Should PIA be sold or re-vitalized?

February 14, 2018

pia

Dr. Kausar Talat

A national flag carrier with a history of milestones in aviation, the first Asian carrier to fly the Lockheed Super Constellation L-1011, the second Asian airline to start jet service with Boeing 707, and again the first in Asia to introduce in-flight audio programs – a precursor of today’s In-flight Entertainment System– IFE.  In the recent past, the launch customer of the Boeing 777LR and first customer to order all three variants of 777 at the time. An organization known to have facilitated and helped establish Emirates Airlines along with many others has fallen on hard times due to many reasons well known to those familiar with aviation businesses.

Instead of looking at the reason for its downfall in industry, I like to discuss on HOW to bring around such an organization that still has highly skilled and competent members. WHAT may it take to have PIA shed it loses and get back into green? Above all WHY PIA should be revived, NOT privatized at the moment?

While researching the state of PIA, not so surprisingly one cannot find the real cause of the operating losses, though the reasons are so obvious. This is because most of the readings one came across are written with politics in mind. Therefore, in this article, I will briefly discuss some very obvious reasons that are taboo to talk and discuss.

Simply put, a radical but simple plan to revive PIA that calls for re-structuring and re-organization, certainly capital injection with some common sense and nationalism is needed to revive the airline’s operations and profit. Installing an empowered management free from government and political interference can accomplish it with a leaner and efficient organization. Engineering skill level at PIA is paralleled to any major airline in the world. Emirates is a good example, where one finds many ex-PIA employees in engineering as well as in mid-management working side by side with other ex-pats. Most of the ex-PIA personnel working elsewhere are frustrated, disgruntled and discontented employees not treated well at PIA. Another example of skilled performance was displayed during the induction of 777s when young engineers were partially empowered to make decisions on the spot during negotiations with Boeing as well as with other vendors. All what is needed was guidance.

Certainly, employee to airplane ratio at PIA, a huge factor in reduced profits is a well-known fact that needs a remedy. Making the organization lean is a challenge for the management. The challenge can only be tackled with honest and fair assessment with political will from the government. A leaner organization is a must to reduce operating cost. A well thought out program based on equity, fairness and service is possible if the management is empowered to make such decisions independently solely on business requirements.

Foremost, the most important solution for revival that has not been mentioned in numerous write-ups is to Controlling/Curtailing existing open sky policies. Those aware of the situation must be aware that many gulf and UAE airlines take-off and lands about 20 times a day – 20 flights every day at and from various airports in Pakistan. While PIA has approximately 6 slots available at these airline’s home countries. Some of these airlines have a reputation of strangling home airlines through buying increased slots in home countries. The practice is well known in aviation industry for taking over home airlines. Presently Angola Airlines is experiencing the same results as PIA due to open sky policy agreement between the two governments. Bangladesh Biman has similar situation where foreign airlines lands and take-off Dhaka 7 times every day. All the ex-pat traffic of South Asia is being cornered by these airlines, just because they can.  More on this aspect later.

The third crucial step in revitalizing PIA is to re-think the equipment utilization. During the negotiations for 777 airplanes purchase, management has plans for direct flights to North America that did not happen due to US security requirements and will not happen ever. So, what do we do with the long-haul equipment? How can PIA operate it efficiently? To make the most of long haul equipment sitting idle requires long term strategy and out of box thinking.

As short-term solution, it is suggested to increase 777-300 and LR utilization to Canada with hub and spoke model by arranging a partnership with American airlines guaranteeing a certain amount of traffic on some routes within the USA. Improved catered service may improve payload on ISL/KHI-London routes making the use of 777s-200 feasible. Such use would reduce cycle times with manageable maintenance cost. While strategizing such move, a renewal of 777 fleets is a must. Current seats and IFE are now 15 years old in an industry where these commodities are changed every five years at the most. Complete interior cabin retrofit is required with an update of IFE system along with connectivity.

For the long-term strategy, PIA must look at acquiring single-aisle airplanes such as 737-900, 737Max, A-320/319 focusing on regional traffic to central Asia, Middle East and South-East Asia. These single-aisle airplanes with catered and cultured service could be a game changer covering 75% of PIA routes in Asia.  Resetting operating business model to the regionally focused network would result in lower cost structure and a greater focus on revenue yield management.

Along with above-suggested steps, management must increase its communication and engagement with its key stakeholders including public accountability briefings to gain back the trust of passengers. Assurance, integrity and safety functions must be strengthened for efficiency and improved service. Certainly, there are many other factors that are dictated by politics and culture of the country that can only be handled by competent and diplomatic but honest management. I have only scratched the surface.

Why PIA must be revived and not sold out, at least not now? Major reason is that at the moment selling the airline is not a good financial decision. The airline is asset rich that can demand respectable price once the airline is profitable but today in current regional business environment, it will be sold in pieces with a price of 20 cents on the dollar. This is not what the airline deserved.

Second Aviation today is the spine of any national economy. As great Salahuddin said “to rule the world one has to have strong navy’ which is true today in defense terms. However, in present day of capitalist world, the national economy of any country is heavily dependent upon strong aviation.

*The author is an Ex Boeing Customer Account Manager; currently an aviation consultant has the privilege of delivering 777 fleet to PIA as the airline account manager at Boeing. He can be reached at Kausar.talat@gmail.com.