Case of missing aircraft, mismanagement, cronyism, indiscipline, kickbacks, & pilferage haunts PIA

PIA is a statutory state-owned organisation, subject to the regulatory control of Pakistan CAA and every other country whose airspace it overflies or lands at in accordance with ICAO rules and regulations. It was created to provide safe air transportation to passengers at competitive and affordable fares on domestic and international routes, which could only be achieved with a team of qualified professionals recruited strictly on merit and aircrafts operated and maintained to meet international safety regulations.

PIA’s parent organisation Orient Airlines was established in 1946, and it was nationalised on January 10, 1955, and officially declared as national flag carrier in 1956 after the PIAC Act.

The national airline’s human resources have been dented over the years by successive governments ever since 1978. Its route structure and slots acquired over years have been manipulated by incompetent and corrupt mediocrity appointed at the helm. Unchecked irregularities in controversial sale and leasing of aircrafts and procurement of essential spare parts, has finally widened the gap between total operating costs (TOC) and revenues.

As long as factors contributing to rising TOC are not addressed and tackled, every ‘BAILOUT’ package and business plan is destined to fail as was the fate of all such initiatives before. Landing and takeoff slots at major airports like JFK and Heathrow etc acquired over the years may have no book value but major airlines are willing to pay over $ 20-30 million to acquire them.

Events of 1971, Pakistan-Bangladesh partition, adversely impacted PIA and its then Chairman AM Zafar Chaudhry recommended that fleet, routes etc be slashed by 50 per cent because half the country had been lost.

Instead, prime minister requested Rafique Saigol to take over who stabilised the airline, restored morale of employees and improved services while consolidating existing route structure. Saigol handed airline to AM Nur Khan who was given full powers and assurances of no political interference.

Nur Khan understood that unlike military aviation, commercial aviation is a competitive service oriented industry subject to strict regulatory controls. He recruited best available talent on merit and with help of experienced executives and technical expertise, enforced financial and administrative discipline, increased both fleet and destinations, inducted DC-10-30s and Boeing 747 into the fleet.

Unfortunately, in 1978 he resigned when Zia Ul Haq took over and started interference in recruitment, procurement, foreign postings etc. PIA’s success and profitability became a liability for the airline, in this era.

The latest figures pertaining to January-July 2017 reveal that TOC exceeds revenues by a staggering Rs 18 Billion.

TABLE 1

Revenue, Direct Operating Cost (DOC) and Total Operating Cost (TOC) for the period January-July 2017, in millions.

There exists a local ethnic market of roughly 13 million passengers within Pakistan. Almost 80 per cent of this traffic originates from northern hubs of Islamabad and Lahore, while only 20 per cent from Karachi and adjoining areas.

With the opening of airspace over former the Soviet Union, more economical and shorter routes emerged and all airlines based in S.E Asia and beyond operating to destinations in Europe and across the Atlantic now operate this route. Additionally, the successive governments allowed gulf based airlines to operate directly to northern hubs directly, which caused another loss for Pakistani airlines. Unfortunately, these ground realities make Karachi an economically unviable base for PIA fleet. While it now operates direct flights from northern hubs, the cost of positioning flights has added another 18 to 20 per cent to DOCs.

PIA engineering no longer has the capability, nor infrastructure to overhaul engines installed on B777 or any other aircraft in its fleet. It only has the capability for engine fan blade replacement or boroscopic inspection at its main base in Karachi, which can easily be made available at any of the northern hubs.

As if this was not enough irregularities and kickbacks in the leasing of aircrafts has further aggravated the situation, culminating in massive corruption such as Premier Service and the missing A310.

Airlines all over the world appoint vendors located along their route for supply of essential spare parts at competitive prices but the decision by AVM Niaz under Chairman Ahmed Saeed to appoint a single vendor located in the UK lead to disruption of schedules, flight delays and compromises on maintenance which finally resulted in imposition of temporary restrictions by EU on majority of PIA fleet.

Lack of accountability has only served to encourage irregularities and in 2011 the same suicidal decision was again taken when an unknown vendor Transworld Aviation Fze located in Dubai was appointed, which resulted in grounding half the fleet. Consequently, PIA’s market share started to decline and so did its revenues while operating cost rose.

By 2004 the airline’s profits slumped to Rs 837 million and by end of 2007 total accumulated losses (TAL) stood at Rs 38.798 billion and by 2008 they rose to Rs 72.354 billion and on December 31, 2012, they had risen to Rs 151.914 billion. By December 2015, TAL stood at Rs 269.946 billion and as of September 2016, they are Rs 297.183 billion. PIA’s Balance Sheet reflects upon the incompetence of the cronies appointed between 2008-17.

TABLE 2

2004     2005       2006         2007         2008           2012         2013       2014            2015

While PIA revenues declined and fleet utilisation reduced, employee strength kept on rising and their salaries rose astronomically and retired employees were rehired on contracts.

If PIA has to survive, it has to reduce operating costs by cutting costs incurred on the positioning of the aircrafts, rationalise salaries in proportion to its financial health and improve human resources by terminating services of over 300 fake degree holders and those accused of gross indiscipline.

The federal government has to stop interference in recruitments and foreign postings and should have the political will to appoint competent qualified executives with integrity and full powers instead of cronies, such as Shujaat Azeem, Nasir Jaffer, Aijaz Haroon, Nadeem Yusufzai etc.