PIA is a beautiful brand: Nasser Jaffer, Chairman Pakistan International Airlines

The national air carrier boasts a prestigious past; one illustrated by international milestones and a history that is thoroughly intertwined with this country since the Independence Movement. However its glorious past has been shadowed by apathy and decay, hallmarks of state-owned white elephants.
Plans for its resurrection have been in the works under successive regimes; but these designs have been thwarted by international shocks and domestic upheavals. The current government too has stated plans for privatisation, but its mantra is that the institutional reform to restore the organisation and its profitability must commence first.
To add impetus to that effort, seasoned businessman and chairman of the Jaffer Group, Nasser Jaffer was inducted as Chairman Pakistan International Airlines (PIA). In a recent interview with BR Research, Jaffer who has taken the reins of the national flag carrier without any remuneration shared his vision, resolve and decisions. The following text comprises excerpts from that meeting.
Revival of the national carrier
"The fundamental problem we have been faced with, is apathy", Nasser Jaffer minced no words as the discussion commenced with a stock of the current state of the national airline. "Lack of accountability, political appointees and zero ownership" are challenges that have afflicted PIA for years if not decades and the organisation's chairman concedes as much. But amendments are not awaited, they are already underway.
"If you monitor us in terms of flight schedules, time management, service delivery and other key performance indicators, we are doing better with each passing month. We are the same people, delivering much better results", he contended. Chairman PIA is unequivocal; the revival of PIA is taking place. More specifically, many decisions were reached regarding the procurement of aircrafts, improvement of human resources in early 2000s, but were never implemented. "This government has been able to implement decisions that have been awaiting for years and that is the revival of PIA" he explained.
More aircrafts, higher top line
Jaffer highlighted two key aspects of the revival of the national carrier; expanding the fleet and improving the quality of human resources. "We are not Qatar Airways or Etihad Airways that we can go and buy 40-50 aircrafts in one go; money is a constraint" he said, explaining the rationale behind the decision to lease aircrafts.
He informed that since last February, plans to acquire more planes have been expedited. Initially, three narrow body aircrafts were procured; all of these being Airbus A320. "Now the die has been cast and we will go ahead with the procurement of ten more similar planes" he said. Orders for six of these planes have already been placed and delivery is expected by the end of July while another four will be ordered within a month.
Jaffer also informed that the lone Jumbo 747 operated by the airline will be grounded within a month as it is approaching the end of its cycles. This will be replaced by two wide body aircrafts on wet lease; both being Boeing 767, a plane that is currently not in its fleet. "The advantage of a wet lease is that the aircrafts will come with crew and maintenance so we do not have to manage those issues on our end for these wide body aircrafts."
At present, PIA's personnel to aircraft ratio are around 622 permanent employees per aircraft. While acceding that this ratio is higher than most prominent airlines of the world, Jaffer pointed out that PIA performs many functions that many of these airlines do not. He also stated that once the fleet is augmented, this ratio will also be rationalised.
The new influx of planes is expected to continue until at least the end of 2016 by when PIA's fleet size will have more than doubled. "Our foremost priority will be to use these new planes to increase the frequency of flights from existing destinations, and then to also add new destinations including some which we had served in the past", he summed up.
Renewed customer focus
As the discussion shifted to the second aspect of the national carrier's revival, the chairman informed that two groups of 15 PIA employees each from various departments have already completed trainings through Qatar Airways.
"There is a marked improvement in the morale and professionalism of these people and we are confident in their ability to pass on their newly acquired skills and mindset to their peers. We feel very strongly that customer service is the name of the game; they are our bread and butter and we intend to make every effort to improve their perception of PIA", said Jaffer.
According to the chairman, the air carrier will not require a large number of new employees to manage a larger fleet given its existing hefty manpower. BR Research drew attention to other aspects of cost management including fuel price hedging, an areas where PIA has lacked planning. In response, he informed that PIA is working with a consultant firm that provides monthly advisory on fuel hedging but that no fuel hedging is currently being considered nor are there any existing options on the portfolio.
Hajj operations
The national flag carrier's responsibilities include managing bulk of pilgrims that travel to Saudi Arabia each year. Preparations for this year are in top gear; this year with an added emphasis through the appointment of a Chief Co-ordinator for Hajj operations. Captain Anwar Adil, a PIA veteran has held meetings with Ministry of Religious Affairs, DG Hajj and counterparts in Saudi Arabia. "All told we are planning for 55,000 hajjis", said Jaffer.
He also added that "the 767s being acquired on wet leases will be used to run Hajj operations and other regional routes." The wide body aircrafts will accommodate a higher number of passengers resulting in higher fuel efficiency.
Aviation policy
Discussing the hits and misses of the recently announced aviation policy, he lauded the decision to allow duty free import of aircraft parts and equipment. "Government should recover taxes from the industry's operations; but the growth should be encouraged by allowing spare parts and equipment without added burden of taxes" he said, adding that this has been understood by all stakeholders and will prove bountiful for the domestic aviation industry.
"We do not want to shun the open skies policy because that would deprive the people of Pakistan from being able to choose their best option. But the government has to make sure that there is no dumping in this industry by others who are subsidising their services" he said, adding that some protection may be indispensable for PIA.
Towards restructuring and privatisation
"Legacy loans" are weighing down on the profitability of the air carrier. The organisation's total debt currently runs in excess of Rs95 billion. This means a cost of Rs3.3 billion a month, just to finance these loans. This cost is separate from operational costs.
Yet the fall in international oil prices has allowed the organisation to report profits in first quarter of the current fiscal, for the first time in five years. The oil price breakeven stands around $68 per barrel. "This performance has been achieved with a very limited fleet for an airline the size of PIA. Once we have more aircrafts, the top line will be that much better", he contended.
Regarding the privatisation of PIA he commented that, "If we look at what has transpired in the case of HBL, UBL, PTCL; the government does not interfere in day-to-day management affairs once it has brought in a strategic partner. Therefore all of those organisations have flourished. Nobody knows what the future holds, but prior experience shows that allowing minority shareholdings by strategic investors has helped companies to flourish."
Citing the example of "PIAIL which is successfully running to hotels profitably", he said that other business verticals within PIA have, in the past, performed services for other airlines in addition to PIA. "Creating strategic business units, each with its set of targets makes a lot of sense."
Concluding the discussion, chairman PIA took stock of wrongdoings reported in press by stating that "we want all the feedback we can get to improve ourselves. We only request that wrongdoings of few individuals should not be attributed to the entire organisation. ""PIA is a beautiful brand and we all have to work together on its revival."