Emirates and Etihad are still interested in buying
The news of Pakistan International Airlines’ privatisation has been making the rounds as the minister for privatisation, Daniyal Aziz, vowed that the government is committed to completing the process before April 15.
This is based on the PIA Amendment Bill which was unanimously passed by parliament in 2016, making it binding upon the government to ensure that the process is completed based on the deadline.
The bill delineates the plan to sell off the national carrier’s core business, including flight operations and management, while a separate entity is to be established by the government for the management of the remaining fixed assets of Pakistan International Airline.
This, of course, isn’t the government’s first potshot at PIA privatisation. In 2013, it was one of the 68 state owned organisations lumped together as part and parcel of a deal with the IMF worth $6.7 billion.
The attempt faced stumbling blocks amidst staff protests in 2016 and was eventually dropped. Now that the government has made up its mind about moving forward, the next step is to take plans to the cabinet committee for approval as soon as possible.
This, of course, isn’t the government’s first potshot at PIA privatisation. In 2013, it was one of the 68 state owned organisations lumped together as part and parcel of a deal with the IMF worth $6.7 billion
Note to the government: Emirates and Etihad are still interested in buying PIA.
So what has pushed the government to finally dig deep?
First of all, PIA has been churning out losses like there’s no tomorrow, which in turn has been exerting pressure on state finances. Losses recorded up to March 2017 amount to Rs325 billion.
Considering divesting from the entity is in state interest, especially when we consider the massive economic problems at hand which are headline by, but aren’t limited to, rapidly depleting reserves and a current account deficit.
PIA has previously witnessed its management’s attempts to improve performances – but in vain, for large part. This has resulted in certain routes being shut down, which is a setback on its own.
The government has repeatedly had to bail the national carrier out and provide for its expenses and operations, with the ECC approving a Rs13.6 billion bailout package in November 2017.
It is clear – for those that haven’t been paying attention – that the current management has not been able to strategically plan out a revival plan for PIA, and so it is very likely that a new private owner – especially one that has experience in efficiency – will fare much better.
History, for one, says so.
For instance, when Inter-Continental Hotels were sold off, they flourished under Mr Hashwani. There are numerous other examples.
Other than bolstering state finances, the new management could orchestrate a turnaround for the company and convert it into a profitable business. With the company operating alongside other private airlines in the country, there would be pressure to operate competitively, which in turn would be in the larger interests of passengers.
Like many other state owned organisations, PIA has fallen prey to overstaffing with appointments of various politically affiliated individuals, with not much heed paid ton merit.
Also, it is no secret – and no wonder – that corruption is at an all time high in PIA, with merit appointments not being given much value.
Attempts to privatise PIA have been unsuccessful with labour union protests forcing the government to stall the process. Hence, there might be a case of the political opposition trying to take up this cause as well.
But PIA’s plunge has reached crashing levels and once the weed is eliminated from grassroots, efficient operations might stem.
Considering the colossal losses, debt and the interest paid by the government to keep PIA afloat, its privatisation would not only take pressure off state finances, but will also allow the taxpayers’ money to be put to better use – education and healthcare, for instance.
And so, while the case against privatisation will be presented, bellowed and politicised, repeated bailouts and continued government funding is not the solution to the problem – especially when the money can be better spent elsewhere.
The government is dealing with precipitous depletion of liquid resources and other economic problems, and this demands an urgent revamp of the financial system.
This can only happen if the drainage stops and the leaks are corked. And considering that PIA is a bit of both for the national exchequer, privatisation is a no-brainer.