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Resistance to PIA privatisation

Updated Sep 23, 2013 12:25pm


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The prime minister has finally the given go-ahead to the overdue privatisation of Pakistan International Airlines, the national flag carrier, by initially putting up on sale 26 per cent of the federal government’s shares in it. But the whole process may not be smooth enough to allow its early completion.

Although the ailing airline, like some other mega state-owned enterprises waiting to be sold, is a great burden on the national exchequer and has already eaten away the nation’s resources worth a cumulative Rs169.921 billion as of June 30, 2013, as revealed in the Senate, there is no dearth of lobbies who are resisting its privatisation and are seeking a status quo. They include a growing crowd of beneficiaries of the corrupt practices that includes the airline staff.

An outstanding critic is the Pakistan Peoples Party. Endorsing Senator Raza Rabbani’s opposition to the federal government’s decision to privatise the PIA, the Sindh chief minister recently said he would raise the ‘people’s viewpoint’ on the subject when the matter comes before the Council of Common Interests (CCI) for approval. And there, he says, he will act in accordance with the ‘interest and wishes of the people’.

After the passage of the 18th amendment, the privatisation of enterprises having strategic importance needs to get a prior approval of the CCI. Then, there are indications that the decision to privatise PIA would most likely be challenged in court.

Currently, the PIA suffers from incompetence, inefficiency, lack of discipline, wasteful expenditure, pilferages, declining service standards, nepotism, and gross mismanagement that is visibly reflected in its service to its passengers. Many still recall the days when it was one of the best airlines in the world, and even helped other airlines to grow successfully.

What is needed is the adoption of modern-day management and work culture to put the airline back on the road to recovery. However, this may not be possible under the existing conditions; nor are there enough resources with the government to infuse fresh life into, or financially restructure, the airline. However, the PIA management needs to cut down its losses in the short term to make the airline eligible for privatisation.

According to PIA’s own report, the airline has suffered losses worth Rs119.84 billion over the last 10 years. Flight delays and cancellations are frequent, and 35 per cent of its flights either do not take off or merely end up being delayed, compelling passengers to seek seats on other airlines. In addition to that, only 24 of PIA’s 34 aircraft are currently serviceable. Some people are of the opinion that selling 26 per cent of PIA will be a mistake, and that the government will be ‘far ahead of the game’ if 100 per cent of the airline is sold.

The privatisation move has evoked a mixed reaction. While former chairmen and CEOs of PIA have hailed the government’s decision, the airline’s unions are opposed to the move and have even threatened to derail the process. Tariq Kirmani, a former airline boss, thinks that PIA’s staff must be slashed by 10,000 personnel. Reports say that the employee-to-aircraft ratio in PIA stands at 552 personnel per aircraft, compared with the global average of 120.

Zafar A Khan, another former PIA chairman, is of the view that under the circumstances, privatisation is the best solution.

The PIA unions, meanwhile, are bitterly opposed to the privatisation of the airline, as they fear it would lead to dismissal of thousands of employees. The government, they say, should have consulted the unions before taking the decision, because PIA employees together hold 12 per cent of the stake in the airline.

The government, says a statement from the prime minister’s office, is fully committed to the reform and restructuring of all ailing state enterprises. These enterprises, such as PIA, Pakistan Steel Mills and Pakistan Railways, have placed an enormous burden on the economy, which has resulted in losses of up to Rs500 billion per annum for the national exchequer. The losses come to Rs1.5 billion a day, or Rs1 million every minute.

PIA is to be restructured so as to seek a reasonable price for its partial privatisation and management control within a year or so. A Senate Standing Committee informed the upper house of parliament on August 31 that there are outstanding loans, both domestic and international, of Rs160 billion against the airline. Of the total, Rs50 billion are outstanding on account of loans taken for aircraft purchases, while another Rs110 billion are being injected into the airline’s working capital.

The opponents of the privatisation argue that an ultimate handover of the PIA to a private firm will deprive the country of its national flag carrier. But it is not so if one looks at the experience of other countries. For instance, the UK has designated British Airways as its flag carrier, even though the government holds no share in the airline, which was privatised in 1987.

Comments (14) Closed

paras behrani Sep 23, 2013 02:59pm

privatization seems their favorite option among all.why they feel that only this economic policy is helpful?don't we deserve our national sovereignty?and the so called transparency will not be entertained!! major problem of PIA is just because of overstaffing.they can not manage just can sell the national pride..

Abbas Sep 23, 2013 09:52pm

Privatization is better option.

Abbas Sep 23, 2013 09:57pm

Privatization is better option.

ARSHAD TALPUR Sep 23, 2013 10:47pm

@paras behrani: in this critical condition when many political stakeholders are partners in PIA management it is not possible to decrease the staff under governmental mangment it must be privitised but this privatisation should be handled in proper way not like KESC

Wasim Ashraf Sep 23, 2013 10:59pm

@paras behrani: I agree with your Ideas, My concepts according to Privatization are that,

Privatization means a people can work sincerely for money(In privatization), but cant work for their Pride, satisfaction and responsibility(Governing bodies in nationalization)

Mukhdoom Sep 24, 2013 03:54am

@paras behrani: I think privatization is the best solution for all state owned ailing industries in Pakistan. Privatization will allow to restructure PIA and turn it around to profitability. It will be a big favor to the nation if this government is successfully able to privatize major state owned corporations.

yasin bantva Sep 24, 2013 04:28am

fully privatization not 26 per there is so poor management its lesson to ppp over staff if nawaz govt not take seriously decision about (pia) then pia mismanagement should do pakistan privatization pl pl pl nawaz sharif take decision GOD HELP YOU

Javed Sep 24, 2013 04:39am

At 26% stake will the private owners have the right to make decisions? or the rest of the 74% stakeholders and Directors will dictate the terms. The investors will soon be defrauded of their investments; while the profits will keep sinking. Bad proposal for the Equity partners.

abdussamad Sep 24, 2013 11:36pm

@Javed: They'll be able to make most of the decisions. The way this has been done in the past is that you have the government taking over most of the liabilities. So that is a good thing for the investors. But at the same time they usually make it very hard for the new investors to fire people. Instead they are forced to offer golden handshakes to most of the employees.

I doubt they'll be able to privatize PIA within a year. It'll take many years at least.

@paras behrani: Well as you said PIA is in trouble due to over staffing. Politicians have inducted their own boys into the airline. Other problems include inefficient and corrupt management and poor customer service. The reason behind all of this is the public sector nature of the airline. If you privatize it politicians can no longer interfere and the private sector management will improve service because they are motivated to earn profits.

Tariq Sep 25, 2013 12:57am

Is it any wonder the national carrier is a net loss maker when each aircraft has 552 employees while the world average is 120! Streamline it fast, relinquish all un-necessary employees and ban the union! And ensure ALL those who board the planes (except the flight crew) are fare paying passengers!

Zahid Sep 25, 2013 04:25am

It has been absolutely ages since one could claim PIA to be a national pride. These days it is a national embarrassment and needs to be fully privatized at the earliest, not just 26 percent.

Sabahat Sep 25, 2013 05:04am

This is such a stupid thing. Rs. 500 Billion of annual loss. This is roughly 90% to what Pakistan just loaned from IMF.

Why don't the Government sell all three of them and use each and every dollar earned from that to pay off Pakistan loans. Even if Pakistan can pay 80% of its loan, the rest can be paid with selling the huge Governor or President houses and put them in other residence that are smaller then 600 kanals (360000 sq. yards or 300000 sq. meter). I am pretty sure 5-10 kanals would be enough for their residence. It is still huge.

If Government can pay its loan 100% then we can utilize 40% of budget on better things like education, health, infrastructure, employment or businesses instead of INTEREST PAYMENTS.

Is it really really hard to understand? I thought it is pretty straight forward if someone wants to do it. I wish someone can suggest this to our Prime Minister (Nawaz Sharif) who himself is a business man. If he does that I am pretty sure he can become PM for next few terms easy.

unbeliever Sep 25, 2013 01:45pm

Privatization sounds great but who in their right mind wants to buy a company like PIA? It's over staffed with arguably incompetent people, it's pilots fly around drunk, it has no landing rights that can't be readily purchased by any airline. In short - your not going to find a buyer let alone a buyer who wants to buy a "minority" interest. Pakistan should cut it's loses - stop funding this loser and let a foreign airlines come in a service air demand in Pakistan.

yasin bantva Sep 26, 2013 01:08am

@Zahid: very very good comment