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Will PIA take off?: A new plan

September 12, 2013

PRIME Minister Nawaz Sharif is not very happy with the performance of the national flag carrier. In fact, no one is. It has been quite a while since PIA has done anything to bring a smile to the faces of those who travel by it or the taxpayers who pay for its losses and staff salaries. The airline has been on the decline for the last several years. The decay has, however, been more rapid in recent years with the company’s losses shooting from Rs18bn in 2011 to almost Rs40bn this year. Corruption, mismanagement, an aging fleet, and, more importantly, political and bureaucratic interference in its affairs are but a few factors that have contributed to the deterioration of the airline that was once the country’s pride. The attempts, however lackadaisical, by the previous government to reform the company failed because of stiff resistance from the unions. Those at the helm of affairs also did not appear very bothered about revamping the airline owing to the financial and political costs involved; instead, they opted for firefighting measures to keep it afloat like the other state-owned enterprises.

The present government appears more determined to revive the company. The loan agreement it has signed with the IMF also pledges to rescue, restructure and partially privatise the airline along with other state-owned businesses. A medium-term plan to restructure the company is being developed, which will strip it of its liabilities and shift them to a separate company — PIA2 — by the end of this calendar year. It is expected that the government will pay off the airline’s loans and retain only those liabilities it can ser-vice. The proposed plan also envisages an equity injection in the company and the launch of a voluntary handshake to shed its excessive staff and transfer of 26pc shares to strategic buyers by the end of the present fiscal year. On the whole the plan appears ‘doable’. But its success will largely hinge on its transparent and honest implementation.