Flights cancellations and delays have become a norm with Pakistan International Airlines (PIA). Almost a third of PIA flights suffered delays due to technical and administrative reasons in 2012. More than 4,345 of PIA’s 12,184 flights were delayed due to various administrative and technical problems in last year’s first three months, Syed Naveed Qamar, the federal defence minister, told the parliament earlier in the year. The result was huge financial loss: in December 2012 the minister revealed that the airline currently faces a loss of 141.4 billion rupees, as compared to 42.4 billion rupees in 2008. Much of the problem is attributed to PIA’s ageing fleet of aircraft, most of which has outlived its manufacturer-prescribed age of 16 years. This ageing fleet has also become an international embarrassment, with several European countries repeatedly conveying safety concerns to the Civil Aviation Authority (CAA) in Pakistan and demanding that a ban be imposed on PIA’s flights. Even on domestic routes, passengers frequently complain about a deteriorating quality of service, leading to a shift to alternative, private airlines for domestic travel.
“Liberalisation is really at the heart of PIA’s woes.”
YES AND NO
PIA’s management has claimed that 150 billion rupees of what should have been the airline’s share of the market has been lost to other international airlines in the past three years since the government has granted traffic rights to foreign carriers. PIA spokesperson Syed Sultan Hasan tells the Herald that granting of such rights has an adverse effect on the airline. “PIA, being the national flag carrier, has suffered badly during the last decade when international carriers started to penetrate the Pakistani market.” The airline calculates the loss resulting from this measure as seven million potential passengers who travelled through foreign airlines between 2009 and 2012.
“A majority of these passengers were travelling from Pakistan to their final destination via the origin (hub) of those airlines; these passengers are carried to other destinations such as UK or USA, where PIA is already running direct flights from Pakistan,” says Hasan.
These international airlines are also said to have increased their market share by periodically lowering their fares to unprecedented levels that PIA finds difficult to match. These low fares, say PIA officials, not only have an adverse effect on the market, but also lead to a huge loss of foreign exchange. “PIA has raised this issue on several forums. While Pakistan has been liberal in granting traffic rights, the advanced nations have been protective about their own markets, economies and airlines by not allowing foreign carriers to operate,” complains Hasan.
Regular air travellers present a different argument, focusing on PIA’s performance, not only on international, but even on domestic routes. They cite flight delays and comparatively expensive air tickets as the main reason for a shift to other, private, airlines. After two air crashes involving private airlines in recent years, a shift of domestic passengers back to PIA was seen, but as the memory of these accidents fades into the past, there has been a renewed move towards private airlines, primarily because of a more competitive quality of service.
There are many voices, even within PIA, which argue against the provision of protective safeguards on international routes to an organisation with such poor performance that it is not even attractive for passengers on domestic routes. Many take a pessimistic view about the airline’s problems being solved through protection from the government. “Only performance and quality will revive PIA, not protective measures,” says one senior PIA official based in Karachi.
“Corruption is what has led PIA to the present pass.”
MOST WOULD AGREE
It may be argued that the slump in PIA’s profitability is tied up with a rise in global fuel prices and downturn in local and international economies. However, economists do not overlook the fact that rising international fuel prices coincide with a time when management issues within PIA also started dominating the national media. “It’s true that the airline business goes through ups and downs all over the world, but PIA [also] has serious management issues which are responsible for the crisis it is [presently] facing,” says Asad Umar, an economist and senior vice president of the Pakistan Tehreek-e-Insaf. He also sees the present phase of crisis in the airline as coinciding with the coming to power of the Pakistan Peoples Party. “That’s when issues of governance started to rise generally … and particularly in PIA and other public-sector entities … If you compare PIA’s performance during the last four years with the four years that preceded [this period], you will find a marked deterioration.”
Others agree to some degree with the PIA management’s assessment of rising fuel prices in the international market as a basic factor in the airline’s woes. According to banker and economist Sakib Sherani, “Rising fuel prices is one cause of the crisis, but after that it is basically management issues that are causing trouble.” Non-merit appointments and petty corruption figure largely within such management issues. The airline has continued to hire new people despite its state of deep financial crisis and a government ban on recruitment. In October 2012, Qamar told the Senate that more than 2,590 people have been appointed to PIA since 2008, when the new government came to power and the ban was imposed. Engineer Arshad H Abbasi, who is an adviser at the Sustainable Development Policy Institute, confirms the graveness of the problem, “Over-employment is the biggest reason behind PIA’s crisis … [the airline’s] employee-aeroplane ratio is the highest in the world.”
Most of these appointments – some with rather hefty salaries – have been in the officers’ cadre. A case in point is that of former deputy managing director Salim Sayani, a Pakistani American, who was appointed in 2009 for a salary of 20,000 US dollars per month, along with other perks and privileges. For years, the management resisted pressure to remove him from office, for, as per the rules of his employment contract, his dismissal would come at huge financial cost. After severe public criticism, it complied by firing Sayani in July 2012.
Since PIA’s internal irregularities and mismanagement have become such a recurrent issue in the media, practically turning the organisation into a byword for corruption in the eyes of the public, the airline appears to be taking some measures to address the issue. “The present management has taken major steps for conducting a forensic audit of the airline, for which it would be inviting offers from the international market,” says Hasan. According to him, an internal accountability committee will also be constituted, which will consist of officers of the highest integrity and unimpeachable character who will investigate and review corruption cases, before referring them to the National Accountability Bureau or other investigating agencies, as well as recommend departmental disciplinary action.
The airline’s state of internal chaos may prove to be beyond these corrective measures, however. According to Abbasi, trade unions have tremendous influence in PIA’s various departments, leading to total helplessness on the part of the top management to act in a situation where merit is largely missing as a factor in hiring. “There is a total collapse of the internal accountability system … recently, they discovered fake degrees of [a number of long-serving] pilots … The top management has lost central control of PIA and this has negatively impacted the working of the organisation.”
“Blaming birds for PIA’s poor performance is preposterous.”
When it comes to flight delays caused by bird hits, the national carrier does appear to be dogged by bad luck, both on domestic and international flights. Two large passenger planes were hit by birds in July 2012, and a senior official of PIA tells the Herald that over 45 bird hits occurred in the outgoing year alone, while there had been 60 such incidents in 2011.
The airline places the blame on CAA for not clearing the sky around runways. Both bird hits in July took place near the Allama Iqbal International Airport in Lahore primarily because its runway is close to the residential areas. The question is: why are private airlines not complaining about bird hits, when they too fly out from the same airports? A senior PIA official tells Herald that private airlines, too, are not happy with the situation: “I don’t know why these airlines are not making a public issue of it, but I know for a fact that they too complain about it.”
CAA officials say that the growth of residential areas around runways is responsible for the problem. “Population growth is something we cannot control,” says one official. “This is for the local government to do.” Bird hits have caused millions of rupees in loss to PIA, with a single hit costing the airline as much as two million rupees, according to officials.
“Investing in new carriers would solve PIA’s problems.”
PIA spokesperson Hasan emphasises that acquisition of new aircraft will improve the airline’s performance. The argument is based on the premise that the country surely needs a national carrier with more – and more fuel-efficient – aircraft in its fleet, which will not only balance its employee-aircraft ratio, but will also help in earning profit. He tells the Herald that more than half of the PIA’s airplanes are older than 20 years. “PIA’s fuel expenses swallow 55 per cent of the total revenue … The new technology aircraft [which the PIA is in the process of buying] are approximately 50 per cent more fuel-efficient than existing ones … [Replacing older aircraft] will considerably reduce maintenance costs … The fuel bill will also be reduced by half, which will enable PIA to achieve profits.”
Scepticism abounds with regards to pouring more money into an airline which has for some time been seen by many as a white elephant and far too reliant on external support. “If it is dependent on the government for acquisition of a new fleet, then it is obvious that PIA is no longer a financially viable entity,” says Umar, proceeding to argue that had the airline been financially viable, it would have had no problem in acquiring a new fleet through commercial financing.
The way the airline has gone about seeking to acquire new aeroplanes has also been criticised. “I think the first thing PIA needs to do is rationalisation of its fleet … If it can’t fly to the US because of restrictions, it should not go for bigger aircraft,” says Sherani.
PIA’s managing director, Junaid Yunus, nevertheless expresses confidence in a recent statement saying that inducting newer aircraft would be a “turning point” for the airline, as it would provide for cutting fuel costs, improving punctuality and regularity, and restoring customer confidence. His December press release cites a surge in the airline’s profits in the three previous months amidst “difficult economic conditions, fierce competition, rising fuel prices, foreign exchange losses and law and order situation” as even further reason to acquire new airplanes, which may advance this trend.
“A national carrier should be done away with altogether.”
AN UNLIKELY PROSPECT
As PIA appears to stumble from crisis to crisis, many have started to question the actual need for a national carrier. After all, there are countries whose transportation system remains effective and dynamic, without the financial burden of maintaining a national carrier. The United States is a prime example of a country where air travel is completely in the hands of private sector.
PIA officials argue that this is not really possible in Pakistan’s case because the airline is necessary for serving the state’s purposes. “PIA flies to Dera Ismail Khan without earning profit, it flies to remote parts of Balochistan, and these are routes which are not at all profitable and which no private airline will fly to [on the fare that people from these areas can afford],” says Hasan, arguing that it is only the national flag carrier which connects the remotest areas of the country with major cities.
But what is the extent of the cost that the national exchequer can bear for making possible this kind of connectivity? The silver lining is that the amount of money required for subsidising operations on these routes is not huge. “The losses incurred on these unprofitable routes don’t make up a large part of PIA’s overall losses,” explains a senior official. And there are also political reasons to keep such routes running. On December 25, 2012, for instance, PIA launched its Quetta-Kandahar flight. The route is not expected to be profitable in the coming months, but the flight is expected to serve a political purpose by strengthening relations between Pakistani and Afghan people and traders.
Abolishing PIA is also not likely for a variety of other reasons. A number of vested interests are seen as ensuring that the airline continues serving as an employment exchange. During military governments, PIA becomes a dumping ground for retired army officers, and during democratic regimes, it becomes a favourite destination for the cronies and protégés of politicians. “Besides, PIA performs many national services which cannot be discussed in public,” claims Hasan.