ISLAMABAD: The Aviation Division is said to have proposed restructuring of PIA, relaxation in PPRA rules for immediate decisions and hiring and firing powers to make the airline's bailout package successful.
Official sources told Business Recorder that recent global recession of aviation industry due to Covid-19 situation notwithstanding the ecosystem for the local aviation industry in general in Pakistan may be improved through a number of measures which will naturally benefit the national flag carrier as well.
The Aviation Division has submitted the following recommendations to help domestic airlines improve their performance: (i) Civil Aviation Authority should play a more proactive role not only as the regulator of the local aviation industry but also as the interface with international regulators and agencies. More focus needs to be placed on ensuring that Pakistan remains compliant with the regulations of ICAO (e.g. State Safety Program etc.) as well as those of the local regulators at destinations of interest. Appointment of an aviation industry professional from the market as DG CAA coupled with organizational restructuring of the Authority will go a long way in achieving this;(ii) Aviation Division may ensure that grant of slots to foreign carriers is strictly on the principle of reciprocity, so that the natural advantage of local airlines to provide direct point-to-point connectivity to the Pakistani diaspora is optimally leveraged to our advantage;(iii) airports infrastructure in general and technical equipment in particular need to be upgraded to facilitate the aviation companies. A case in point is the CAT-Ill equipment required for landing during smog which is installed only at Lahore airfield. Resultantly, flight schedule is severely disturbed during the winters each year. For this purpose, the ongoing exercise of bifurcation of CAA into a regulating authority and an infrastructure development company needs to be completed at the earliest and; (iv) reportedly, review of the Aviation Policy is in the offing and recommendations are being developed in this regard. As a policy, PIA and other local aviation companies should be actively consulted whenever such exercise is carried out so as to address their concerns.
According to the Aviation Division, during last three decades, few trends have become quite obvious in the airlines business. Most of the state airlines have been privatized. These airlines are now merely using the old national names/symbols like British Airways, Japan airline, Lufthansa, Qantas and few US airlines. These all are now owned by private fund managers and investment houses. Airlines, which are in the public sector like Air India, Malaysia Airline, South African Airways etc are making heavy losses. Around 20 airlines of the public sector have closed down in last thirty years and many in the private sector. Only airlines of UAE are in public sector, but these are also being operated by the Fund Managers, not per say by their national governments, which provides the flexibility to take decisions" and operate purely on commercial terms.
The airline industry has become a business with modicum and declining margins due to burgeoning competition. In Pakistan, somehow, the ecosystem required to take bold commercial decisions has fast lost its ground. GoP particularly Aviation Division and CAA would have to take the responsibility to remove the unnecessary hurdles impeding the commercial operations of Pakistani airlines.
Recommendations specific to PIA - Implementation of PIA organizational restructuring plan needs to be closely monitored, not only to track the progress but also to facilitate the management in overcoming difficulties if any. For this purpose, a Committee may be constituted after considering the options for balance sheet restructuring or alternatively PIA may be asked to present a quarterly progress before the Cabinet Committee on Reforms (CCoR) for review.
Balance sheet restructuring is the biggest issue for public exchequer as far as
PIA restructuring process is concerned. In this regard, an earlier decision is of much significance as financial projections have been made assuming that the process will de completed by the end of year June 2021. To this end, Aviation Division may finalize the proposal and initiate summary for ECC in due course with beforehand consultation with Finance Division as Finance Division has to take up the matter with the IMF in the first place.
The Aviation Division being the administrative Division maintains an oversight over PIA performance, and it is equally important that company should operate as an autonomous corporate organization. Therefore, PIA Board should be allowed to act in an independent manner for the best interest of the company with little lateral interferences. Administrative reorganization that includes appointment of a Chief Commercial Officer (CFO) and experts in aviation industry may be necessary in light of the lean and focused business opportunities. Expensive office spaces and residential accommodation at stations from where the PIA is withdrawing itself should be immediately disposed of. Health insurance in place of the PIA provided facilities and the existing reimbursement system would minimize the abuse and inflation of medical expenses. Other opportunities for cost savings through robust internal controls and automation should be explored.
The procurement through lengthier PPRA-prescribed procedures puts PIA in disadvantageous position in comparison to its competitors. This is especially true in case of narrower windows of opportunity requiring immediate decisions. In order to acquire necessary agility to respond to market dynamics, it is imperative for the PIA, with the approval of Board, to adopt an alternate procurement manual. However, if it is not possible due to legal reasons, PPRA Board may consider the case and recommend appropriate exemptions/relaxations to fulfill PIA needs. In the absence of procurement and hiring and firing flexibility, the success chances of the bailout package are slim.
Copyright Business Recorder, 2021
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