Will PIA remain a white elephant or can it be fixed?
The troubles afflicting Pakistan International Airlines are widely known. These include debt, self-damaging resistance from labor unions, overemployment, lack of funds to invest in infrastructure and services. Can this sorry situation be turned around?
PIA is saddled with unsustainable debt, accumulated over decades of losses from egregious overemployment, mismanagement, and pilferage. Servicing this legacy debt of about Rs. 150 billion costs some Rs. 47 billion annually. While this stands, there can’t be any improvement in the performance and operations of the airline. The national carrier needs additional equity from the government to replace its increasingly unserviceable and inefficient fuel-guzzling aircraft, improve its handling equipment and facilities to prevent costly flight delays and ensure that passengers choose to fly PIA, and pay off its debt. The government must provide enough new equity to at least wipe out the built-up debt.
Overemployment is another problem, but rationalization of the costs structure is a hard sell. The existing fleet of 33 aircraft should require between 4,000 and 5,000 full-time personnel—perhaps even less if PIA can hire productive and properly trained professionals. Instead, PIA currently employs some 18,000 people, and this number is growing because of strong union resistance to moving personnel from overstaffed to understaffed stations. This is an untenable situation, forcing the airline into higher inefficiencies and unjustifiable outlays.
The unions are also resolutely opposed to hiring fairly-paid international aviation professionals. Union opposition inexcusably exalts an indefinable “patriotism” over proven competence and expertise, and predestines turnaround efforts to failure. The unions exercise undue influence on the airline’s management, whose writ, as a result, has been rendered ineffective and weak. If PIA is to succeed, this writ has to be restored.
On-ground passenger handling is another challenge. It has been 20 years since any notable investment was made on this front, particularly in ramp-services equipment. PIA does not have enough passenger buses, especially at Islamabad Airport, and the existing ones are in a state of disrepair. Similarly, ground cooling units for the cabins are old and unreliable, distressing passengers preflight during the summers. The state of these services is a direct consequence of funds not being available for new equipment.
Despite the debt and human-capital crises, PIA is working on augmenting and refurbishing its fleet. It is renegotiating purchase terms with Boeing for the procurement of five wide-body new aircraft. For the short- and medium-term, it is leasing aircraft. Over the last year, PIA has added 11 Airbus A320 aircraft, with another four to five coming in over the next few months. PIA has also solicited offers for wide-body aircraft—new or no older than two years, on dry or wet lease—with flatbed seats, plush cabins, the latest in-flight entertainment, and Wi-Fi. Six of PIA’s 11 Boeing 777 aircraft are being retrofitted with flatbeds, cabin improvements, and modern in-flight entertainment systems. The 10-strong fleet of ATRs is also being incrementally upgraded. All four of PIA’s old Airbus A310 aircraft will be replaced.
PIA competes with Emirates Airline, Etihad Airways, and Qatar Airways for market share—despite the fact that passengers prefer traveling nonstop from Pakistan to Europe or North America. Even though PIA offers these nonstop flights, passengers have been put off by its slipping standards over the years. PIA intends to launch a premium service, starting with one long-haul route, this September in order to compete with upmarket carriers by providing flatbed seats, a world of entertainment to passengers, sumptuous meals, and an immaculate cabin service and comfort experience from check-in to landing.
Can PIA be turned around? Yes, but only if the unions allow that to happen.
Saigol is the chairman of PIA Corporation Limited.
From our July 2-16, 2016, issue.