The national carrier, Pakistan International Airlines, is negotiating a mind-boggling US $2 billion deal at list price with Airbus and Boeing for the purchase of 27 new single-aisle aircraft within the next few weeks. Aviation circles term this order a "princely order", considering the fact that airline's loss before tax had increased to Rs 39.729 billion in the year ended December 31, 2008 as compared to Rs 13.070 billion in the corresponding period in 2007.
Although, its after tax loss declined to Rs 2.048 billion in the quarter ended March 31, 2009 as compared to Rs 5.487 billion recorded in the corresponding in 2008, its A class ordinary share of Rs 10/- closed at Rs 3.32 on the Karachi Stock Exchange on June 30, 2009. Not an encouraging reflection on the financial health of the airline.
Meetings with Airbus and Boeing have already taken place and the deal would go through once PIA receives final offers from the two leading aircraft manufacturers. Details of the prospective purchase order were revealed to Flight Daily News (published from Paris) by Managing Director, PIA, Captain Aijaz Haroon, during his visit to the 48th International Paris Air Show, which took place from June 15 to 21 at Le Bourget Exhibition Centre.
The deal would be a purchase-lease mix. He was quoted by Flight Daily News as having said that the airline had completed evaluation for the expansion of its fleet and was presently looking at Airbus A320 and Boeing 737. The PIA Managing Director said that nine firm orders would be placed with nine purchase rights, and take nine from leasing companies.
Deliveries will start at the end of 2010. He also signed a deal at the show with Thales, a global technology leader for the aerospace, space, defence, security and transportation markets for a RealitySeven Boeing 777-300ER full-flight simulator, which will begin operating at PIA training centre in Karachi next year. It will be used both for PIA training needs and for third party work.
Currently, PIA uses 777 simulators at the CAE training centre in Dubai and British Airways in London for its training. While it is true that the airline needs narrowbody aircraft for short domestic hop on routes like Lahore-Islamabad or Islamabad-Peshawar because these are fuel efficient, experience has shown that in the past it has never been able to come out of trouble despite badly needed huge investments in its fleet.
In fact, during the past 10 years, PIA managing directors had been replaced for their failure to revive the ailing carrier. According to PIA insiders, no input had been taken from the engineering or pilots as per standard aviation policy in this current deal. For instance, not only does the Egyptian airline take inputs from the pilots, it also has had the cockpit customised according to local aviation standards because their exclusion might jeopardise passenger safety.
Owing to a previous management's blunder, a Boeing 747-400 was bought from Cathay Pacific without soliciting engineering input on PIA's maintenance facilities. The result was that till date engines of the same are removed at the hangars and physically sent to Hong Kong for maintenance each and every time the plane's overhaul is needed. The earlier decision of PIA management to purchase widebody aircraft for domestic use was neither a wise decision, nor was it based on ground realities.
For reasons best known to the management the widebody aircraft were used on short sectors, thereby increasing its operational cost and adding to losses. Needless to mention that airline industry is in deep trouble all over the world due to global recession. Only airlines enjoying monopolies on domestic routes are making some money.
On the other hand, aircraft manufacturers are desperate to dispose of their stocks as many big airlines have cancelled their orders and now aircraft can be purchased at highly cheap rates. The airline is suffering now because of the wrong decision to buy only widebody aircraft that are more efficient on long hops but unsuitable for operations on short domestic routes.
PIA should start a separate domestic airline operation as the Indian, European and American airlines already have done. For example, Indian Airlines focuses primarily on domestic routes, along with several international services to neighbouring countries in Asia while Air India flies a world-wide network of passenger and cargo services.
Not only does PIA need narrowbody carriers for domestic operations, it needs to ensure that the purchase is done after proper home work and after ensuring full transparency in the deal. Other domestic airlines, like Air Blue, mainly operating on domestic and close regional routes are earning money because they are using narrowbody aircraft for this purpose.
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