PIA’s fall from grace

From first to worst

In 1994, board of directors of Continental Airlines appointed Gordon Bethune to resurrect it from the ruins. It had already gone into bankruptcy twice over. Under his watch Continental rose from the worst to top performing airline of the world with its stocks rising from $2 to $50 per share.

Bethune started his career at early age of 17, as electronics technician in the US Navy, joined Barniff International Airlines and worked his way up to become its vice-president maintenance and engineering. He did his BSc, completed advanced management course from the Harvard School of Business, joined Boeing and then worked his way up to become VP and GM, later heading Renton Division, under whose charge next generation of B737-700 and B737-800 series were produced.

Under his watch for six consecutive years from 2004 to 2008, Continental was ranked by Fortune magazine as ‘the No 1 Most Advanced Global Airline of the World’.

He wrote a book, which is presented as a model by Harvard for management executives. The title of the book: ‘From Worst to First’ – Behind the scenes of Continental’s remarkable comeback in 1996.

Bethune created, “forward work plan, to fix problems, motivating employees, improving quality of product, route structure etc. He stressed upon cutting delays by creating maintenance bases at key hubs, so aircrafts are not held back, or need to return back to base as a consequence disrupting schedules and causing inconvenience to passengers. He stressed upon upgrading passenger services, and in his famous ‘Pizza Analogy’ stated that if you keep on cutting down on cheese to save costs, the pizza will not sell.

PIA is in far worse situation with total accumulated losses having risen from Rs42 billion in March 2008 to over Rs200 billion by December 2013, with half its fleet grounded, escalating administrative costs and a management dominated by mediocrity.

From amongst top twelve airlines declared by Sunday Times in 1979-80, which declared profit, with giants like British Airways, Pan Am etc. going into losses, it has gone into technical insolvency with liabilities far exceeding assets, forcing external auditors to repetitively comment for years in succession that it is no longer possible for it to be a going concern.

When it soared and how!

From its inception on January 10, 1955 after merger with the Orient Airways, PIA soared with revenues rising every year, guided by executives with impeccable integrity. These were men like M.A. Ispahani, Zafarul Hassan, Rafique Saigol, Nur Khan, Enver Jamal and Asghar Khan.

PIA’s first setback was in 1972, when after secession of East Pakistan, it lost 40 per cent of its inter wing traffic.

The MD AVM Zafar Chaudhry and his deputy, Air Commodore Khaqan Abbasi, recommended slashing it by half in every which way: fleet, routes, frequency of flights and staff. The duo also recommended selling or leasing excess aircraft to make up for lost revenues.

The PM, Zulfikar Ali Bhutto, turned down this suggestion and appointed Rafique Saigol as MD with full powers. And the PIA bounced back so swiftly, much like a phoenix rising from the ashes.

In a short while Saigol motivated employees, boosted revenues and restored PIA back on solid foundations. Saigol handed over PIA to Nur Khan in November 1973 and PIA underwent expansion in fleet, routes with stress on quality of services, passenger comfort and training. PIA’s human resource improved and so did its services with pioneers like Schroff heading corporate planning.

There was zero tolerance for political interference and credit for giving a free hand goes to Bhutto. In one instance a request from the PM’s office to delay an Islamabad bound flight from Karachi for 15 minutes to accommodate the prime minister was turned down, with no questions of ego raised by the VVIP.

All appointments, recruitment, contracts, procurement were done in a transparent manner, on merit, with thorough scrutiny by auditors.

Ziaul-Haq, the PIA’s scourge

PIA’s problems started when Zia ul Haq took over and Nur Khan resigned in protest against day-to-day interference by the presidency. PIA was handed over to Gen. Rahim (the man recommended by Hammodur Rahman Commission for court martial) as chairman and AVM Viqar Azeem as MD.

This was the beginning of the fall of PIA, with depletion in its human resources and corruption scams eating up reserves built over years. Professionalism and calibre of PIA’s executives till 1981 could be gauged from the fact that it was the first airline to buy crude oil directly from Saudi Arabia, eliminating middleman, got it processed and saved millions of dollars exchanging it for JET-1 aviation fuel. In 1981, it earned record revenues of US$329 million, exceeding the previous year’s yield by $72 million.

PIA’s financial success, assets and lure of foreign postings, foreign travel etc. turned it into a victim of greed and envy of unethical rulers. The PIA Investment owned prized real estate property in partnership with a Saudi, hotels like the Roosevelt in New York, the Scribe in Paris and the Holiday Inn in Riyadh etc. Zia posted his relative Group Captain Salim to New York to take charge of the Roosevelt and later appointed him GM America.

This was the period when first major financial scam was reported as PIA was made to sell four of its new DC-10-30s with spares through a broker Page Avjet based in Orlando Florida, who bought from Canadian Pacific four aged B-747, with hull life near completion along with a Simulator and spares. PIA just got four Boeing 747s, while Don Carty president of CP Air is on record that his airline’s net benefit from deal was $20 million.

And it is in the same period that PIA GSAs, GHA agencies and procurement contracts were doled out to political favorites and human resources polluted with excessive recruitments in violation of merit, while routes were doled out by a nexus of corrupt within MOD, CAA and PIA.

In 1997 PIA made a unique deal in aviation buying five Boeing 747-300s without engines. In 2002, it turned down an offer by the United Airlines, who having paid 35 per cent advance for B-777s, offered PIA to buy them at 65 per cent of factory value. PIA’s executive corridor was filled with political nominees of ill-repute during the PPP rule in early 1990s.

The last straw that broke the camel’s back was in 2008, when semi-literate cronies of Asif Zardari, men like Aijaz Haroon, Nadeem Yusafzai and Obaid Jatoi were handed over the airline and in just five years they have driven it to point of extinction.

And now instead of appointing professionals with calibre and integrity of Rafique Saigol, Nur Khan or a Gordon Bethune, the PML-N government appointed whom as the PM’s aviation advisor? A controversial former PAF pilot holding Canadian nationality, and it is just for starters. The gentleman has previously been court martialed. And there is an obvious conflict of interest, as he has financial involvement in construction of the new Islamabad Airport and owning a Ground Handling Agency regulated by the CAA.

The task at hand

While decision to take PIA out of the ministry of defence’s clutches was correct, the choice of person to head the Aviation Division was doomed and Supreme Court declared it void. In the interim period, PIA posted a loss of Rs13.58 billion in last quarter of 2013, the highest in its turbulent history, which speaks ill of those at helm.

What PIA needs is a strong management, free from political interference, with powers to hire and fire, consolidate its routes, make efforts to lure back abundance of ethnic traffic it has lost, improve services and reduce administrative expenditure. Excess employees, with their baggage of corruption and incompetence, have had its toll on revenues and efficiency.

Whether this government wants to proceed with privatization, offering management to a party with 26 per cent of share holdings, or restructure, it requires transparency, and decisions made strictly on merit, with no political favoritism.

Routes lost must be retained; otherwise PIA will be like a bird with wings clipped, unable to survive. These routes and prime slots have been cultivated after years of toil, and should never be surrendered to any other airline, foreign or local. Given a competent management, PIA can come out of this crisis. The problems of PIA are a consequence of corruption and lack of governance that afflicts most Third World countries. If this government has political will and commitment to provide clean governance, it is no doubt an uphill task, but an achievable objective.

The writer is an independent aviation analyst.