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Resistance to PIA privatisation

Updated September 23, 2013
- File Photo
- File Photo

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.