Pakistan Muslim League (Nawaz) had promised the nation in their 2013 manifesto that they would make the Pakistan International Airlines one of the best airlines in the region once it ascended to power.
PIA is a classic case of the failure of Public Ownership. Key reasons for this failure are political interference, excessive hiring to extend patronage to supporters, over staffing, inefficient management, and a powerful trade union. An airline that was emulated by other airlines during their years of origin and development now stands stagnant and only represents mismanagement.
PIA runs at a staggering loss of over Rs 36 billion annually while the accumulative loss runs over Rs 300 billion. The carrier failed to even take advantage of the falling oil prices lately. While the government bails out the airline by burning a hole in the taxpayer’s’ pocket, the debate over the privatization of PIA has gathered more storm than any resolution.
The opposition is always trying to extract political mileage out of the turmoil without giving a solid argument for or against private ownership. The government was bent on beginning the process of privatization of PIA in 2015 in hopes that private management would bring some sanity to the chaos but the Union, with massive support from the parties in opposition, sabotaged the effort.
The government had decided to off-load 26 percent shares in PIA and enter into a strategic partnership with a private stakeholder.
Pakistan has had a fairly good experience with the privatization of the banking sector. The six large scale banks, all local except one, had posted a whooping cumulative profit of Rs 130 billion in 2015.
PIA has been identified as an outlier in terms of its poor safety record. The national carrier has one of the highest employees per plan ratio, which stands at about 700 employees per aircraft, while Emirates has around 220. The reason behind this massive difference is the range of services that, unlike other international airlines, PIA carries out single-handedly. From engineering services to ground handling to cargo management and maintenance to name a few, PIA does it all alone.
PIA had removed the Chief Executive Officer Bernd Hildenbrand on corruption charges. He is accused of leasing an aircraft from the Sri Lankan airline for an exorbitant price. PIA went into a wet lease with the Sri Lankan airline and leased an aircraft for $8,500 an hour, while the same aircraft had been leased by a private firm for $4,500 an hour.
Hildenbrand has been replaced by Nayyar Hayyat who interestingly had been removed as the Chief Financial Officer of PIA by its Board of Directors for misusing Rs 3 billion from the Provident Funds. PIA officials have confirmed that no inquiry is underway against the newly appointed acting CEO in connection with the embezzlement of the provident fund.
Khurrum Dastagir, Minister for Commerce said that the PIA is not for sale. “We were only following the international practice of off-loading a certain amount of shares so that more competitive parties could be brought forward to manage the airliner,” he said. “Frankly speaking, the government should not be feeding this giant organization without the competency that it so clearly lacks,” he added. He explained that they had been trying to turn PIA around but it required massive investment, while adding: “The government is firm about paying for the losses.”
Kawaka Izharul Haq, leader of opposition in the Sindh Assembly from MQM, said that manifestos and realities are two different things. Every government works against their manifesto. According to him, the reason that the state owned institution had failed to make profit in Pakistan was due to political hiring, which led to overstaffing and ultimately, and incompetent workforce. “Our politicians have always considered state run organisations as their personal fiefdoms and PIA is no different. The government has never been serious about reforming it,” said Izhar.
An insider from PIA, who does not wish to be named said: “The government had tried to take the first step towards reforming PIA in 2015 by getting a part of the organization privatized but the hue and cry made by the union at the behest of the opposition parties did not let it happen.” When asked about the future plans of the government regarding PIA, he said that there were no plans. He told Truth Tracker that the government is not serious or concerned. “Government officers dispensed with the responsibility to take policy decisions pertaining to PIA are absolutely inept when it comes to civil aviation matters,” he said. When questioned about why the government had accused the outgoing CEO of PIA of corruption charges, he said that the fault lied with the government and all those committees formed to oversee the working of the airline. “Where were they when PIA was making the lease? Did they know how much it cost to buy a new airplane? What has been their input in policy decision of leasing aircrafts and other matters that have left the airline in shambles?” said the source.
Senator Sehar Kamran from Pakistan People’s Party blamed the government for the current situation of PIA. She said that PPP and other parties in opposition had to unite with or support the union when the government was planning to off-load 26 percent shares of the airliner was the opacity of the deal. “Lack of sincerity to promote and secure businesses, political interests, political appointments, wrong decisions, wet lease and above all, a policy to sell the national asset to meet budgetary deficits,” said Kamran, “has led to the deteriorating condition of PIA.” She added: “The privatization plan was developed to serve Mansha interests.” “The opposition had demanded transparency, sincerity and protection of the national assets,” she said.
Former Director PIA, Irshad Ghani, who had served in the organization for 35 years in different capacities, said that the decisions the government had been taking to turn the organization around were never meant to serve PIA; they were far from it. “Political meddling is rife and the union has been allowed to become so strong that the real employees do not get the chance to perform or show their talent,” he said.
“The solution,” said Ghani, “lay in firing all those who had been hired on political basis and in initiating a bottom up accountability mechanism.”
The PML-N government has failed to introduce reforms for a turnaround in PIA, even at a local level.