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Tuesday / October 16.

Cash-strapped and tired, but ‘the world’s toughest airline’

ISLAMABAD: The days when Pakistan International Airlines (PIA) proudly trumpeted itself as “Great People to Fly With’ are a distant memory. Buried under a mountain of debt, PIA is struggling just to survive.
Most of its problems are the result of administrative oversight: PIA is overstaffed; its management overspends; many staff members complain of meritless job transfers; and, more disturbingly, some of its employees have even been suspected of drug trafficking in the recent past.
“Despite these issues,” said PIA’s General Manager, Public Relations, Mashhood Tajwar, “the airline is surviving. It’s also making some headway. One could describe it as the toughest airline in the world since it has been facing immense competition while dealing with a number of internal challenges.”
PIA became a public limited company in December 2015. The government has been trying to privatize the sinking carrier, which has accumulated losses of Rs.300 billion (approx. $2.85 billion) within the span of 10 years. In fact, its financial constraints have risen to such an extent that a bailout has become its only option.
Talking to Arab News, however, Tajwar claimed there were signs of sluggish recovery.
“In the last three to four years, there has been a decline in our losses,” he said. “Between 2011 and 2013, we were facing more losses; but in 2014 and 2015, they dropped significantly.”
In 2016, however, PIA acquired a new fleet of aircrafts that once again put it on a downward financial trajectory.
“The fleet size doubled — we added about 18 planes,” said Tajwar. “However, we are now paying Rs.1.5 billion in markup on a monthly basis. This is over and above the amount of Rs.3 billion that we have been paying to knock off the principal amount.”
On November 2, the Economic Coordination Committee of the Cabinet approved a bailout package worth Rs.13.58 billion to help PIA meet its financial obligations. However, Prime Minister Shahid Khaqan Abbasi and his cabinet rejected the 40-page revival strategy prepared by airline officials, warning the company executives that the government would not bankroll the carrier in the future without a comprehensive plan to resuscitate it.
PIA officials believe they can break even if they have an adequate number of aircraft and the system is allowed to run smoothly for four to five years. They also seek tax exemption and relief from debt servicing.
“Due to high rates of tax,” said Tajwar, “we only get 60 percent of the fare. People think we get 100 percent of the ticket charges, but that’s not true. If we get some relief on such high rates of taxation, we will be able to deal with our financial constraints more easily.”
PIA’s foreign competitors have a major advantage in terms of their operational costs that helps them secure greater profit margins, Tajwar explained.
The airline has also been facing other challenges, one of which recently forced the company to retire its decades-old direct flight to New York.
PIA had started to incur heavy financial losses on that flight due to the American insistence that all passengers must undergo a security check in Manchester. The CEO of the airline, Musharraf Rasool Cyan, met the US Consul General in Karachi, Grace W Shelton, and asked her to convince American authorities to allow the airline to operate non-stop flights to New York.
While Shelton promised to extend all possible cooperation, the timeframe for the resolution of this matter remains indefinite. The mandatory screening of passengers by US officials may not be possible in Pakistan since the country lacks X-ray body scanners and is situated in a violence-prone region where several known militant entities continue to operate.
In response to the New York flights’ cancelation, the president of the Pakistan Airline Pilots’ Association, Captain Khalid Hamza, recently released a statement that served to highlight further the internal disagreements within the organization.
“This was a poor decision which will have far reaching impacts on [the] commercial viability of the airline,” he noted. “The current PIA management doesn’t have commercial aviation experience and should not have even thought of closing down this route … [T]he passengers, once lost to other carriers, will not be won back.”

via AN