Overstaffing & Rising Fuel Cost Incurring Heavy Losses

Nov 05 - 11, 2007

Zafar Ahmed Khan, Chairman Pakistan International Airline (PIA) was looking quite disturbed at the Press Briefing last week with the financial performance of the national carrier suffering a loss of around Rs.1 billion every month during the current financial year.

During the last quarter ended September 30, 2007 the airline suffered a loss of Rs3.2 billion while the performance in the previous quarters was also not different from the last quarter under review. In fact, the carried forward losses so far accumulated to the tune of Rs35.5 billion while the end of the tunnel was still not in sight. So far the government has subsidized the losses in one way or the other but how long it would sustain is a big question mark.

Contrary to the general practice of hiding the facts, Zafar Ahmed Khan however had courage to admit the ground realities instead of trying to paint a false picture about the organization which is facing the accumulated losses of Rs35.5 billion and consequently sparing a major chunk of its revenues on financial charges to the banking sector.

Zafar Ahmed Khan, Chairman PIA, accompanied by Deputy Manager Director Umar Ghafoor, however did not speak much about overstaff, the real burden on the resources of the airline. Currently PIA has workforce of over 18000 one of the major reasons behind the losses incurred by the national airliner. Replying to a question regarding possible downsizing in the organization he in a way declined to answer as he was avoiding to take up the issue in public obviously to avoid any sort of industrial unrest within the organization. But the fact remains that having such a large number of staff liabilities it looked hard to become commercially viable unless some practical steps are taken. Commending on the question of downsizing in the airline, he said in a very mild told that it was not on the priority list of the management. He however conceded that on one hand the skilled and technical staff was still needed in the airline, while on the other hand the strength of non-technical and non- skilled work force was in access. On the question of hue and cry being raised by the engineers in the airline and a considerable number of them have already left for better jobs in the Middle East where around 5-6 new airlines are coming up, he said the management is holding a dialogue with the engineers which have reportedly gone on go slow for pressing their demand particularly for raise of the wages. Zafar Ahmed Khan said that the management was in touch with the representatives of the engineers and trying to convince them to sort out the issue especially on the back of financial crisis being faced by the airline.

When asked to identify causes of the losses, PIA chief attributed to various factors including loss of revenue on UK flights. It may be mentioned that Airblue, a private sector airline was granted licence for operating Manchester flight from Pakistan which has grabbed a big market share. Another factor he pointed out the decline in Umrah traffic due to difficulties created due to visa policy for Umrah. It is interesting to note that despite an open sky policy, PIA still enjoys a strong government protection on various revenue generating routes where the private sector airlines are not allowed to operate. The best example of such routes is the flights between Pakistan and Saudi Arabia the most sought after sector in the airline business. On this prize route which also include an annual traffic of over 130,000 Hajj passengers besides capacity flights round the year.

Apart from fall in traffic as referred by the Chairman, the most concerning issue was ever-increasing fuel prices eroding the profitability of the airlines especially like PIA which is operating with a fleet comprised of old aircraft. It is worth to note that there is a boom like situation in airline business around the world and those airlines which are making profit despite abnormally increased oil prices; they are making profits due to fuel efficient fleet of newer aircraft.

Realizing the importance of fuel efficiency in aircraft, PIA was also on its way to buy new aircraft to get rid of the old one. In this respect PIA has already acquired Boeing 777, and currently waiting for induction of new Airbus-A320 while old fleet of Fokker have also been replaced by ATRs.

As earlier said boom in airline industry has created a great demand for new aircraft and the two major companies producing Boeing and Airbus have orders for next five years. Hence acquiring new aircraft is a great achievement for the airlines in the business. It is interesting to note that the private sector airline Airblue had to wait for more than a year to acquire new aircraft for introducing the Manchester flight from Pakistan. It has more new destinations to introduce yet it is just waiting for its turn to get the new ones.

The PIA Chairman after the conference while talking to PAGE said that in his personal point of view he was not against the privatization of the airline. Actually, the government has rightly admitted that doing business was not the job of the government, let the private sector allow to prevail in the business arena as practically speaking doing business is the job of the private sector in the real sense.