire, Pakistan Railways seems to have done a better job at going in the right direction with its fortunes, increase its revenues from a mere Rs18 billion to almost Rs50 billion in a couple of years.
Rana Hayat says he will ‘expose’ those responsible for PIA’s mounting losses, saying that the National Accountability Bureau (NAB) should take action. He says the case of acquisition of Airbus A-320 planes on lease would be referred to NAB, because of the colossal financial losses.
But PIA CEO Musharraf Rasul says the airline is en route to improvement, but concedes the losses faced in the last 12 years that he maintains have been owing to a multitude of problems.
The major challenge is to change PIA from a loss-making entity into one that generates profits and continues to serve the nation
Perhaps the biggest of these is corruption. Only recently embezzlement worth Rs11 million was detected in the airlines food division.
The Audit Department sniffed the embezzlement for procurement of catering items to be used in VIP and VVIP flights by the food division. Investigation unveiled that purchases were not made through the annual contracts and weren’t based on quotations by PIA’s approved vendors either.
148 Internal Requisitions worth Rs11 million were made between January till August 2017 by the Islamabad Flight Kitchen, which was approved by the Food Services Division Manager.
While the auditors have raised their objections in detail, PIA maintains if the objection is not addressed, the issue would escalate towards an inevitable action by the Public Accounts Committee.
While this is merely one example of fraud that has come to the surface, the issues in unison are impacting cumulate the negative impact.
Last year, the Pakistan International Airlines was forced to suspend its Premier Service following heavy losses in the course of six months of commencing the service.
The service that ran from August 14, 2016 to February 6, 2017, had earned approximately Rs0.96 billion. Its total losses were Rs2.88 billion.
The management says the service was discontinued due to capacity glut and the fact that the fares did not increase even though ‘they were previously worked out to increase’. PIA now plans to resume the service only when its own fleet of aircrafts is upgraded with value-added services.
The mounting financial pressures seem to be impacting the airline in multiple ways. For instance, another issue that was brought to the surface during 2017 was regarding fuel supply by Pakistan State Oil (PSO). The oil company had partially suspended the supply, as the airline was not clearing its dues.
Pakistan International Airlines’ debt with Pakistan State Oil amounts to nearly Rs35 million a day. According to reports, the airline had to clear outstanding payments to the tune of Rs16 billion in late November.
The upper management of Pakistan International Airlines is said to be in the process of implementing a business plan that is expected to turn the institution into a profit generating engine by 2022 or earlier.
The first phase of the business plan, V1’s implementation, is said to be underway and is expected to bring about good fortunes in a span of 18 months.
The first phase of the plan is expected to introduce drastic changes to service. These changes include new accounting systems for revenue and implementation of controls to prevent revenue leakages, rebranding of PIA, increase in digital footprint, enhanced cabin look, refresher training for cabin crew, ground staff customer service, improvements in customer touch points and introducing ease of interaction.
But amidst the unquestionable, and multi-pronged, falls PIA has taken baby steps elsewhere.
According to the organisation’s operating reports, sales for October 2017 had increased by 29%. Customer service has improved and communication channels such as call centre, SMS, apps and social media are being actively used.
Also, PIA might have a helpline in the help that has been offered by Asian Development Bank (ADB) in terms of structural reforms.
But the next 18 months are absolutely pivotal for Pakistan International Airlines. As the business plan V1 is implemented, results need to be visible.
The major challenge is to change PIA from a loss-making entity into one that generates profits and continues to serve the nation. There’s bumpy flight ahead, but the PIA needs to start taking off – right about now.