Saving PIA from sinking - By Farooq Khan

[Abbas Ali]

By Farooq Khan

As reported in The News of December 7/8, the Public Accounts Committee has taken a serious note of the rising financial losses of PIA amounting to almost one billion rupees per month. The Committee has also strongly observed the induction of consultants and foreign cabin crew at very high salaries.

The PIA chairman has admitted that the airline is in a serious financial crisis with overall losses to the tune of almost nine billion rupees during the period January to September 2006. In the corporate report for this period these losses have been attributed to high fuel costs and employment.

The report does reflect some positive improvements in PIA's performance in 2006. This includes an overall increase in revenue by 13 per cent which was offset by an unfavourable 39 per cent growth in fuel cost due to a 28 per cent rise in fuel prices. The airline's cargo business increased by 7 per cent. PIA's market share in the domestic passenger segment rose to 69 per cent and to 48 per cent in the international sector.

It is true that the increase in international fuel prices has contributed to the growing losses but high fuel costs may well be only one of the many factors affecting the airline's financial status. If other multifarious issues are addressed in a holistic manner, the airline may well revive its past glory.

PIA is heavily over staffed and thus has to bear extremely high overhead costs. Nowhere in the world would an airline employ around 20,000 plus employees to support a fleet of 40 plus aircrafts which implies a scale of 500 personnel per aircraft. US Airways has a fleet of 357 jet aircraft and 352 express aircraft with worldwide operations but supported by about 35,000 employees only, which is a ratio of 50 workers to an aircraft. If PIA is to sustain a positive growth rate, become financially viable and be more efficient then it must be restructured and downsized.

Hiring foreign airhostesses at high salaries in dollars makes little sense. If the argument is that foreign airhostesses are more suited to handle language-related issues on foreign routes, then the better option would be to get the local Pakistani airhostesses trained in foreign languages from the National Institute of Modern Languages, Islamabad, which is an institution renowned for offering foreign language training up to interpreter level in all major world languages. If foreign girls are preferred simply because they are more attractive and would do well in public relationing, then this argument holds no ground because there is no dearth of beauty, brilliance and talent in Pakistani girls.

Recent press reports highlight that PIA has consultants working at exorbitant salaries up to half a million rupees per month or even more. Is the PIA chairman competent to hire such stunningly expensive consultants? Even if PIA were to be making huge profits, keeping such highly paid consultants may not be in line with current airline business trends where cut throat competition calls for minimum spending to maximise profits.

Given the current level of PIA's losses, it implies that these consultants are more of a drain on PIA's economy and should either be removed from service or their salaries drastically reduced. PIA's lower supporting staff like ground handlers, drivers, peons, security personnel, daily wagers etc. has generally been on the higher side including entrants not for genuine airline requirement but more so out of political compulsion. We are all too familiar with the stories of ghost workers, inflated overtime payments and allowances, and prolonged leaves with pay etc. of non-productive workers in the past that came down heavily upon the airline's resources.

Extraordinary situations require extraordinary decisions. If PIA is in extremely difficult times then it should temporarily suspend the over generous privileges like highly discounted almost free air passages both on local and international routes to its thousands of serving and retired employees, till stability returns to the airline's accounts.

Till the 1980s, PIA engineering had acquired international certification and undertook repair and overhaul of heavy bodied aircraft of certain foreign airlines in their wide bodied hangers in Karachi, thereby earning valuable foreign exchange. These engineering activities gradually faded away. PIA must restart this third party work since airlines are beginning to commercialise the activities of their engineering branches towards generating additional revenues. The ongoing in country refurbishment programme of jumbos by PIA engineers and technicians is a healthy revival of efficient technical services.

The real rip-off is made by the foreign aircraft manufacturers in the supply of exaggerated packages of aircraft spares and assemblies at the time of the initial sale of new aircraft. Due to faulty planning or connivance with the suppliers when spares and assemblies continue to be procured over and above the requirement this may result in a pile up of huge surplus inventory in the long run.

When a fleet is phased out of service, this surplus inventory becomes dead and hence becomes a permanent liability for the organisation. The airline needs to make a serious review of the current stock holdings of aircraft spares and assemblies and ensure that float and reserve levels are realistically and economically prepared so that surplus stores are avoided and procurement costs minimised. The inactive or dead inventory caused by Fokker and older version Boeings phase out needs to be disposed off through well negotiated contracts with foreign buyers transparently at the best possible prices.

There is an urgent need for a fresh review of PIA's organisation and functioning so that the airline sets course in the right direction on a long term basis. The following strategy is recommended:

• All inductions in the airline be ceased forthwith.

• The government should constitute a high-level PIA study group comprising professional aviators, engineers and management and financial experts to examine and propose all round improvements in the airline. Some suggested areas of focus are as follows:

• Restructuring/downsizing of the organisation by identifying the surplus staff and appointments, merger of departments and trimming at all levels to cut extra fat so as to make it more efficient and economical.

• Long term plan to induct fuel efficient aircrafts.

• Administration/finance, including pay/allowances of the higher management, over the board perks and privileges for employees be re-evaluated.

• Introduction of austerity measures and cost cutting opportunities.

• System of foreign postings and scale of PIA personnel at stations abroad including closure of non revenue earning stations.

• System of planning and procurement of aircraft spares and assemblies from the Original Equipment Manufacturers and steps to avoid accumulation of inactive/surplus/dead inventory.

• System of repair/overhaul of aircraft related major assemblies including engines from abroad to make it more cost effective.

• Disposal of obsolete equipment and surplus/dead inventory in a transparent and cost effective manner.

• Commercialisation of PIA's engineering and training facilities for domestic and foreign airlines.

• Disposal of the airline's real estate assets in the country or abroad or steps to enhance their earnings.

The airline is a national asset and the higher management must leave no stone unturned to restore the financial health of the airline on an emergent basis. Through better governance a visionary approach and above all a selfless commitment will surely enable the airline's leadership to turn around PIA to serve the national interests.

Source: The News

[Adnan Anwar]

I know PIA outsourced its Customer Service and also Checkin-in Desk to outside party in Pakistan. So why cannot they outsource the same in foreign countries as well, if they have not done that yet.

As far as Air Hostesses, stewards and ground handling staff are concerned. They should be revise the terms of the employment and then retain most on a contract.

[FMC]

What is the name of the outside party. Is it from singapore?

[F27]

Mr.Abbas. A similar news item had appeared earlier in THE Gulf News. In the light of this report there is nothing else left to imagination. I pray for PIAs well being.

[Max]

20,000 plus employees to support a fleet of 40 plus aircrafts

Wow

[pkjet]

Having worked as a Traffic assistant for PIA and coming into daily contact with PIA cabin crew , I can safely say that foreign Airhostesses would add much more sincerity to welcoming /saying farewell to passengers instead of chatting amongst themselves and also would have a flexible attitude to helping passengers.

This is of course a problem only select crew have(not bothered attitude) and of course we all note the negative first !

I do not see why hiring foreign cabin crew is a downfall for PIA. It only helps propel the airline's image more as a truly international airline.

I welcome the day when local people are hired and the old corrupt men of the airline are sent packing back to their homes.

[zerbaer]

I do not see why hiring foreign cabin crew is a downfall for PIA. It only helps propel the airline's image more as a truly international airline.

Depends who you talk to. Sane people will find it rather stupid. It is Pakistan International like in the country Pakistan with 150 million people & not jhulay laal express attempting to seduce passengers.

Do remember you are already wet leasing 11 aircraft supposedly for this Hajj season. Over staffing is an important issue, but by no means the single element in the debauchery that has become synonymous with the folks that make up PIA.

Cheers!