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Rescue package for PIA

According to new management this revival plan is expected to reverse the situation

From Shamim Ahmed Rizvi,
June 18 - 24, 2001

The cash-starved government of Pakistan, under sheer force of circumstances, had to approve, last week, a rescue package of financial assistance and administrative measures for PIA to salvage the national flag carrier from the acute financial crisis and keep it flying. The package authorized the PIA to raise Rs. 20 billion through assistance from the Ministry of Finance and has all its unions and associations banned.

The package was announced after the much awaited presentation to the Chief Executive General Pervez Musharraf in Islamabad by the new management of the airline headed by Managing Director Mr. Ahmed Saeed. On humanitarian considerations, however, the CE did not agree with the suggestion of retrenching 4000 employees. Under the rescue package, PIA would work with the Ministry of Finance to raise Rs. 20 billion to meet its accumulative financial obligations and maintain its operation at home and abroad. The Ministry of Finance was earlier reported to be against providing hard cash to the airline but had to backtrack on Gen. Musharraf prevailing who appeared impressed by the presentation of new management of the PIA headed by a successful businessman.

According to new management this revival plan is expected to reverse a situation where airline was loosing heavily (with a total loss of Rs. 18 billion suffered up to April during the current financial year) to a position of profitability. It was brought out in the briefing that without the rescue package it will not be possible for the PIA to operate normally. It was hoped that with normal operation on restructured routes, the airline will not only eliminate the losses but would earn a profit of over Rs. 2 billion during the next financial year. The PIA management optimistically hoped to enhance its profitability to Rs. 4 billion by the year 2004. While agreeing to provide the rescue package the Chief Executive emphasized the need to turn the organization into a disciplined, effective and profit making organization.

It may be recalled that a number of strategies had been worked out to halt the unabated degeneration that had steeped into PIA during the recent years of its comedown, despite various shifts and changes, including overhaul of the top management. However, none of these proved of any real avail in stemming the rot, mostly because what has come to be identified as the result of interference from the changing governments as also aggravated by the waywardness of the union leadership.

The new administration's approach, evidently based on this premise, has sought, among other measures, restoration of the amendment to PIAC Act in 1984, aimed at the suspension of the activities of the trade unions and associations. Together with ensuring return of discipline in labour-management relations, thereby, it hopes to contribute also to improvement in its efficiency. However, this has to be accompanied by an effective check on domineering from outside the airline's own setup, which seems to have been taken for the granted.

In so far as the present government is concerned, one may have little to fear on this count. But now that restoration of the democratic order, in whatever form, is a foregone conclusion in view the government's commitment to abide by the Supreme Court's timeframe, the threat of return to old malpractices can hardly be overlooked. Apart from the suspension of trade unions, the extraneous influences on the airline's working do not appear, therefore, to have been adequately covered by the new plan.

The gross losses of the airline up to end December are stated to have risen to Rs. 18 billion. With the reported addition of another Rs. 2 billion by mid-year 2001, it would swell to the figure asked for the execution of the proposed plan. Viewed in the perspective of the extent of the average losses, the rescue fund should leave not much to finance efforts for efficiency either. Morever, despite all the promise of a revolutionary change in the airline's profitability, it may not be possible to raise funds for the estimated cost, in the absence firm assurances of repayment. The Finance Ministry will be required to provide, in the first instance, something like Rs. 8 to 10 billion in interest-free loan, payable from the sale of Hotel Roosevelt in New York.

The new PIA Managing Director Ahmed Saeed, who is himself an entrepreneur of high order, seems to do business. He truly contemplates to put the airlines on the right track and putting an end to its further downslide. He impressed upon the CE for funds which he requires to put into practice his plans and schemes to make the airlines a world class organization. Speaking after the meeting, Ahmed Saeed remarked that the funds would undoubtedly be involved in negotiations and any unreasonable agreements between the previous management and the unions would, however, be revoked. Let us hope he is able to deliver.