Adviser to Prime Minister on Institutional Reforms and Austerity, Dr Ishrat Husain has proposed to the federal cabinet bifurcation of Pakistan International Airlines (PIA) into two companies - one as a new core business operating company without any debt while the other as a non-core company where all liabilities and debts can be parked. He considers this as the only viable option for the revival of the national carrier.
The adviser also highlighted the strengths of PIA such as its rights over lucrative routes secured during its golden period and the optimism to encourage and target nine million Pakistani expatriates to travel through the national airline.
During that federal cabinet meeting, the PIA CEO revealed that the total debt of the airline stood at Rs. 400 billion with annual interest payments of Rs. 24 billion.
The proposal of the adviser could be based on financial wisdom, but one is intrigued to wonder how moving losses and liabilities from one head to another will make the two evaporate from the books of the government and whether the new company free from debt will turn out to be a profitable entity considering the pathetic operational and financial status of the national airline.
Furthermore, the strength of PIA, highlighted by the adviser such as its rights over lucrative routes secured during its golden year is no longer there. Since a couple of years, PIA has walked out of many lucrative routes, giving way to competing carriers. Whereas, whatever meaningful routes were left out, PIA got barred from operating on them due to the fake license debacle. This make it difficult to encourage and target nine million Pakistani expatriates to travel through the national airline.
The answer to the problems of PIA has to be found from a deeper look into the size of its debt and the amounts of interest payments. Parking debt and losses is an easy thing; it's only a matter of financial swapping and optics. The difficult one is to sincerely dig into the complex and multiple causes of the PIA debt and losses and to come up with a realistic strategy to address them.
As things stand today, the revival of PIA appears extremely challenging in view of the global and domestic but profound dynamics of the aviation industry in the midst of COVID-19 pandemic.
PIA's issues are further compounded by years of misgovernance, bureaucratic and political influence and extremely poor financials.
The incumbent government appears to be in a flux to privatise PIA or rejuvenate it.
PIA, like all carriers across the world, by all accounts, is a stand- alone business enterprise exposed to global and domestic market dynamics of competition, service and profitability. The golden era of PIA lasted till it was recognized as such by the government. Thereafter, over the years, the entrepreneur soul of the airline was sucked out and replaced with bureaucratic, political and vested interest controls. The result is before all of us. If there is an iota of chance for PIA to stage a comeback then the government has to go back to the governance regime of its much remembered golden era.
(The writer is former President, Overseas Investors Chambers of Commerce and Industry)
Copyright Business Recorder, 2020
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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