PIA subsidiary to be set up with clean balance sheet

In first phase 40pc efficient workers, 40 aircraft
and other assets to be shifted to new subsidiary; govt
can’t afford to waive Rs300 bn; employees willing
to do their jobs not to be sacked

ISLAMABAD: Rejecting demands to take outstanding loans of Rs300 billion of PIA on official books, the Ministry of Finance has prepared a plan for establishing a subsidiary, shifting its assets and making its balance sheet cleaned and taking 40 to 50 percent employees on its strength to run the new entity on professional and efficient lines.

Official sources confirmed to The News on Sunday that Pakistan’s economic managers were quite perturbed during recently concluded review talks with the IMF at Dubai when Fund’s mission chief Herald Finger informed them that the national flag carrier, PIA, was again facing operational losses in recent months once after achieving turnaround by running into operational profit a while ago.

The Pakistani team promised to reply in detail after ascertaining and verifying facts.“One decision has been taken for sure that the separate entity of PIA’s subsidiary will be established with clean balance sheet which may attract potential strategic partner to invest its money to run the business in efficient manner,” said the top official.

“We cannot afford to waive off or take on our books outstanding loans of Rs300 billion as demanded by some opposition parties’ leaders as financial management did not allow moving ahead with such easy decisions.

They said the PIA would be distributed into two entities with good balance sheet and bad balance sheet. “We will not sack any employees who are willing to do their jobs,” said the official.

In the first phase, around 40 percent efficient workers will be shifted on the strength of the new subsidiary of PIA by transferring existing 40 planes and others assets on its balance sheet. Then the potential strategic partner will be sought through transparent mechanism.

The economy of scale will be increased as the new subsidiary will be assigned to double its fleet in one year enabling them to absorb 40 percent more employees who are willing to perform their duty in professional manner.

The existing PIA management and its Board had failed to deliver because despite massive reduction in oil prices which declined from $106 per barrel to below $30 per barrel and decrease in interest rates its losses could not be controlled. It is perceived that that increased numbers of employees is the major problematic area but it is not alone as the salary bill of PIA employees stands at within the range of 20 percent of its expenditures while other international airlines this expenditure is even slightly on higher side.

“There is need to analyze reasons for remaining 80 percent expenditure that shows structural problems being faced by the PIA thus causing losses,” said the official.

For instance, the PIA Board is a classic example where no one possessed experience in aviation side but all of them with their extended families enjoyed perks of free ticket for international destinations with free stay.

A few years back, one federal secretary managed to hold over 70 meetings of one board in Karachi in just one year because he wanted to visit Karachi almost twice a week.

When former Deputy Chairman Planning Commission Dr Nadeemul Haq, who is currently living in the US, was contacted, he said a lot of friends were assigning all the blame for PIA failure to the staff. “I think we must have an inquiry into the downfall of PIA and assign the blame properly.

He said there was need to ask questions such as who had appointed the board of directors and senior management of PIA. Was it done on the basis of competence? Are these people blameless?

He said, “We all know how board members and their families’ enjoyed free joyride of world travel for decades. It was prized position and people vied for it. To be awarded a PIA Board position was a matter of much jubilation. What did they do?