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Restructuring PIA

Updated February 13, 2014


- File Photo
- File Photo

PIA’s plan to lease at least 21 small and big aircraft between July and December this year for replacing its superannuated fleet is quite in line with the government policy of ‘restructuring’ it before handing it over to private investors through a ‘strategic’ sale of 26pc stakes. Three aircraft are expected to join its fleet by July and the tenders for another 18 have already been floated. The purpose is to dump the 25-year-old aeroplanes before the end of the year, rationalise routes, increase frequency of domestic flights to snatch back the market share lost to local rivals over time and revive some international connections to make the loss-making company a profitable concern. The government has spelled out this plan in the Letter of Intent it sent to the IMF in September to secure multilateral dollars to prop up the country’s foreign exchange reserves. Disinvestment of the airline, the government believes, is the only way of saving it from total extinction. The company is losing Rs87m every day and its accumulated losses have spiked to Rs180bn. The government has already injected Rs11.75bn as equity this year and plans to invest another Rs4.25bn to keep it flying. One-third of its present fleet of 34 planes remains grounded because of overage or want of repairs.

The national carrier’s present management, as well as its staff, insists that the airline can easily be turned into a profitable concern through the acquisition of new aircraft and new routes. The financial turnaround, it is argued, will preclude the need for the firm’s privatisation. The opponents of PIA’s privatisation have a point here. Investment in its fleet and revival of the profitable routes — domestic and international both — can help it earn more revenues. Indeed, the experience of the recent induction of three Turkish aircraft in its fleet has shown that acquisition of new planes can help the airline earn profits. But is that enough to turn around a dying company? Not really. Tough decisions must be taken to revive the airline’s sagging fortunes. These will include significant reduction in the number of employees to bring the aircraft-staff ratio to acceptable international standards. A truly independent board and professional management will have to be installed to put an end to political and bureaucratic interference in airline affairs, plug massive corruption and improve management.

However, many remain sceptical of its turnaround in the hands of the government and without the involvement of the private sector in the airline’s management. Even though many users of the services of the national flag carrier share this scepticism, there is no harm in giving a chance to those who think they can make the required change happen and bring back its days of past glory. After all, the government always has the option of giving its control to private investors.