PIA Woes - a letter to DAWN editor

[Abbas Ali]

THE press has been full of statements from various sources giving excuses for the sorry financial state of PIA. Oil prices, old aircraft and over staffing are the usual hiding places. Nothing is mentioned about the management.

Oil prices have been at record highs this year yet European airlines have been unaffected. British Airways, Air France and Lufthansa have all done well as is reflected in their share prices which have gone up anywhere from 60 to 80 per cent. These can be seen on the internet as well as business papers like the Financial Times. Last month Easyjet, a budget airline, revealed record profits. These results were not achieved by raising ticket prices but by cost control and online booking plus the surge in air traffic worldwide brought about ironically by lowering fares – so much for oil prices.

The aircraft fleet of PIA is, on comparison with the mentioned airlines, relatively old but if PIA is usually running at a loss it cannot find the money to buy new aircraft without government support that is usually averse to the continual drain. And yet another huge sum is in the pipeline to bail out the airline.

In any case, the use of old aircraft does not mean running a loss — in a well-run airline it only leads to earning decline. Some budget airlines like Ryanair and Easyjet started with old aircraft but after showing results obtained private funds to modernise their fleet. Recently our own AirBlue, a private airline, using second hand aircraft has declared a reasonable profit.

Excess staffing is another favourite defense. The wage per employee is certainly much lower than in the West; even if this does not make a difference in PIA’s favour moneywise, the bigger labour force could at least show greater efficiency. That it does not is a lapse in management. In the past labour unions created problems with respect to productivity. Now they have been tamed but nepotism and favouritism remain.

Anywhere else in the world an organisation like PIA running into loss in recent times would have been privatised. That is not likely even now because the government and politicians would lose the patronage to keep their selected people happy. The history of the airline will repeat itself moving from one crisis to another – much like the history of Pakistan.

Air Vice Marshal (retd) M. Sadruddin
Islamabad

Source: DAWN (December 31, 2006)

[Moin]

Why always compare PIA's position to that of airlines like BA, AF, LH, EK etc? Of course they will do well, they're rich airlines and can sustain high fuel prices and rising costs.

What about those other airlines whom we could 'perhaps' compare PIA to airlines such as AI, RJ, OY, RB, BG, A.Arg etc. How exactly are they fairing under the prevailing circumstances?

[zerbaer]

In this Sunday's Dawn Magazine article: Their Rise and Fall in Power-II, byAnjum Niaz, there are two comments she quotes from th US Ambassador in 1998, pasted below. I feel both are more relevant to the predominant psyche on this forum - What do you think?

What US ambassador Simons said over eight years ago about our leaders still rings true today: “Pakistanis are proud of being emotional and sincere. I have a problem with that. They think it gives them a license to make stupid mistakes. As long as they are emotional and sincere, everything is forgiven. That’s culture. That’s not the real world. They don’t think through the consequences of what they are doing. They want their hearts to speak. Even the writings in the newspapers are not based on facts. They come out from the Urdu court culture of northern India where the definition of truth is beauty: statements which have nothing to do with facts but become facts because they are well said.”

[FULLTHRUST]

In this Sunday's Dawn Magazine article: Their Rise and Fall in Power-II, byAnjum Niaz, there are two comments she quotes from th US Ambassador in 1998, pasted below. I feel both are more relevant to the predominant psyche on this forum - What do you think?

What US ambassador Simons said over eight years ago about our leaders still rings true today: “Pakistanis are proud of being emotional and sincere. I have a problem with that. They think it gives them a license to make stupid mistakes. As long as they are emotional and sincere, everything is forgiven. That’s culture. That’s not the real world. They don’t think through the consequences of what they are doing. They want their hearts to speak. Even the writings in the newspapers are not based on facts. They come out from the Urdu court culture of northern India where the definition of truth is beauty: statements which have nothing to do with facts but become facts because they are well said.”

[PakN'US]

Nothing wrong with emotional and sincere or there is? The real problem in Pakistan from my vantage point is that we are habitual liars and corrupt to the core. I am not going to lump the entire population in this catagory but that is how I have felt over the years that I have been visiting Pakistan. The country needs a strongman that is not afraid to rout the corruption from its base and it has to be done in a top down manner.

[Abbas Ali]

PIA’s response

PIA Woes

This is in reference to the above-titled letter published in The News on Jan 6 by AVM (r) M Sadruddin. First of all, oil prices, oil aircraft and overstaffing are a reality and not "hiding places" or "ruses". PIA has maintained total transparency about its workings, sometimes even at the risk of comments such as the retired air-vice marshal's. He should at least believe IATA which, in a statement as late as December 12, 2006, has said that the cumulative losses of the airline industry, including restructuring costs, are US $6.5 billion. The airlines of the world are yet recovering from a colossal $41 billion loss incurred from 2000 to 2006. The airlines which he mentions and which have shown profits are all airlines that hedged their fuel, at the right time. Unfortunately, PIA did not hedge fuel when fuel prices were low in 2004. Since 2004 they have risen 74 per cent. Further, the industry average of fuel cost as a percentage of total revenues is 31 per cent, whereas in PIA it is an unbelievable 49 per cent.

As far as the PIA management is concerned, all operational indicators, without any exception whatsoever, that are critical to the performance evaluation of any airline, have in the last 19 months shown an improved trend, whether it was market share or fleet utilisation or the number of passengers carried or the yield (read, revenues) or cargo uplift or punctuality or regularity. All this reflects the efficiency of the current management's hard work in putting new systems and processes in place, which posted an increase of 14 per cent and 11 per cent in revenues, in 2006 and 2005, that translates into an operating profit of Rs3.3 billion in 2005 and Rs2 billion in 2006, if you take fuel prices to be constant at 2004 levels. Thus Rs4.3 billion is the revenue increase in PIA since the new management has taken over and, without a shadow of doubt, fuel prices wiped out this good work, not considering other factors such as the old 21 years average, fuel guzzling planes and the personnel to aircraft ratio.

Another comment heard ever so often is about the top-heavy management. Only a few years ago in PIA there used to be a chairman, a managing director and chief operating officer. All these functions are now performed by one man. There used to be three DMDs, now there is only one. There were 18 SVPs or directors as they were then called, and now there are only thirteen. There were 60 general managers then and now there are only forty-five. So much then for the criticism of the top "heavy" management now operating in PIA.

A bigger labour force does not result in more efficiency and any student of business management knows it. In fact if four people are doing the job of one person it creates an inefficiencies galore. And such is the case with PIA where we have 410 people to each aircraft while the international average is 130 persons per aircraft.

Capt Hassan Jaffery

GM Public Relations, PIA

Karachi