| PIA board to hear bad news today |
| Monday, January 14, 2008 |
By Ansar Abbasi
ISLAMABAD: The PIA board of directors will be presented a delayed budget for 2008 on Monday projecting losses of about Rs 12 billion as against the estimated losses in 2007 running close to Rs 15 billion, PIA sources said on Sunday.
They said the last quarter ending on Dec 31, 2007, could turn out to be the worst for the whole year with losses running between Rs 4 to 5 billion because of various reasons, taking the total losses suffered by the airline to over Rs 55 billion during the Shaukat Aziz government.
Chairman PIA Zafar Ahmed Khan, however, when approached on Sunday refused to discuss the budget details before they were approved at the airline's board meeting. Khan rather found it unethical on the part of The News to get such information from what he called "backdoor channels".
"Why should I tell you what I am going to present before the PIA Board?" the chairman PIA said, adding, "Nowhere in the world do journalists do this". The PIA chairman met caretaker Federal Minister for Defence Salim Abbas Jilani informally in Karachi two days ago to discuss a number of issues, including the increasing losses to the national airline.
Their meeting came amid growing apprehensions among PIA employees that a massive plan to cut some 3,000 to 5,000 jobs was on the anvil, through golden handshakes or other such schemes, if the government provided enough money to the company.
Talking to The News on Saturday, Salim Abbas Jilani and PIA Chairman Zaffar Ahmed Khan both denied that any such massive cut was discussed in their informal meeting in Karachi. "When I come to Karachi I meet heads of departments under the Ministry of Defence and I would also be meeting Civil Aviation officials," Jilani said.
Aviation experts and analysts are surprised at the massive PIA losses despite an injection of billions of rupees by the government during the last three to four years under the Shaukat Aziz government.
"Oil prices are rising the world over and all airlines are facing the crunch and coping with it while PIA recovers most of the fuel costs by charging the passengers under the head of fuel surcharge," said one former PIA director. "They cannot blame all these losses on oil prices alone."
Experts and analysts say the story of PIA has been one massive failure of the Shaukat Aziz government, which had been deliberately covered up by one top management reshuffle after another, all making the situation slip from bad to worse.
According to the published figures of PIA, the operating loss after-tax for Jan-Sep 2007 was Rs 10.904 billion while the accumulated operating loss after tax was Rs 34.839 billion. The current liabilities of the company, its own figures show, exceed current assets by Rs 29.552 billion.
During the last three years, due to political turmoil and the government's preoccupation with other vital issues, PIA has escaped a close scrutiny of its continuously deteriorating financial situation and now it has almost reached the point of no return unless the government is forced to inject massive equity for its revival, experts say.
"PIA needs to earn an operating profit similar to the amount it will be losing during 2007 which will be around Rs 14 billion. Based on the current losses, PIA will require around one billion US dollars or Rs 60 billion for the next two years for its revival and upgrading," a former top executive of the company told The News on Sunday.
Many experts partly blame the country's aviation policy for the sorry state of PIA, but it is much more than just the 'open skies' policy that is to blame for the airline's plight. "The fact is that Shaukat Aziz appointed one non-aviation chief executive after another to run the airline on preferences other than merit and field experience," says the ex-PIA director.
This is true if the business experience of Ahmed Saeed, Tariq Kirmani and current Chairman Zafar Ahmed Khan is taken into view.
Saeed came from Servis Industries, a shoe manufacturing enterprise, Kirmani was from the oil sector which has hardly anything to do with airlines except providing fuel to the aircraft and Zafar is from PTCL and fertilisers, fields that are miles apart from flying planes.
"All these non-aviation executives made rosy presentations to the government, obtained billions of rupees in cash and government guarantees, promised profits by the billions but could not turn the airline around," according to an analyst.
The chairman PIA, however, when asked about the appointment of successive non-professional top executives in the airlines, initially said "you are right" but he hastened to add: "When I will agree to this, I would leave this assignment."
It was after this question that the chairman PIA refused to answer any further queries from this correspondent, suggesting that this scribe should seek an appointment from him to get answers to other questions.
Analysts, however, say that the major underlying reason for the failure of successive top executives of PIA was common to all of these top men. They relied on the senior management under them, as they themselves were non-airline people. "Surprisingly, not one of them changed or removed any of the senior management when they took over and still many of these senior executives, who advised all the three PIA chiefs, are on their posts, trying to cover up their past failures," an analyst said.
It is an interesting mix of these senior management people who are running the company into the ground. The current deputy managing director was basically a Flight Engineer who still flies some hours to keep his license valid. He was first made a general manager, then a director and then finally Deputy MD by Ahmed Saeed and continues to remain in that position.
The chief financial officer is from PTCL, brought by Zafar Ahmed Khan on a huge salary running into hundreds of thousands per month. A computer engineer was appointed to head the flight kitchen of PIA who outsourced the kitchen in Karachi and Islamabad to foreign companies although at least in this field Pakistanis lack no talent. He was made director of marketing last week.
The present problems, experts say, include the revenue squeeze, rising oil prices, spiralling wage increases, restructuring of network and ability to convince CAA in matters relating to grant of traffic rights.
The CAA and PIA have to create a 'new strategy' to compete with Gulf airlines and find an innovative formula whereby they can restrict this loss of traffic without resorting to fresh negotiations of bilateral air services agreements.
The value of this traffic to and from Pakistan through the 'Gulf hubs' at Dubai, Abu Dhabi and Qatar, is around US$500 million and is growing annually at 20 per cent. This is being siphoned off and if PIA is able to recapture its share, it will be able to restore its direct flights to these countries.
In a recent interview, the chairman PIA admitted that the financial health of the airlines has increasingly deteriorated and today the situation has reached to an alarming proportion.
"PIA suffered a loss of Rs 12.7 billion in 2006 and within nine months of the current year, the airline lost another Rs 10.7 billion," he continued, "The figure 'billion' sometimes just becomes an incomprehensible statistic. It might register better if it is said that PIA is losing over Rs 40 million every single day, or Rs 1.8 million every single hour of the day."
According to the chairman, the money that PIA's shareholders gave was all gone. "In fact, the airline is living off bank borrowings. These losses are not sustainable, and a normal company with such losses would have been declared bankrupt and shut down," he was quoted as saying.
The chairman had added that one of the severest blows PIA recently received was the imposition of operational restrictions by the European Union (EU) on some PIA aircraft in March last year.
In the same interview, the chairman PIA had ruled out the impression that the management was considering downsizing. "This is something that will have to be seriously considered in years to come. PIA has a ratio of 440 employees per plane, as against the international average of 150 to 250 employees." Privatisation is the best way to pull PIA out of its quagmire, he declared.
Zafar Khan cited the rising fuel prices as another reason for the downfall of PIA. "It was because of this that the airline suffered a loss of Rs 12.7 billion in 2006, and a further loss of Rs 10.7 billion in the next months." "It is not known whether the PIA board meeting on Monday can do anything about these issues quickly," an aviation expert said.
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