Jan 30 - Feb 5, 20

Today, Pakistan is just paying the price for the prestige of having an international air carrier, which heavily relies on bank borrowings and government's bailout packages.

The national carrier Pakistan International Airlines (PIA) is currently facing difficulty in handling domestic and international schedules, as the grounding of planes has badly affected the flight schedule.

In the past 20 years, the airline's financial health has continuously deteriorated. With burdened balance sheets, PIA is in chaos. Its accumulated losses in just three years soared to nearly Rs100 billion from Rs73 billion in 2008. Last year, its expenses on fuel increased to Rs44.7 billion from Rs31.5 billion in 2009. The government has announced Rs20 billion bailout package for national carrier.

PIA recently grounded its nine aircrafts for want of spare parts adversely affecting the airline flight operations. The grounding of aircrafts is the result of a controversial business deal the PIA signed in October with Transworld Aviation, a Dubai-based US firm, which failed to supply aircraft spare parts to the PIA at a time when more than 109,000 Hajj pilgrims were expected to travel with PIA.

Critics say that PIA has become white elephant, which is perpetual drain on national exchequer due to rampant corruption that has also eroded its efficiency. The successive governments in Pakistan kept this white elephant over the years through cash injections at the expense of public money.

The cabinet committee on restructuring (CCOR) of public sector enterprises (PSEs) has finalized a Rs20 billion bailout plan for PIA under restructuring plan for revival of national carrier. The plan is expected to bridge the widening gap between expenditures and income of the PIA.

Prime Minister Yousuf Raza Gilani however refused to inject Rs20 billion in PIA without a clear roadmap for the national carrier's financial and administrative restructuring. Gilani constituted a committee under the chairmanship of finance minister Dr Hafeez Sheikh that will submit a report outlining a roadmap for PIA to the prime minister.

PIA is reportedly facing a ban threat to its operations in Europe for the second time. The European Union has expressed safety concerns about PIA aircraft due to systematic deficiency in aircraft maintenance. European Aviation Safety Agency (EASA) could impose the ban on the airline operations in the region after a careful examination of PIA aircraft, which has been started. In 2007, PIA flights to the 27-nation bloc were banned for the first time over safety concerns about the condition of PIA's fleet of 747s and Airbus 310s.

During the last six months, the PIA aircrafts are increasingly developing faults or lacking safety measures apart from failing to clear the safety tests at foreign airports.

The French Civil Aviation Authority in August last year also warned Pakistan's Civil Aviation Authority (CAA), the regulator, to overcome the shortcomings detected by the inspectors of safety assessment of foreign aircraft (SAFA) on a PIA Airbus A-310, failing which the airbus operations could face yet another ban in European air space.

Last year, a PIA's aircraft had been detained at a French airport owing to safety reasons citing some 39 snags including fuel leakage.

The passengers were evacuated in emergency when the safety team detected a fuel leak from one of the engines of Airbus A-310 (registration AP-BGO) flying from Paris to Lahore on August 9, 2011.

A final decision regarding the ban is expected to be taken in the EASA's next meeting to be held in March 2012. EU's aviation guidelines are considered among the strictest in the world.

Critics say that the CAA officials have compromised the safety procedures and other requirements to favor their colleagues, as it lacks proper independent human resources. Mismanagement, overstaffing, and corruption have turned PIA, the country's flag carrier, from once prestigious carrier in South Asia into a burden on national exchequer.

PIA remained the only operator for many years since its creation in 1955. Pakistani aviation market however witnessed a major growth in the early nineties when four new private airlines launched their operations.

Critics say that the absence of any policy at the government level to promote the aviation industry has exacerbated the problems adding to woes of the flagging industry, as only 18 out of 42 airports are functional and just nine are equipped to cater to international traffic.

In the last fiscal year, the country's total passenger traffic rose to 14.1 million from 14 million in the preceding fiscal. Most of the growth has come from international traffic as the number of domestic passengers dropped to 6.3 million from 6.6 million.

Three private airlines- new Indus Air, Bhoja Air, and Pearl Air are all set to launch their flight operations in Pakistan on domestic routes this year to meet the demand after the number of air travelers witnessed a sharp rise in one year.

The number of air passengers within the country jumped to 3.6 million in fiscal 2011 compared with 3.5 million in fiscal 2010. Indus Air has been awarded a license to fly while Bhoja Air is re-launching its operations after a gap of 12 years. Pearl Air was among the airlines, which were issued licenses in the 1990s when Pakistan adopted the open-sky policy.

The major reasons behind PIA's worsened financial position have been the ineffective marketing, open sky policy, increased competition, EU ban, brand damage, inability to pass through high oil prices, failure in hedging oil prices, use of old planes, oversized establishment, ailing corporate culture, negative equity and huge debt servicing bill. PIA is still undergoing an operational, financial re-structuring and modernization activity to further improve its customer service and performance.

Political and security situation in the Asian region also adversely affected the international operations of the PIA.

In 2001, Islamabad's mounting tension with India curtailed PIA's extensive connections with the neighboring country. In January 2002, India banned PIA from its airspace. Owing to the restrictions, the Cathay Pacific stepped in to carry PIA traffic to Bangkok, Hong Kong, and Singapore. The political instability and military volatility in the Middle East and Central Asia continued to affect the operations of PIA.

The US-led attacks against the Taliban in Afghanistan also forced the most of the foreign airlines to cancel their scheduled flights to Pakistan and 29 of them closed their offices in the country in September 2001. The air strike against Taliban also affected PIA, as seven of Pakistan's airports had been closed and its airspace was declared as a war zone. PIA lost Rs2.09 billion on sales of Rs47.11 billion in the year ended December 2001.