PIA confusion

Confusion reigns supreme about what to do about Pakistan’s poorly performing national air carrier. While no major action was taken in the first year of the PTI government on reforming PIA, it appears that it is finally being stirred into action. The problems in PIA are not merely financial. The quality of service delivered by the airline has been declining rapidly as well. In a meeting with Finance Advisor Dr Abdul Hafeez Shaikh on Friday, PIA’s president revealed that the management has cut 1,000 jobs as part of the measures to reduce the airline’s operational costs. The trouble is that salary costs constitute a small part of the airline’s operational budget. If anything, cutting down staff creates the space for a much greater fight between the PIA staff and management, which affects the airline service even more. Losses in the airline are due to decades of mismanagement and disinvestment. Putting the failures to overstaffing is a popular tactic that avoids putting responsibility where it must lie.

The government has asked the PIA management to produce a business plan to fix the airline. However, it should be clear that a business plan will need to be combined with investment by the government. This is a key area where the government is both showing a lack of vision as well as financial commitments. It is not clear whether the government is still committed to privatising the airline, like the previous PML-N government, or whether it will choose a different tact. This clarity is crucial before deciding how to proceed. Quarterly performance reports will do little to push the airline into a long-term improvement cycle without a larger plan in place. In the meanwhile, PIA losses have crossed over Rs400 billion in the last decade.

The IMF’s last report suggests that the government needs to sell a minority stake in the airline. However, it should be clear that airlines are not easy to bring to profitability. One need to only look at Pakistan’s private airline market to see how little growth there has been, despite attempts at liberalising domestic air travel. New entrants have not been able to bring in high profits, which means most airlines continue to operate the same routes, instead of expanding them. PIA is still crucial to domestic and international travel for Pakistanis. It is important that the government approaches PIA reform with a serious plan, which includes financial commitments. If it continues to choose half-hearted measures, there will be more problems on the horizon.