What ails PIA

As reported in the media government has taken off PIA and Pakistan Steel from privatization list. These are our most prestigious costly and strategic assets and can be revived if the root cause is tackled. Our democratic Prime Minister Imran Khan is requested to go through the contents of this article so that he gets the complete picture how these two costly assets have been ruined. For Pakistan Steel this should be handed over to Russians and employ all old trained retired engineers to revive this huge steel industry
Now coming to PIA when new aviation policy was announced the apprehensions expressed are coming true and result is before us. PIA has gone in to further mess, CAA has been rendered beyond repair, Steel Mill is closed. Introduction of open sky policy is good thing but while implementing it our own interest should have been protected but no such thing was done and this was intentionally overlooked to safe guard personal interests. So called liberalization policy has been adopted in order to benefit the foreign carriers in general and Middle Eastern carriers in particular no such thing was done, as a result PIA kept nose diving with passage of time.
How foreign carriers are siphoning our foreign exchange that runs in to billions of dollars annually is a very serious matter and needs immediate attention before our own airline is permanently drowned in deep sea. You cannot employ a dental surgeon to carry out heart surgery, like wise our state enterprises are run on whims or through cronies who keep personal interest over all other considerations whereas it requires thoroughly professional team with clean record. Recent appointment of Air Marshal Arshad Malik as Chairman PIA & MD is a good step but unless root cause is attended nothing will change.We have seen even Air Chief Marshals in PIA but with no success
How the nation is being deprived of billions of dollars every year does not require holding seminar nor it is a rocket science, it is a very simple matter and explained in succeeding paragraphs. We introduced open sky policy to invite Foreign/Private airlines to generate more revenue. It is true we have more airlines we earn more revenue. But while allowing free hand our national interest was never considered and everything went in the favour of foreign airlines landing at our airports.
Let us analyse loss being incurred to national exchequer through present aviation policy. Capacity mounted by foreign carriers (Emirates, Fly Dubai, Etihad, Qatar airline) for UAE ex Karachi is approximately 5000 seats daily. The major share is with Emirates with 50% market with daily 5 flights to Dubai from Karachi . Yearly capacity floated by Foreign carriers ex Karachi for UAE is approximately 18,25,000 seats (365×5000).
Assuming 75% seat utilization by these carriers throughout the years comes 1368750 seats. Out of this 60% is utilized for UAE it comes down to 821250 seats. Remaining 40% is beyond UAE for example UK, Europe, USA it comes to 547500 seats. On an average if tickets are sold for Rs 36000 KHI-DXB-KHI and converted at present rate in dollar value amount comes to $ 222 million. On an average if tickets are sold for Rs 100,000/ KHI-UAE beyond other destinations in dollar value it comes $ 411 million. The total dollar value comes to approx USD $ 633 million, depletion of valuable foreign exchange only from KHI UAE sector. This may be pointed out here that the above working is done on bear minimum numbers and working is based on KHI-UAE foreign carriers only.
Roughly the average yearly depletion of Foreign Exchange from Pakistan is in the bracket of around 6 to 8 billion dollars , if other northern stations are constituted such as Lahore ,Islamabad, Peshawar, Faislabad, Multan etc the figure goes little higher
Impact of foreign operators on Pakistan aviation industry/economy
The biggest impact is the depletion of foreign exchange reserves as all foreign operators convert their sales in Dollars to remit to their country. Unfortunately it is all Pakistani traffic which travels on these foreign carriers, so it’s our passengers who are compelled to use foreign carriers since there is no adequate capacity mounted by local players. Imagine if these carriers are restricted to operate with 50% traffic rights controlled then it would reap positive results to our local industry in terms of:
a. Increase in foreign exchange reserves.
b. Expansion in local industry, thus creating direct job benefits for the people of Pakistan.
c. Direct contribution on GDP growth.
d. Expansion in Aviation infrastructure, such as Engineering set up, IT, Pilots, Ground Handling, Passenger services, etc.
e. Approximately 100,000 to 150,000/- new jobs shall be created if industry is expanded to cater this traffic.
Current government policy is unfriendly for aviation industry
The National Aviation Policy is extremely damaging for the industry due to following reasons:
a. While formulating aviation policy major stake holders were not taken in to confidence
b. The age restriction of the aircraft has resulted in heavy capital investment in the business which does not make the business viable as return on investments are poor.
c. Due to security concerns in Pakistan owner of aircraft are reluctant to lease their aircraft in this region. Even if they agree the Lease cost plus Security deposits are extremely high which makes the cost of operations too high. Competition on the other hand is extremely tough as all foreign carriers are established and there is no security threat in their region. Moreover Carriers like Eithad, Qatar, Emirates are supported by their Government and since they have oil based economies and their fuel is subsidized. Fuel in aviation constitute approx 35 to 40% of the overall operating cost.
The people at the helm of aviation in Pakistan have joined hands with the Middle Eastern carriers to God forbid uproot PIA.
How to revive the aviation industry
a. Age of the aircraft restriction should immediately be abolished.
b. There should absolutely be no compromise on the standards as per ICAO rules and if aircraft Is airworthy it should be allowed to be inducted.
c. Government should immediately control the foreign carriers and Reduce the traffic rights
d. Concessions should be granted to the Local Carriers in the form of taxes,duties (in particular 17% GST on Domestic sector services), parking, aeronautical and CAA charges applied by different departments.
d. The regulatory authority should ensure a level playing field for the operators and strict control on Traffic Rights should be implemented.
e. Traffic rights to be granted to foreign operators under the compliance of “Bilateral Air Services Agreement” only.
f. No foreign carrier should be given additional Traffic Rights.
g. The regulatory authority should ensure and safe guard the interest of the Local Carriers first.
h. Those foreign carriers who are operating frequencies in addition to the BASA( Bilateral Air Services Agreement) , commercial agreements to be initiated and royalty to the Local Carrier to be provided.
i. There should be no compromise on safety standards and all private operators operating in country should follow the industry benchmarks.
j. For the development of aviation infrastructure offices and proper allocation of space to be provided to the Local Carriers at the airport and its vicinity.
k. Once a level playing field is set the regulatory authority can invite open competition, but initially the national carrier interest has to be safeguarded.
l. Over and above if any additional rights are given to foreign operators, then local operators should be given ROYALTY per passenger.
m. Since there is a sizable chunk of passengers which needs to be transported from point A to B, then local bank should support the operators in terms of aircraft financing/leasing.
n. Local banks could play a role of guarantors / head lessor’s.
o. Separate core activities from non core activities
p. Establish PIA Foundation and handover all non core issues to foundation. It will be self revenue generating unit and there will be no burden on PIA. Ramada Hotel earning huge profit , likewise Hotel INN is liability.
The people of Pakistan should be compensated with realistic cheap fares which would give them value for money, convenience for direct travel from point A to B, comfort, reliable service and a sense of pride travelling with their local carriers. This would further expand the travel market base in Pakistan locally and internationally both.
It will not be its passengers but the whole workforce of the Aviation Industry who had strived so hard to sustain the airlines during hard times should have a sense of belonging and achievement to see organizations grow, prosper and flourish and not land in foreigners hand under the cover of privatization.
No PIA employee irrespective of its designation should get more salary then the Chairman PIA.( excluding crew staff). Union activities to be strictly in accordance with Industrial ordinance. Extra staff at higher level may be dispensed with. Merit coupled with efficiency and good discipline should be the only criteria for promotion. Sometime tough decisions are to be taken in the national interest. We wish good luck to new Chairman PIA and pray for his success.

The writer is a freelance
journalist and defence Analyst.

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