Financial restructuring of PIA: Govt should evolve political consensus: survey

ISLAMABAD: The government should evolve a political consensus which is essential for the completion of proposed financial restructuring of Pakistan International Airlines (PIA), an anecdotal survey carried out by Business Recorder revealed.

Sources in Aviation Division stated that the government would divest 26 percent of its equity share to a strategic partner with management control once the restructuring process is completed. The government has earmarked Rs20 billion for payment of PIA current loan in financial year 2020-21 which stood at Rs27 billion in 2019-20.

At present, financial restructuring of the airline's balance sheet is in progress and being supervised by Finance Secretary Naveed Kamran Baloch. Preparation of a strategic business plan for PIA will be submitted to the ECC for approval in the current month. Human Resource's rationalisation plan including offering of Voluntary Separation Scheme (VSS) to employees will also be prepared, whereas non-core functions separation will be done by December 2020.

These measures if implemented would reduce airline workforce by 7000 and help PIA to maintain acceptable 'employee to aircraft ratio' (200 employee per aircraft), which otherwise could only be possible if airline expanded its fleet to 70 aircraft or lays-off up to 8000 employees.

Dr Salman Shah former finance minister said that the PIA's main issue was less planes and more crew. There are almost 500 staff members for one plane when only a crew of 50 is needed to run one plane. So you definitely need downsizing, he added.

"The employees need to be given a golden handshake and ensure that the employees per plane ratio is the same as the top airlines in the world. Whether there is public-private partnership [in the future], or privatisation, it is the politics within PIA that needs to be eliminated first," he said.

Discussion over VSS in PIA, are ongoing under Reforms and Restructuring Programme (RRP) however there has been no progress since last year. The loss earning national flag carrier, which has the highest employee to aircraft ratio (around 500 employees per aircraft) in the world, has two survival options: either to go for massive lay-offs or separate non-core services from the airline, sources said.

Sources said that the RRP has proposed to the concerned authorities to separate all non-core services and establish at least five separate business units for engineering, catering, airport service, etc.

Former economic advisor, Dr Ashfaq Hasan Khan told Business Recorder that there would be strong resistance by PIAs employees unions against the restructuring plan of PIA with backing from Pakistan People's Party (PPP), Pakistan Muslim League (N), Jamat-e-Islami and MQM.

He further stated that opposition political parties should support the government decision of restructuring as PIA cannot survive without budgetary support and has become a burden on the national exchequer. He suggested all the political parties should be on board before proceeding with the restructuring.

The airline currently incurs a monthly loss of about Rs6 billion and spends Rs24 billion per annum on salaries of 14,000 employees. The airline witnessed 10 crash incidents in the last 12 years. The national flag carrier's total debt (foreign and domestic) stood at Rs400 billion on June 30, 2019.

Copyright Business Recorder, 2020