The big debate: to sell or not to sell PIA?Archive
by Ammar Shahbazi
Nostalgia can be addictive. And when it comes to a past that was glittered with red-letter days, emotions run high when there is talk of sending home some great people to fly with. This is exactly what’s happening in Pakistan International Airline (PIA) — the once stellar national carrier, now living off dole from the public exchequer.
The government’s proposal to off-load 26 per cent share in PIA and enter into a “strategic partnership” with a competent private stakeholder has predictably been received with enormous hue and cry. This was expected from the clumsy juggernaut that PIA has become over the years. Workers union came out charging and mainstream opposition parties too jumped into the fray.
But the numbers don’t lie: as things stand today, PIA has an accumulated debt of Rs300 billion and incurs yearly losses of Rs20 to Rs30 billion, which the government has to pay to keep it alive. The PML-N government is fed up of nursing the problem child and is all set to handover it to able hands. One of the main persons tasked with the job is Mohammad Zubair, a minister of state and chairman of the Privatization Commission.
“I don’t understand why this process is being termed privatization, we are not selling off PIA,” insists Zubair.
“We are just offloading some shares and that’s a standard practice world over. We are trying to save the national carrier.”
Zubair sounds frustrated with the way the whole PIA issue is being raised in the public discourse. “Honestly, the government does not think it is worth feeding a giant organisation with billions of rupees that, we know for certain, cannot be revived on such monthly survival doses. PIA needs radical changes.”
The government plans to invite private firms with two basic qualifications: world class management experience and deep pockets to inject money in the airline for a complete overhaul and make it competitive. Zubair argues that politicians often speak about merit, but when it comes to the merit of PIA’s workforce that is sustaining on dole, the issue becomes political.
“In the last two-and-a-half years, we tried to fix the situation,” he says, “But PIA needs massive investment and we barely manage to pay for its losses.”
Quoting a renowned auditor, who has been watching PIA’s books for years, Zubair said that since the 1980s, the PIA is not making any profits. “It’s not something recent. The organisation was dying a slow death, over decades. A good year followed by bad.”
The losses became more prominent after Pakistan opened its skies to foreign airlines, especially from the Gulf region to do business in the country. Airlines such as Emirates and Gulf Air gobbled up PIA’s market share and its revenues began to fall. In other words, Pakistan’s national carrier, despite boundless opportunities and empty playing field until the early 2000s, was not efficiently being managed. When faced with competition, it began to crumble.
“You cannot call yourself a huge multinational corporation with operations in several countries, if you cannot compete at that level,” says Zubair.
To explain the magnitude of PIA’s mess he gives an example. The PIA management had called off its flights to Amsterdam. A station manager didn’t like the idea. He went to court and got a stay.
Now the chairman or the managing director cannot do anything. The matter is with the courts.
“In any efficient organisation , the human resource is the most important asset, that’s what we read in schools,” he says, “But they have to be the best. You do regular appraisals and promote or fire people. This is how organisations work world over.”
PIA has one of the highest employee per plane ratio, which stands at above 700 employees per aircraft, while Emirates has around 220. The reason behind the massive difference is the range of services the national carrier keeps under its belt. From engineering services to ground handling to cargo management and maintenance to name a few, PIA, unlike other successful international airlines, single-handedly runs its own show.
But globally, the non-core segments of airlines business are usually outsourced to make the management leaner thus efficient. For instance, Dnata, one of the leading an airport service providers, offers ground handling services to Emirates in its home base. But PIA is top heavy with departments and runs like any bureaucratic government office.
If PIA has been on and off the reds for decades, one of the reasons was the way the organisation was handled by successive governments. “The decisions made about PIA were never meant to serve the organisation,” says Irshad Ghani, CEO Aviation Business Consultants, a consultancy firm that advises firms and companies on Pakistan’s aviation sector. “The decisions were almost always beyond PIA, made behind closed doors.”
Ghani, who worked in PIA for over 35 years in various capacities, argues that political meddling in the organisation is so rife that the “real employees” never really got a chance to perform. However, he is against the ‘sell off.’
Aware of the many excesses of the union, Ghani says that the unions were always patronized by political parties, who infused the culture of inefficiency in the organisation. But they can be handled if managed properly. “The political appointments and the culture of unaccountability bottom up can be implemented if the government appoints a foreign chairman with vast experience from abroad and allow him/her to run the airline.”
“This has happened with Malaysian Airline. They hired a German guy and entrusted him with all the power. And he made it work. You don’t have to sell it.”
Ghani accepts that in order to make PIA competitive, some radical decisions have to be taken, including shredding people hired on political basis and bringing efficient workers at the forefront.
But the government seems to have tried all the tricks in the cards. As Zubair points out that the power to change the organisation is too shattered. PIA needs a stakeholder who has money to put in and manage it like one’s own.
But what if things continue as usual?
Giant public enterprises that begin milking money on humanitarian grounds usually end up becoming piggy banks in the hands of politicians and top management, while the lower rank employees sustain on salaries which also dries up over a period, resulting in closure, says Owais Legari, former IT minister who oversaw the privatization of Pakistan Telecommunications Corporation Limited (PTCL).
“Things would begin to crumble if hard decisions are not taken at this point,” he says, “See what happened with Pakistan Steel Mills. The government kept paying billions every month yet the employees were not getting paid.”
“When an organisation knows it has the government to fall back on, it is dangerous. The government should immediately speak to the workers and reasonably compensate them. And stop it from further bleeding. That, I think, is the way forward for PIA.”
The writer is a freelance journalist based in Karachi.
He tweets @AmmarShahbazi
by Ahmed Yusuf
These winters have been historic: for the first time ever, Skardu Airport was accessible on all days and there were no shutdowns. Some flights were delayed due to inclement weather but not because the airport was not operational.
“We flew private airlines till Lahore, drove on the Motorway till Islamabad, and then flew PIA from Islamabad to Skardu. We didn’t think the first part of our journey would be problematic, we were expecting more problems from Islamabad. But it was actually the other way around,” says Maham Kausar, a 36-year-old doctor based in Karachi.
The flight out of Karachi was delayed while there was fog on the Motorway the night Kausar’s family had planned to drive to Islamabad. Already on a tight schedule, the family had to reschedule their flight to Skardu, which cost them a few days. All things considered, her experience improved once they boarded the PIA flight to Skardu.
“We have three children, two of them under five, and travelling with them is often a struggle. We were expecting that travelling a smaller aircraft might be problematic for them, but the journey was rather smooth as was the landing,” she says. “Maybe it is because Skardu Airport is a smallish airport but the staff was rather courteous and helped us a decent motel for lodging.”
Indeed, domestic tourists trickled into Gilgit-Baltistan this season, over 600,000 of them, and aviation officials are confident that the number will rise substantially in the coming years. As airlines and aviation officials argue, crucial to the revival of the Pakistan International Airlines (PIA) is creating a niche for itself that cannot be impeded upon by any other operator.
In PIA’s case, argue aviation and airlines officials, this niche exists in tourism to Pakistan and within Pakistan. Put another way, PIA’s revival is connected with resuscitating the tourism industry, which is beginning to pick up once again. PIA retains a monopoly over domestic tourism routes, with no other operator flying to Skardu or Gilgit from Islamabad.
In practice, this translates into harnessing a number of profit-spinning opportunities such as the air transportation of fruit and dry fruit produce from Gilgit-Baltistan.
“On average, a goods transport truck charges Rs150,000 for the journey between Islamabad and Skardu,” explains one aviation official, on the condition of anonymity. “Air freight charges cost a fraction of that, but we are restricted by the aircraft that ply the Islamabad-Skardu route and the frequency of flights,” he says.
As a result, most produce never makes it out of Gilgit-Baltistan since the costs involved become prohibitive, thereby compromising great revenue opportunities for local farmers in Skardu and other areas. Meanwhile, PIA’s monopoly over the route is left unexploited.
Away from Gilgit-Baltistan, there is also pilgrimage potential to Pakistan, as Hindu and Sikh pilgrims make their way to Chakwal and Nankana Sahib, from India as well as other international locations. The airline also holds great sway in pilgrimage tourism to Saudi Arabia, although pilgrimage tourism to Iraq and Iran has yet to be leveraged.
Such measures require the aviation division and tourism ministry to work in tandem, with the specific goal of presenting Pakistan as a tourist-friendly destination. In obtaining control of the airlines from the defence ministry and in enforcing the presidential order to convert PIA into a public limited company, the government has allowed itself the space to do so, but there is a distinct lack of will to tackle the crisis PIA finds itself in.
If balancing the books is a primary concern for the organisation, then it becomes a management issue. It is important to recall that PIA incurred substantial debt when it last offered a golden handshake to its employees as a cost-cutting exercise. This very fact resonates heavily with middle and lower-tier staff of the PIA in Karachi, many of whom resent the privatisation process largely due to the uncertainty it leaves them hanging in.
“These debts were accrued by during the golden handshake scheme, they don’t have much to do with us,” claims Muneer Salim,* a veteran cargo handler at the Hajj Terminal. “They doled out money in millions and now they expect us to pay for it. Do they take us for fools?”
Salim has a family of seven dependant on him, while his eldest son only recently completed graduation and is now plying a rickshaw on Karachi’s streets. According to the cargo handler, this wouldn’t have been possible without his job.
“When I first got a job at the airport, it was because of the son quota system. My father was employed here and I could get in easier, but its not the same anymore. Unless you are connected with the right unions and the right office-bearers, your son won’t be able to bag a job. There are thousands like me finding the right connections,” sighs Salim.
The PIA privatisation debate in the public sphere assumes the absolute incompetence of labour employed by the organisation, but as Salim points out, after the last golden handshake scheme, many of PIA’s most talented found lucrative jobs elsewhere in the aviation sector.
Clearly, labour isn’t the problem, but its utilisation (or lack of) is an issue.
“To assume that the labour unions represent everyone is a little unfair; they don’t. But the irony of the situation is that those who’ll be able to keep their jobs will be from unions since no management wants to ruffle their feathers,” chimes in Waqar Hussain,* who serves as ground staff at the Karachi airport.
Both men agree that calculating staff that are not needed or are deemed surplus is a management issue, rather than one that requires the entire corporation to be privatised.
“If say 5,000 people are not working for you, does that mean you’d shut the entire organisation down? No, you’ll figure out how best to make them work for you or why they haven’t been working,” argues Hussain. “If the unions are encouraging a culture of slacking, disband them by all means. But in privatising the administration and bypassing the voice of labour, the government has only shown that it doesn’t have the will to make things work.
The writer tweets @ASYusuf
Published in Dawn, Sunday Magazine, January 24th, 2016