To Privatize or not to Privatize: PIA

PIA - Unfortunate-much needed - Privatization

Nostalgia can be additive. It is hard to imagine an airline which was once run by Air Marshal Nur Khan, under whose exemplary leadership PIA was portrayed as the Ambassador of the nation is now edging towards privatization.

PIA not only helped Emirates & likes of Singaporean airlines to spread its wings but also owns the famous Roosevelt Hotel in Manhattan where several movies like Wall Street, Maid in Manhattan, Men in Black and The Dictator have been shot.

What went wrong?

Although there are lot of reasons for PIA’s downfall, but for me the negative numbers and accumulated losses in the balance sheet are results and not causes of the failure.

With pilots found drunk, crew members smuggling mobile phones, ghost employees who get paid for nothing, political recruitments, poor planning, interference from the govt and the elite class which travels business and uses privileges at a feeble cost are all to be blamed for this. There is no reason for the hue and cry for an ailing elephant close to its fall.

It is hard to imagine that an airline with merely 26 operational aircrafts supports a staff of 16,600 regular and 2,700 contractual employees. With 742 employees per operational aircraft, PIA is perhaps the world’s least efficient airline. No wonder the airline was running losses up to 3 billion rupees each month. In comparison, Air India with 27,000 employees for a fleet of 122 aircrafts carried 221 employees per aircraft. Several western airlines have fewer than 20 employees per operational aircraft.

Nawaz government seems to be following the Kenyan model. In 1994, the Kenyan government had sold 26% stake to a strategic partner and by the year 2000 it had doubled its passengers and cargo and started recording profits.

I strongly feel after the 26% stake in PIA is sold to an ‘unknown strategic partner’, the real story will begin which will be a turnaround for the national carrier. In the second stage, the GOP might manage an IPO which will be quite attractive for the Gulf and Pakistani financial institutions and the government might maintain 10-20% stakes in the airline. PM Nawaz recently spoke about employees being rewarded for not falling prey to the trade unions and reporting to work so there is a hint of 3-5% of stake for PIA employees who support this stance of the government.

Unfortunately, turning the table and making PIA profitable is not a possible task for the current government as the mess is huge. The objective here is to transfer this ‘burden’ on tax payers’ money to a taxable source of income for the GOP. The extra baggage needs to be offloaded!