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Cumulative losses of Pakistan International Airlines (PIA), which is 87 per cent government-owned, were 76 billion rupees in 2013-2014 and were expected to continue into 2015, despite a sharp fall in the price of oil. The airline is rated poorly (never mind its glorious past) on customer care, in-flight service and timeliness. Given the open skies policy, international travellers using Pakistani destinations have a choice of Qatar Airways, Etihad Airways, Turkish Airlines, Emirates and Thai Airways. They notice the difference in service quality and have since deserted PIA.
Is privatisation the solution to PIA’s ills? Let’s look at the competition: Qatar, Etihad and Emirates are among the world’s top 10 airlines according to consumer satisfaction surveys and are all government-owned. Thai Airways (ranked 19 in the world) is also majority-owned by the government.
Turkish Airlines, on the other hand, was 87 per cent government-owned in the mid-2000s and was in the doldrums. The government reduced its share to 49 per cent, brought in professional management and saw a huge growth in operations. From 2004 till 2014, aircrafts increased from 73 to 261, destinations from 102 to 264, passengers from 12 million to 55 million, net profit quadrupled and, most importantly, technical staff increased by 2,000. (Take note, PIA labour unions.)
The common factor among all these well-run airlines is a professional management targeting the global tourism and business markets. The resource-rich, labour-scarce owners of Qatar, Etihad and Emirates have mastered the art of hiring professional management to produce goods and services that meet world standards, be they hotels, ports, shopping malls or airlines. Thailand sees Thai Airways as a vital input into its unmatched global tourism industry. The turnaround of Turkish Airlines was the result of the decision to integrate Turkey into the world economy via trade, investment and tourism. Privatising PIA will certainly help stem the rot because of greater transparency and more accountable management that our government owned companies find a challenge to institute. Karachi Electric Supply Company (KESC) and the telecommunications sector are good examples of progress after privatisation. But if we truly want PIA to be a flagship carrier we are proud of, we have to make Pakistan a hub of global economy and not a playground of protected local monopolies, free-riding officials and jet-setting jihadists.
This was originally published in Herald's Annual 2016 issue. To read more, subscribe to Herald in print.
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(36 comments)
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Feb 07, 2016 09:22am
If privatisation does occur, the first step would be lay-offs. That is actually the case that people are afraid of.
Several meetings held with government officials, all with no positive outcome. The longer the decision-making takes, the more losses we are bearing every hour.
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Feb 09, 2016 12:41pm
No government-owned institution can be evaluated and analyzed on its own. The quality of the concerned government's overall governance and management competence and the conduciveness of the prevailing economic environment is directly proportional to the performance of a government-owned entity. Comparing PIA's performance with airlines of progressive economies and governments owning them is to say the least, inappropriate.
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Feb 09, 2016 12:57pm
Imagine this image in an ad for PIA? Would anyone in their right mind want to fly a plane with even a cartoon of a broken plane??
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Feb 09, 2016 12:59pm
"Qatar, Etihad and Emirates are among the world’s top 10 airlines according to consumer satisfaction surveys and are all government-owned."
Actually, these airlines are private because governments in these countries are privately owned.
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Feb 09, 2016 01:00pm
The picture is in poor taste. Please change it. It is after all the flag carrier.
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Feb 09, 2016 01:33pm
When there is a will, there is a way. It looks that the stage is all set to sell PIA at peanuts, benefitting the buyer and the seller while the people of Pakistan suffer colossal losses.
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Feb 09, 2016 01:38pm
You cannot compare successful governments of UAE, Qatar and Turkey's with government of Pakistan. There is not one example of successfully run government entity in Pakistan. Most of PIA staff is incompetent as they were not hired on merit. Privatization is the only viable solution. The PIA staff are protesting because they know they are incompetent and they will never find a job on merit in any other airline.
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Feb 09, 2016 02:30pm
The fact that it could be very profitable if run properly is itself a good reason that the government should keep PIA and run it properly. So the country makes this profit and not some private business tycoon. Instead of placing all blame on PIA employees (who makeup only 20% of the PIA budget), the government should fix the real issues which lie in senior corrupt management and misuse of the national airline. In short, don't sell it, fix it and make it profitable. That will be the real service to this country.
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Feb 09, 2016 02:40pm
@Farhan Its not a coincidence that all three airlines are from countries where you don't pay corporate tax and employees may have benefits but are not entitled to pensions etc like in Europe. Airlines in US and Europe operate from a different cost base and have to provide returns to shareholders.
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Feb 09, 2016 02:42pm
"Qatar, Etihad and Emirates are among the world’s top 10 airlines according to consumer satisfaction surveys and are all government-owned"
And the governments in these states are ruling families. Therefore, they are all family-owned private enterprises, where the people of the country have no say in the matters of the ruling family.
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Feb 09, 2016 02:50pm
@Abbas I would say there is not even a single Pakistani brand - privately or publicly-owned enterprise - that is recognizable anywhere in the world - except the erstwhile PIA at its prime in the 70s or 80s. Not a single manufacturer, services company, or even a bank outside of Pakistan that represents the country proudly or even competitive with any world brand.
What a shame for a nuclear-power, and a nation of 180 million.
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Feb 09, 2016 04:02pm
Nobody will object the privatisation or strategic partner, the problem is selling of its valuable assets at lower prices to friends and family.
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Feb 09, 2016 04:09pm
@Farhan
These Government owned airlines get oil at a price that we can get peanuts.
Their cost per seat is vey low, so profits are high.
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Feb 09, 2016 04:24pm
The whole crisis is for the fear of large scale retrenchment of dead-wood workers who only work to make their claims for hefty perks and ghost salaries that are also sky-high in amounts..
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Feb 09, 2016 04:31pm
Privatisation is the key to re-floating PIA. The excess, under qualified workers/staff workers should get a workable financial settlement. A practical, safe, improved PIA will reap in more money and the Gulf Airlines will lose some revenue.
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Feb 09, 2016 04:52pm
@Farhan - What does that mean?
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Feb 09, 2016 04:56pm
Privatisation under the current circumstances will not bring good value for the PIA. It is better to clean up the balance sheet and take off the debt (which the government will be forced to do any way if it wants to find a buyer). That will bring it back to profit since most of the earnings are going into debt servicing. On top there is need to modernise and expand the fleet and improve customer care and get rid of under performing staff.
PIA is a strategic asset and should be revived and it can be easily done since there is huge market in Pakistan.
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Feb 09, 2016 05:29pm
The way that I see it is that, even if our government becomes super efficient even then we can't sort out PIA, because next government will intervene when they take office. Like the PPP has done a lot in their times. So our Public/Government sector and bureaucrats are incapable of running anything and with this experience the only way forward is privatisation.
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Feb 09, 2016 07:07pm
@subh
Gulf countries are monarchies. Hence their governments are owned by the royal families. Hence we can say that the governments of gulf countries are privately owned.
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Feb 09, 2016 07:34pm
Get rid of these white elephants (planes) we can't afford to feed them and their mahouts.
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Feb 09, 2016 09:46pm
@Mahmood How do you expect to fix the problem for PIA if we are not even ready to acknowledge that there is one? It is the national flag carrier but there is no point denying it is in shambles.
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Feb 09, 2016 11:06pm
@Kamran Those who are skilled and capable shall never fear lay offs but those who are
merely passing their time politicizing all this should
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Feb 09, 2016 11:41pm
All the Middle Eastern carriers, no matter how good they are internationally, use old aircrafts to the Pakistani destinations. I have encountered this many a times. Having said that, it is not necessarily a bad thing. I flew from Toronto to Abu Dhabi on a brand new B777 once, but with an extremely cramped economy seating configuration. So much so that I decided never to use the airline again. But the connecting flight from Abu Dhabi to Islamabad, albeit with an older airbus, was extremely roomy.
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Feb 09, 2016 11:42pm
@Mahmood The image reflects the fact that the airline is broken as an organisation, not the flag.
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Feb 09, 2016 11:48pm
Very balanced and brief. PIA can win over a vast number of expat Pakistanis by improving its standard.
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Feb 10, 2016 12:44am
If they do succeed in rebuilding PIA akin to Turkish airlines, we should replicate it with Air India. They run on similar models and have the same problems. Our accumulated losses run into $447 billion. But I think in India, 90 percent of people will be happy if they privatised Air India.
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Feb 10, 2016 01:20am
You should have done this 35 years ago when the downfall started. PIA is a joke in the travel industry. If a person asks for a ticket on PIA, people sitting next to the person, at the travel agency , move a little further. To really revamp the airline, start at the top and go all the way to the janitors and cleaners. Noor Khan's PIA is no where.
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Feb 10, 2016 01:49am
PIA employees have a sense of entitlement. They feel it is their right to be employed by PIA. That is the root of the problem. Secondly, the airline should have reduced head count through attrition when its routes started to shrink. That was terrible management. I would be hard pressed to find a personal assistant to a manager in any foreign airline short of senior vp. But in PIA almost all managers have PAs. Even in this day of word processors PIA still has people who take dictation using shorthand. You cannot run an airline in a competitive environment.
The writing was on the wall 30 years ago. Its time put this body to rest. We the people can no longer afford it.
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Feb 10, 2016 02:55am
Except a few most of the enterprises that have been privatised have failed(they should not have been nationalised in the first place.There is going to be no transparency during the sale of PIA if it takes place we all know that. There is lack of good governance both in the government and PIA and they both need to improve.
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Feb 10, 2016 04:35am
K-Electric financial success was due to lack of competition and gains from alleged use of cheaper fuel and cheaper power purchased from other sources. Airline industry is much competitive than electricity.
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Feb 10, 2016 09:21am
You forget...the biggest difference between the countries you mentioned and Pakistan is the absence of terrorism. Until terror is wiped out, and visa rules are relaxed, no on will want to visit Pakistan.
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Feb 10, 2016 12:20pm
Would someone tell me who is interested to buy this debt ridden organization...called PIA?? seems to me another governmental eye-wash to hide their in-competencies and ignorance towards corporate responsible governance.
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Feb 10, 2016 03:51pm
The writer forgot to mention the example of previously nationalized banks which have seen considerable improvement in their performance post-privatization.
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Feb 10, 2016 08:56pm
@Zafar Ahmed The people of Pakistan are already suffering colossal losses from PIA; Rs.76 billion in 2013-14.
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Feb 10, 2016 09:00pm
Good article, but it overlooks one point. All the airlines mentioned – – Qatar, Emirates, Ethihad, Turkish, Thai -- use hubs that are comfortable and, above all safe; think Doha, Dubai, Abu Dhabi, Istanbul, and Bangkok. Would anyone want to use an airline that required him/her to be continually flying to Karachi?
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Feb 11, 2016 06:15am
If Ayan Ali can have half a million than PIA can have a half a billion. After all we are claiming of having highest forex in history. See no privatisation. Go for excellence, airline facelift, proper governance and airline management and look after the national asset of the country.
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