EDITORIAL: Pakistan International Airlines (PIA), the national flag carrier, one of the three white elephants (the other two being Pakistan Steel and Pakistan Railways), has been increasingly reliant on injections from the taxpayers to meet its rising losses that are attributable to flawed policies.
Nawaz Sharif, an ardent proponent of competition, launched his open skies policy in the 1990s which proved disastrous for the financial health of PIA as the previous policy of reciprocal arrangement was abandoned and the foreign airlines that could offer only one or a maximum of two destinations per day to PIA were allowed 10 to 12 destinations in Pakistan which is a large country with a population of over 220 million.
Ghulam Sarwar, the Aviation Minister, claimed during the question-hour on the floor of the House that the open skies policy cost the airlines 107 billion rupees in 2020 though this claim did not deter him from raising salaries of PIA staff by 25 percent.
Sarwar continues to defend his inexplicably flawed decision to state the government’s intent on the floor of the House that an inquiry will be initiated as out of 860 active pilots for different airlines, 262 did not take the examination themselves and asked someone else to sit on their behalf instead of first holding an inquiry, firing those who had fake licences, and then publicly releasing the information.
As a consequence, he did incalculable damage to PIA’s image and financial fortunes as his accusation not only led to Pakistani pilots employed by other airlines being dismissed but also the suspension of PIA flights to nearly all Western destinations.
Sarwar informed the relevant parliamentary committee in October last year that the cabinet cancelled 50 pilots’ licences except seven which were in court and 32 were suspended for a period ranging from six to 12 months (barring 11 cases in court).
Be that as it may, there is yet another proposal that is in the works which would sound the death knell for the national carrier prompting PIA’s Chief Executive Officer Arshad Malik to write to the Prime Minister and draw his attention to reports that Pakistan has extended domestic rights to a foreign carrier.
The ostensible reason given is that this would attract foreign direct investment (FDI) urgently required by the country as actual annual inflows into Pakistan have been abysmally low, never reaching even 2 billion dollars, and with the 100 percent repatriation allowed outflows have usually outpaced inflows.
This argument notably that an incentive to a foreign company would generate FDI has been used again and again by influential pressure groups to the detriment of local industry with no appreciable rise in net inflows.
Examples of other countries, both in the region and in the West, show that national airlines have been supported in the past. And while privatisation is generally regarded as a policy decision that would support higher productivity and minimise the need to provide budgetary support for the white elephants yet the investment climate has to be right to ensure that the family silver is not being sold at throwaway prices; and nor is competition allowed when the national carrier does not have any capacity to bear its burden.
India for example sold Air India to the Tata group recently after failing to sell a majority stake in 2018 at Rs 18,000 crores with 15 percent to be deposited in the exchequer and the rest to clear the Airline’s debt. Air France and KLM merged to strengthen the financial fortunes of the two airlines.
Insofar as our penchant for foreign direct investment (FDI) is concerned, we need to revisit our policy and restrict such investment in areas of highly capital intensive projects and those that would result in transfer of advance technology and know-how that does not exist and is needed by us.
Copyright Business Recorder, 2022