PIA GOES PUBLIC

It may be mentioned that PIA has demonstrated exceptionally well during past four years from 1999-2004

By AMANULLAH BASHAR
June 14 - 20, 2004

The Pakistan International Airline (PIA) offered its 5 percent shares to public through Karachi Stock Exchange (KSE) in the second week of the current month and the public offering remained open for three days i.e. from June 7 to June 9.

Actually, it was the second offering of the PIA shares to the public, as in the first instance 5 percent shares were also offered during Benazir government. Due to overscription by the investors, the PIA management had to opt green shoe option in the first offer subsquently enhaqncing the 5 percent shares to 10 percent. Similarly, the history is likely to repeat as PIA would certainly opt once again the green shoe option as the response from the institutional buyers may lead to overscription of the shares this time too. That means that overall holding of the PIA shares with the public will rise to 20 percent.

It may be mentioned that PIA has demonstrated exceptionally well during past four years from 1999-2004 during which the professional and skillful handing of the corporation's affairs enabled the corporation to make a turnaround especially in sales, profitability and customers services. The national career is well poised to hit unprecedented profits of Rs4 billion during the current financial year.

Despite a global recession in the aviation industry, credit certainly goes to the present management for making profits, strengthening of the fleet with the induction of three prestigious Boeing 777 aircraft into its fold which certainly elvated its stature among the contemporary airlines.

Looking back into the past, undoubtedly PIA has a rich and glorious past. However, over politicisation within the organization resulted in overstaffing which not only eroded the profitably of the national airline but also produced a culture of lethargy, ineffciency and unwilling workers. The declining interest of the management in customer services was reflected in the poor maintainance of the aircraft, uncleaned bath room, and dilpidated seats of the planes.

Ultimately, once the pride of the nation, PIA became a liability on the exchequer like other public sector organization which make huge losses every year.

The cabin crew became rude to the passengers and generally reluctatnt to serve the customers spontaneously. All this earned a bad name and image for the organization, however, the corporation managed to survive under the umbrella of protection and mainly because of monopoly enjoyed by PIA in the past. the situation is, however, changing fast altogether. The arrival of the private sector airlines has now posing serious threat in every segment of the aviation services.

After the events of September 9/11 while almost all major airlines were severally hit especially in the United States and the Western world due to drastic cut in tourism activity around the globe. The snapped aviation relations with India soon after the nuclear test, also proved a blessing in disguise for PIA giving an option to close down unoprofitable and loss making flights and put its aircraft on the profit making routes. This greatly helped PIA to overcome its accumulated losses and generate profits by operating on profitable routes.

Although the present management has succeeded not only to overcome the losses but has started earning profits, it has expanded its fleet as well as flight destinations from 38 to 50 and in collaboration with Chinese airline is operating on different internaional airlines.

The current move on the part of PIA management to offer its shares to public through stock exchange is expected to help improve its overall performance especially the financial health as well as customer services.

According to Arif Habib, Chairman, Karachi Stock Exchange, there was an appetite in the market and hopefully the PIA shares would get a positive responsive of the investors, especially from the institutional buyers.

Meanwhile the public offering of the PIA's 5 percent shares (57.3 million) received a good response and there are strong indications that with the option of greenshoe the total offering may double to 114.6 million. In addition to the local investors, a large number overseas Pakistanis also showed interest in PIA shares through overseas branches of Pakistani banks.

The subscription process, the allotment of the shares to the successful applicants will be finalized on June 19. The shares would be alloted under a policy of encouraging the small investors, hence the first preference would be given to the applicants of 500 shares.

It is expected that with the growing size of the public share holders, the PIA would become answerable to its shareholders hence developing a transparency in the decisions of the management on various issues.

Infact, there is a need to off-load more government share holdings to the public because the growing say of the share holders in PIA's affairs would help improve its operations in all directions. The decision makers would be answerable to the share holders at least once a year at the AGMs. It is the accountability which helps keeping things to move in the right direction.