closer look at PIA affairs
Poised to recapture the market
By AMANULLAH BASHAR
Sep 04 - 10, 2000
Sher Afgan Malik, the Managing Director of Pakistan
International Airlines (PIA) has taken over the reins of the national
airline in a situation which poses formidable challenges and piled up
backlogs which have to be cleaned by the new broom.
He has accepted this responsibility at a time when
these factors have adversely affected the performance of the national
carrier in the past years, which continued to cast their shadows. The
growth in revenue stood restricted from the full impact of yield
dilutions, which took place a year back. The high prices of fuel are
also putting acute pressure on the cost structure and therefore a
source of considerable concern.
The airline fuel bill in the first half has almost
doubled and additional cost absorbed is approximately Rs2.7 billion as
compared with the corresponding period of last year, as per the half
yearly un-audited financial results ended June 30, 2000. According to
these financial results, this enhanced cost due to rise in fuel prices
remained un-recovered, which alone is the reason for the loss of Rs1,
172 million being reported for the period. A summarized view of PIA's
un-audited financial results for the half year ended June 30, 2000,
the Operating Revenue was estimated at Rs18,945 million as compared to
Rs17,332 million for the corresponding period last year, Operating
Expenditures Rs19,032 million compared to Rs16,587 million previous
year and an Operating loss of Rs87 million during the said period. The
overall liabilities have jumped to Rs33 billion.
The operating losses have aggravated the liquidity
problem but the management has devised a strategy to overcome this.
The airline is vigorously pursuing with PIA-IL for return of its US$
90 million borrowed in 1997. The funds are expected to be available to
PIA before December 2000 for which PIA-IL is arranging necessary
financing. Besides, restructuring of some of the short-term debt,
management is also working on disposal of non- productive assets to
Malik said that the grounded aircraft, which are 5
in numbers, would be disposed of while the 11 Fokker would also be
replaced with new aircraft. Replying to a question, he said that the
new management would prefer to induct brand new aircraft into its
fleet instead of going for the second-hand stuff. "I don't like
the impression that PIA is an airline of used aircraft."
Brushing aside the allegations that PIA was being
asked to suffer a loss of over Rs200 crores in the division of
proceeds from the proposed sale of Roosevelt Hotel, the PIA Managing
Director remarked that nothing of the sort is going to happen. Rather
PIA is going to earn handsomely against the sale of Roosevelt owing to
a general improvement of real estate prices in New York. Against the
sale proceeds of Roosevelt PIA would not only get back its advances
worth US$ 90 million but also be able to get US$ 120 million against
that deal. Hopefully, the deal would be finalized early next year.
Similarly other two hotels i.e. Hotel Riyadh and Scribe Hotel in Paris
would also be disposed of in due course of time, he said.
Sher Afgan was firm in his tone to put the national
carrier back on track leading to a sound financial position by June
30, 2001. In a brief interview to PAGE at his office, he
outlined his programme about reforming the system in PIA. The focus of
all these reforms being introduced in PIA is on improvement of the
product. A better service in the real sense has the cutting edge and
is the key to solving all problems, he observed. To achieve this
target, concerted efforts are being made to improve customer services
on board, quality of food has been improved with wider choice of menu,
special care is taken for ground handling, extensive training
programmes for cabin crew are going on, all aircraft are being fitted
with new interior decor and latest technologies are being introduced
in all areas. Remedial steps focusing attention on revenue growth and
reduction in costs have already been initiated. As a part of the new
marketing strategy, operations have been restructured by discontinuing
services to unprofitable routes and by deploying extra capacity in
some of the key markets to exploit the available growth. The strategy
has started showing results as passenger traffic has enhanced since
early part of the year and continues to grow at a rate of 10 to 11 per
cent compared to last year. The growth has further accelerated from
the month of June, despite excess capacity induction by competitors,
the airline has not only been able to retrieve its loss of market
share but is now poised in making inroads into the competitors' share
in some of the key markets. A continued recovery in traffic growth has
provided airline an opportunity to review tariff structure also.
Consequently, the issue of low yield is now being seriously addressed.
Fare increases on international sectors have already been implemented
and domestic tariff has also been revised from the middle of August.
Hence, the revenue performance will be recording an
improved growth enabling the airline to overcome the operating losses
and put it on the profitable path. The airline is also embarking on
additional revenue enhancement and cost reduction measures whose
results will be visible by December.
Sher Afgan Malik was however not happy over what he
described uncalled for gossips over PIA-Sabre disputes by the media.
It may be mentioned that Sabre was appointed Information Technology
consultants to PIA by the then Chairman Shahid Khaqan Abbasi. They
left the country without any formal intimation due to change of
government in Pakistan. Explaining the actual position, Khalid Butt,
Advisor to the Managing Director PIA said that formal talks took place
between representatives of PIA and Sabre on August 26 and 27 in
Karachi. The talks concerned the disputes between PIA and Sabre.
Contrary to various media reports, PIA and Sabre did not meet in
London in July.
Representatives of PIA were in London in late July
for the purpose of finalizing PIAs Defence and Counter-claim in the
International Chamber of Commerce (ICC) Arbitration currently
proceeding in London. The PIA representatives included the Managing
Director, the purpose of whose visit was also to attend the
Farnborough Air Show.
Further, contrary to some recent reports in
national newspapers, PIA has not settled the disputes with Sabre. In
the event of any settlement, PIA would of course let this fact known
in the appropriate and proper manner. Unofficial reports of settlement
are therefore no more than rumour based upon misinformation. Likewise,
recent extraordinary claims as to the sums which an Arbitral Tribunal
might find Sabre owe to PIA are without factual or legal basis, and
are a complete nonsense.
The talks which took place on August 26-27, 2000
were conducted in the manner to be expected of two commercial
organizations. They were amicable; the representatives of PIA and
Sabre discussed their differences at length and sought in good faith,
to find a resolution to the disputes. The differences between PIA and
Sabre are substantial, and could not be resolved in the present round
of discussions. It is however not decided but further talks may take
place in future.
Commenting on another related news item, the
Managing Director categorically denied any talks with Amadeus for
PIA's future IT plans. He said, "Nor PIA has asked and neither
Amadeus has sent any proposal, therefore, considering their offer does
not arise at all."
It is important that it be understood and known
that PIA is embarking upon a serious and urgent process of
regeneration. It is imperative that the fortunes of PIA be turned
around. To achieve this goal, PIA plans to invest in the Information
Technology so that it can keep pace with its competitors in the 21st
Century. To this end, PIA is considering a range of different IT
solutions from different suppliers around the world.
As Pakistan's national carrier, PIA sees itself as
a flagship for the country and the Management of PIA feels committed
and determined to put PIA back on the road of recovery.
Afgan Malik, Managing Director PIA
Sher Afgan Malik, has taken over as Managing
Director of PIA since 11th May 2000.
A Management Accountant by profession, Mr. Malik
has an extensive and diversified work experience in re-organizing and
financially turning around large industrial and trading companies. Mr.
Malik has worked in Saudi Arabia, USA and UAE, where under his
leadership, large sick industrial units employing thousands of
employees from various European and Asian nationalities, were revived
and put onto a course of profitability through proper planning and
Mr. Malik, has served as Chief Executive of large
business groups in Saudi Arabia, and transformed them into prestigious
and financially sound entities. He has also been instrumental in
spearheading joint venture agreements with giants like Mitsubishi
Corp. and Marubeni Corp. of Japan, Ssangyong Group of South Korea,
Goodyear Corp. of USA, and other European and regional conglomerates.
His innovative ideas, identifying and promoting entrepreneurial
initiatives and introducing contemporary management practices, earned
him a prominent place among major financial institutions and business
community in the region. The national carrier's new Managing Director
had also created the best managed heavy transport fleet in the Middle
East by inducting appropriate expertise, exercising financial
discipline and encouraging a spirit of cohesiveness.
Earlier, as Vice President of a U.S Corporation,
Mr. Malik supervised Financing, Accounting, Auditing, Contracting
Pricing with clients including U.S. Air Force, Navy, Army, The Royal
Saudi Armed Forces, Northrop Corp, Page Communications Inc., among
The new Managing Director is keen to instill a new
sense of professionalism in PIA, so that it can meet the challenges of
the new Millennium in this fast changing industry, where survival of
any airline rests with hardwork, adoption of new ideas and
technologies and by providing better customer services.