PIA'S AGENDA FOR FUTURE DEVELOPMENT
New chairman has ambitions to regain the lost glory
July 23 - 29, 2007
PIA, the national carrier is currently going through a challenging time. The management continuing its accelerated emphasis on high standards of safety and engineering maintenance.
Zafar Khan, newly appointed Chairman of PIA in his first interaction with media last week while discussing background of the airline said that 2006 has been an extremely challenging year for the aviation industry. Most of the airlines continued to experience pressure on their profitability. According to IATA reports, the IATA member airlines suffered a loss of over $41 billion during the past five years mainly because of un precedented increase in fuel prices since early 2005. Some of the airlines managed to minimize additional fuel cost through timely fuel hedging, whereas PIA had to fully absorb the additional cost.
The imposition of operational restrictions by European Union on some of PIA AIRCRAFT DURING March 2007 has been of deep concern to the entire nation. PIA wishes to follow maintenance practices consistent with the best global standards. The lapses pointed out b y the U Inspectors were a matter of serious concern and now have been addressed on the highest priority, leading to EU Air Safety Committee's modification whereby it finally notified on July 4, 2007 stating that the operational restriction imposed on Pakistan International airlines since March 2007 is modified in order to allow operations into the Community with specific Boeing 747 and Airbus 310 aircraft in addition to its Boeing 777 fleet already authorized. As consequence, the aircraft mentioned below have been removed from EU list and allowed to operate top EU destinations. PIA aircraft restored operations into the community include three Boeing 747-300, two Boeing 747-200, and six Airbus A-310. On a more positive note PIA has achieved the ISO-0001: 200 Quality management System (QMS) certification of its key service delivery functions and interaction with passengers.
The ED operating restrictions on some of PIA aircraft now stand modified effective 06.07.2007, which augurs well for the airline. The airline also introduced cost cutting measures to at least partially offset its financial crisis. GOP support and airline's internal financial restructuring shall lead to a complete reversal of existing problems, moving into multiple directions of positive and development specific achievements. At the same time, the Airline Management and the Board have agreed on a plan to accelerate the modernization of its fleet through cost effective means so as to aim for an average fleet age of around 10 years.
Pakistan International Airline has chalked out a specific action plan that unfolds future strategy for development of the national carrier.
In his first media briefing Zafar Khan, the newly appointed chairman of PIA outlining the flight operations development plan said to combat EU operating restrictions PIA finalized a fully charged recovery and restoration plan. PIA's operational manpower associated with aircraft refurbishment has been regrouped to a motivated functioning to meet EU standards. Growth and development plans have been substituted by recovery and rehabilitation strategies, modifying future strategy, cost cutting measures have also been introduced to offset all negative implications. These cost cutting measures focus a more rigorous implementation of existing operational procedures with special emphasis on flying direct routes whenever and wherever possible in order to save fuel.
The rationale for strategic engineering development is "continued airworthiness of the airplanes and safety of PIA customers keeping in view PIA profitability". He said our Strategy is "Root Cause analysis with Recovery Plan". Engineering Department has got assistance from Aircraft manufacturers (M/s Boeing, M/s Airbus) and also secured support from a professional body A VISA (Aviation Safety Agency) having experience in similar organizations/situations. After on-site assessment by three professional bodies of international repute, root cause analysis has been carried out and recovery action plan has been developed on their advice, focusing Training Policy, Aircraft Structural Discrepancies, Cabin Discrepancies, On board Documents and Weakness in Quality Assurance in Engineering.
SALES DEVELOPMENT PLAN
In order to make PIA operations viable and to offset the heavy losses incurred in the preceding year, a Business Plan for the year 2007 was approved by BOD wherein the Sales Department has been given the revenue target of PKR 74.1 Billions which is a 32% increase over last year sales.
Accordingly, the department has made a region wise analysis of the strategy and expansion required in each of the respective areas, which would enable the achievement of the target.
CORPORATE DEVELOPMENT PLAN
In order to improve overall product offering, PIA is endeavoring to reduce and maintain its average fleet age to below ten years. To achieve this objective new aircraft are planned to be inducted and old aircraft will be phased out. 737-300 fleet is planned to be replaced. After detailed evaluation 737-800 from Boeing and A320 from Airbus have been short-listed. Final decision in this regard is expected shortly. In the next phase, other aging aircraft like A310, B747 are also planned to be replaced as per approved strategic plan 2008-2012. In addition PIA also plans to acquire additional ATRs.
For the year under review (2006) the airline's expenditure rose because of increased operating expenditure in 2006, increase in fuel cost by Rs.6.9billion, 26% higher than last year.
Since mid 2005, the crude oil prices in the world market have been, witnessing abnormal increase, which reached its peak in August 2006 when crude was being sold at USD 78 per barrel. Consequently, the aviation fuel prices also showed sharp increases.
Since PIA 'had not hedged its fuel prices, unlike some other airlines, all the cost increases have been absorbed in the respective period accounts. For the year 2006, our fuel bill rose from Rs.26.5 billion in 2005 to Rs.33.4 billion in 2006, showing an increase of 26% over last year.