Putting PIA back on track
Once upon a time, Pakistan International Airlines (PIA), the nation’s flag carrier was among the world’s premier carriers. The green flag was painted on every plane as a symbol of statehood. With the highest levels of safety standards, service quality and punctuality, it was really a ‘Great people to fly with’ airline.
Originally founded as Orient Airways in 1946 in Calcutta, British India, PIA was nationalized in January 1955 and renamed Pakistan International Airlines. PIA has a history of milestones and was a leader in regional aviation industry. It was the first Asian airline to fly the Lockheed Super Constellation and the second to have a jet aircraft Boeing 707. It also helped establish today’s leading airline Emirates by leasing its aircraft and providing technical and administrative services in the mid-1980s.
PIA was a successful player in the market until the early 2000s with enormous opportunities and an empty playing field. It began to crumble when exposed to foreign competition. Today, the very same airline is facing an unprecedented crisis and is in appalling conditions. It has been sucked into a vortex of burgeoning losses and is paralysed beyond repair. It has become a white elephant for the government—too costly to keep up but too lucrative to discard. It is almost impossible for the government to feed this giant organization with billions of rupees every month when there are no hopes of reviving it on these monthly injections.
State-run enterprises seldom prosper. Political and bureaucratic interference, debt burden and over staffing, a lack of professional staff and poor management often lead to slow yet steady demise of these entities. PIA also went through the same thing. Rising expenses, falling revenues, inefficient capacity utilization, poor planning and short-sightedness have left the airline with an accumulated loss of over Rs300 billion. According to the latest figures given during a Senate committee hearing a few weeks ago, the airline’s monthly spending is around Rs13.14b against an earning of around Rs7.5b, resulting in an additional loss of over Rs5.6b being added every month.
A lack of innovation and a laidback attitude from the employees has rendered the airline non-competitive. Over a period, the operating cost and payroll spending continued to swell as revenues declined, making it more difficult to manage. The staff-to-aircraft ratio at PIA is among the highest in the world, making it one of the world’s least efficient airlines. All these factors have contributed to transforming an airline generating billions for the national exchequer to where it is standing today.
Looking forward, PIA needs radical changes in its set-up and organizational structure. It can be revived by entering into a strategic partnership with some competent stakeholder who is well-versed in managing airlines. As long as it is in the government’s hands, despite all efforts to curb corruption and ensure transparency, the bureaucratic style of management and political interference will always place both government and public at a disadvantage. The government plans to divest 26% of its stake to improve its efficiency. The majority of the stake will remain with the government but the administration will be in private hands.
There are many success stories of airlines being privatised. British Airways, Sun Air Airlines of South Africa, Austrian Airlines, Bangladesh’s Biman Airlines, France’s AOM French Airlines, Canada’s Air and Japan Airlines are some of the examples in which an inefficient and loss-making airline was converted into a profitable and efficient one after privatisation. These airlines not only improved their service quality and profitability, but most of them are among the world leaders of the industry today.
Privatisation is a bitter pill to swallow but it is the only option available to cure. This will save a hefty amount of taxpayer money disbursed as subsidies. After all, why should the poor taxpayer subsidize the government’s businesses? When in private hands, its management will be more concerned with operational efficiency and profitability of airline. They will have to meet the increased expectations of the stakeholders for the return on their investments. They will come up with logical justifications and scientific reasoning for anything that happens. They won’t go around slaughtering black goats to ensure a safe flight.
Privatisation in Pakistan is easier said than done. There will be resistance and an outcry from the airline’s staffers, labour unions, the media and and opposition’s political parties. The government should take all these key stakeholders into confidence, otherwise it will compromise the success of the overall process and the taxpayers’ money might go to waste. Some organization of international repute should be hired to assist with this procedure. Proper due diligence should be conducted and transparency ensured. This is the only hope.
The writer is a finance professional and freelance writer, serving a public sector oil and gas entity. He tweets @WAminhas