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Privatisation of Pakistan International Airlines - Good Idea: Expert
Privatisation of Pakistan International Airlines - Good Idea: Expert
Sputnik India
PIA recently canceled flights due to a severe fuel shortage. This unfortunate situation has raised concerns about the airline's looming bankruptcy and its broader implications for Pakistan's economy.
2023-10-21T18:08+0530
2023-10-21T18:08+0530
2023-10-23T12:33+0530
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To the dismay of travellers, Pakistan International Airlines (PIA) cancelled almost 50 domestic and international flights earlier this week. According to reports, the reason for cancelling was inadequate fuel supply. In addition to domestic flights, some of the cancelled flights were scheduled to fly to Dubai, Muscat, Sharjah, Abu Dhabi, and Kuwait.The airline claimed that the passengers of the cancelled flights were accommodated on alternative flights, but it is no secret that the airline has been in a state of financial distress for several years.PIA was once known for its slogan "Great People to Fly With". It also played a big role in establishing Emirates in its early years, providing technical and administrative assistance as well as providing a new Boeing 737-300 and Airbus A300B4-200.In 1964, PIA became the first non-communist airline to fly to China.Unfortunately, since the late 1990s, the airline has been slipping from its glory days.Politicized DilemmaIn the past few years, PIA has consistently reported significant losses and its debt burden has continued to mount. At present, PIA's debt and liabilities stand at Rs 743 billion ($2.6 billion), five times more than the total value of its assets.Hence, it comes as no surprise that the airline was recently approved to be privatized by the federal Cabinet, which means the government wants to sell PIA off.Sputnik India spoke to former PIA district manager, Syed Tariq Ismail, who said that selling PIA is a good idea.The situation worsened after the global COVID pandemic and amid mounting concerns, the Aviation Ministry had requested an immediate "cash injection" of Rs 23 billion ($83 million) last year, also asking for the suspension of duties, taxes, and service charges to domestic agencies.However, reports suggested that these requests were not accompanied by a concrete and viable business plan.Mismanagement, inefficiency, and corruption within PIA have also contributed to its inability to secure a steady supply of jet fuel. These internal issues have hindered the airline's ability to negotiate favourable fuel contracts and maintain operational efficiency.Moreover, the global rise in oil prices has had a significant impact on the aviation industry worldwide. As PIA heavily relies on jet fuel to operate its fleet of aircraft, the soaring costs have put substantial financial pressure on the airline.Impact on Pakistan's EconomyThe consequences of PIA's loss-making and operational disruptions extend beyond the airline itself and have significant implications for Pakistan's economy.According to Ismail, PIA plays a crucial role in connecting Pakistan to the rest of the world, facilitating tourism and trade.According to him, the government has frequently injected financial support into PIA to keep it afloat.Need For Urgent ReformsTo address the crisis at hand and the broader economic implications, Pakistan may consider urgently implementing reforms in PIA. This includes streamlining the airline's operations, reducing inefficiencies, tackling corruption, and exploring public-private partnerships or privatization to inject fresh capital and expertise.Although the Air India fleet now has 130 aircraft and a much better global air routes network, in 2020, the Indian Civil Aviation Ministry was really struggling and had no choice - either privatize or close the airline.Hence, PIA's comprehensive reforms may ensure sustainability in the future with priority to Pakistan's national economy.
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Privatisation of Pakistan International Airlines - Good Idea: Expert
18:08 21.10.2023 (Updated: 12:33 23.10.2023) PIA recently cancelled flights due to a severe fuel shortage. This unfortunate situation has raised concerns about the airline's looming bankruptcy and its broader implications for Pakistan's economy.
To the dismay of travellers, Pakistan International Airlines (PIA) cancelled almost 50 domestic and international flights earlier this week.
According to reports, the reason for cancelling was inadequate fuel supply. In addition to domestic flights, some of the cancelled flights were scheduled to fly to Dubai, Muscat, Sharjah, Abu Dhabi, and Kuwait.
The airline claimed that the passengers of the cancelled flights were accommodated on alternative flights, but it is no secret that the airline has been in a state of financial distress for several years.
PIA was once known for its slogan
"Great People to Fly With". It also played a big role in establishing Emirates in its early years, providing technical and administrative assistance as well as providing a new Boeing 737-300 and Airbus A300B4-200.
In 1964, PIA became the first non-communist airline to fly to China.
Unfortunately, since the late 1990s, the airline has been slipping from its glory days.
In the past few years, PIA has consistently reported significant losses and its debt burden has continued to mount. At present, PIA's debt and liabilities stand at Rs 743 billion ($2.6 billion), five times more than the total value of its assets.
Its losses for the last financial year were Rs 86.5bn, of which Rs 11bn was due to operational losses. If the decline continues, PIA’s debt and liabilities will rise to Rs 1.98 trillion, and its annual losses will rise to Rs 259bn per annum by 2030.
Hence, it comes as no surprise that the airline was recently approved to be
privatized by the federal Cabinet, which means the government wants to sell PIA off.
Sputnik India spoke to former PIA district manager, Syed Tariq Ismail, who said that selling PIA is a good idea.
"Pakistan’s aviation sector and PIA is managed by bureaucrats and for years now it has been some general, or military officer, or combination of both that control the airlines. That leads to a bureaucratic and unaccountable system, which results in mismanagement, red tape, payment delays and so on", Ismail said.
The situation worsened after the global
COVID pandemic and amid mounting concerns, the Aviation Ministry had requested an immediate "cash injection" of Rs 23 billion ($83 million) last year, also asking for the suspension of duties, taxes, and service charges to domestic agencies.
However, reports suggested that these requests were not accompanied by a concrete and viable business plan.
Mismanagement, inefficiency, and corruption within PIA have also contributed to its inability to secure a steady supply of jet fuel. These internal issues have hindered the airline's ability to negotiate favourable fuel contracts and maintain operational efficiency.
"For a while now, PIA was becoming the last choice for travellers as the public sector airline had a poor reputation for timing and service in the past. Many aircrafts were flying with half-full cabins and tickets were not being sold. So this impacts the airline's business even more as many people are inclined to fly privately owned airlines, like Air Sial and Air Blue", the former manager added.
Moreover, the global rise in oil prices has had a significant impact on the aviation industry worldwide. As PIA heavily relies on jet fuel to operate its fleet of aircraft, the soaring costs have put substantial
financial pressure on the airline.
Impact on Pakistan's Economy
The consequences of PIA's loss-making and operational disruptions extend beyond the airline itself and have significant implications for Pakistan's economy.
According to Ismail, PIA plays a crucial role in connecting Pakistan to the rest of the world, facilitating
tourism and trade.
"The cancellation of flights not only inconveniences travellers but also disrupts business activities, potentially leading to economic losses for the country", he explained.
According to him, the government has frequently injected financial support into PIA to keep it afloat.
“This continuous bailout diverts resources that could be better utilized in critical sectors like healthcare, education, and infrastructure development. Also the persistent issues facing PIA have damaged Pakistan's image on the global stage. An unreliable national carrier can deter foreign investors, tourists, and international businesses from engaging with the country", Ismail explained.
To address the crisis at hand and the broader
economic implications, Pakistan may consider urgently implementing reforms in PIA. This includes streamlining the airline's operations, reducing inefficiencies, tackling corruption, and exploring public-private partnerships or privatization to inject fresh capital and expertise.
As an example, PIA can take inspiration from India, which recently sold its government-owned airliner Air India to Tata Sons for about $2.4bn. Before this, Air India had totalled up a loss of $9.5bn, with reports saying it made $2.6 million in losses every day. Hence, privatization of PIA may not be such a bad idea after all.
Although the Air India fleet now has 130 aircraft and a much better global air routes network, in 2020, the Indian Civil Aviation Ministry was really struggling and had no choice - either privatize or close the airline.
Hence, PIA's comprehensive reforms may ensure
sustainability in the future with priority to Pakistan's national economy.
