Pakistan’s National Carrier is Re-engaging

Posted on 06/28/15
By Ikram Sehgal | Via ViewsWeek
(Photo by Ángel Ferrer, Creative Commons License)
(Photo by Ángel Ferrer, Creative Commons License)

The disastrous “Open Skies” aviation policy, atrocious management and rampant politicization of its employees made the acronym for PIA “Perhaps it Arrives” synonymous with its terrible reputation for not leaving or arriving on time. PIA’s ageing fleet kept diminishing till it was not humanly possible to juggle aircraft and cockpit crews around to keep to any reasonable schedule. That PIA continued to operate is a miracle made possible by the competence of its core aviation staff,  primarily PIA’s pilots and ground engineers and secondarily its ground staff. Keeping the diminishing ageing aircraft flying safely was a tremendous feat by itself.

 

An entrepreneur is generally far more skilled than a salaried person to conduct a cost-benefit exercise.   As a former airforce pilot and self-made entrepreneur with experience in the commercial aviation field, selecting Shujaat Azeem to manage the civil aviation sector was one of Mian Nawaz Sharif’s better decisions. Shujaat’s proposals for a modern fleet envisaged (1) increasing revenues to offset PIA’s operational and administrative expenditures, and service its burgeoning debt (2) increase passenger confidence and comfort (3) reduce costs by schedule and route rationalization, and reduce (4) fuel and (5) maintenance costs. Downsizing is required but is not a critical necessity; the real challenge is to profitably employ the extra manpower.

 

Taking double the amount of fuel for the same distance for the same number of passengers as does the comparable Airbus A-320, the Airbus A-310 fueling consumes more than half the company’s annual revenues.  Because of the shortage of aircraft,  Boeing-777 for which routes less than 5 hrs flying time are not recommended being uneconomical are still being used criminally on shorter domestic routes. Plans for rationalizing includes increasing less fuel consuming aircraft from 19 to 42, reducing the burden of fuel by 38% and increasing the number of passengers from the present 4 million to 5 million annually.

 

PIA’s revival plans include long haul with latest state-of-the art aircraft to the US, Europe, Japan, etc offering customers, premium class service to match the product/ services being offered by leading regional airlines. Mian Nawaz has recently given approval for 13 Airbus A320s, 5 ATR72 500s and 3 Boeing 777s to be inducted between May to Dec this year, the first time that such a large number of aircraft are being inducted by PIA in such a short time. The new generation aircraft will enable the national flag carrier to increase its flight frequency and introduce new routes. Fortunately the gradual fleet replacement process has started to increase revenues and profits.

 

A profitable airline is one which gets its passengers safely, comfortably and on time from one destination to another. PIA’s modern Boeing 777s are not as comfortable to fly in compared to Boeing-777s in service in most airlines in the world which have concentrated on enhancing their seat comfort and as well as their entertainment mode, PIA’s has deteriorated over the years from bad to worse. Business class seats sometimes do not work, the lack of adequate built-in entertainment makes the long haul flights cumbersome and uncomfortable. Whoever selected the entertainment mode had bad taste, was simply sadistic or was a moron. To change the seats and entertainment on all the 777s (including those being inducted) will cost about US$ 53 million. Money well spent will soon be recouped in a surge of additional business. Business persons would rather opt to go direct to London and New York and fly back directly using PIA instead of stopping over and walking long distance in the terminals and within the terminals in Dubai, Abu Dhabi, Doha, etc, cutting almost 5-6 hours of travel time.    We also need to replace the passenger buses presently plying the tarmac at our international airports, Karachi, Multan, Quetta, Lahore, Islamabad and Peshawar. Why not purchase COBUS 3000 like SAPS and Royal Aviation Services have or avoiding outright purchase take only services from them?

 

The previous PPP government hurried through a deal during its last days to purchase (airlines nowadays primarily opt for leasing and/or securitization instead of outright purchases) five new Boeing 777-300ER aircraft worth around US$ 1 billion. PIA’s inability to sustain the heavy cash outflow to meet its contractual obligations.  The government and the Aviation Division supported PIA in engaging Boeing avoid default. The three options available to PIA i.e. (1) purchase five 777-300ERs with revised delivery schedule (2) swap them with purchase of Boeing-787 of equal contractual value or (3) select a combination thereof.   PIA’s route rescheduling calls for inducting the state of the art futuristic 787s, leasing 3-5 till such time the 777s paid for can be replaced by 787s.

 

Creative accounting aside, PIA has been in the red for almost a decade. The reasons include whimsical management and overspending by dilettantes imposed by the rulers as Chief Executives and into senior management positions. During 2012 PIA suffered a Rs. 32 billion loss (overall Rs. 100 billion during the PPP regime), an accumulated debt of US$ 2 billion had put the PML government into a very problematic situation.   PIA’s present financials are a good indicator of improvements in key areas, posting of an operating profit of Rs. 2.83 billion for the first quarter as opposed to incurring a loss of Rs. 3.93 billion in the first quarter last year. The 7 billion turnaround was possible because of reduction in (1) global oil prices and (2) fuel quantity reduction i.e. (a) induction of fuel efficient aircraft and (b) optimizing fleet deployment as well as  (c) cost control.

 

To rebuild morale and retention of our core cockpit crews PIA must give salaries commensurate to international aviation standards, or they will simply leave like they are now doing in droves.  Because of lower cost of living in Pakistan, they would be more than happy to take a 20-25% adjustment downwards to stay with their families. Having several thousand employees ourselves, we follow Richard Branson assiduously, “train them well enough so that they can leave, treat them well enough so they do not leave.”

 

Beset by extraordinary interference over the years, both during military and civilian rule, anyone who thought two years ago PIA would survive without declaring bankruptcy had to have his head examined.  Even Malaysian Airlines has gone that route.  Two years later, there is a glimmer of hope for PIA’s revival.  Virtually a basketcase of the aviation industry, PIA is now clearly re-engaging to be the model airline it once was among third world airlines.

 

Failure is not an option, Shujaat Azeem says the only option is to make PIA “Great People to Fly With” again.

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