Fifty five years ago, a Saudi Air team came to study PIA. Today someone should come to study on how to acquire and turnaround the ailing airline. Forget about restructuring the company by government herself, the national flag carrier today cannot even publish financial accounts in time due to implementation of ERP system.
We have been hearing about privatization of PIA for ten years. In the process PIA accumulated losses (net equity) ballooned from Rs31 billion in Dec 2008 to reportedly Rs431 billion in Jan 2019. In ten years, the average loss per year (borne by tax payers of Pakistan) have gone up to Rs40 billion - Rs3.5billion per month. Pakistan government could have bought a decent size profitable airline (such as Air France) in Rs400 billion.
Doing nothing for another five years will cost another Rs200 billion. Asad Umar, a few weeks back, said that the amount released to PIA is sinking into a black hole. Yet, the FM is not convinced on privatizing the airline. How can you reform an organization which finds ERP implementation a hindrance in publishing financial accounts - last published accounts of PIA are of quarter ending Sep 17 - five quarters are gone and counting.
The PTI government in six months of power has sunk Rs20 billion into PIA's hole - the rate is consistent with previous ten year average. We are in 2019, and cannot live on 1960s glory to revive PIA - it was the second best airline then and third worst in the world today.
Given the capacity constraints, government should not have any business doing business. The money to be saved from running PIA on clutches can be used for social uplift of the poor. There could be a way out to manage the 14,000 employees. The employees to aircraft ratio in PIA is 5-8 times of better run airlines.
To turnaround the company government has to take tough decision of sacking inefficient staff - politically tough decision, and replace those with relevant manpower along with equity injection for leasing new aircrafts and improving other services.
Neither the government has money nor the PIA employees have the capacity to capitalize on additional equity. There is no other way to come out of the mess, but to get rid of running operations. Time is running fast, the fiscal ability to absorb Rs40 billion per year for PIA is diminishing. Government has to have involvement of private hands both for equity injection and technical and operational capacity enhancement.
The one model in talks for a while is to separate aviation business from other assets of PIA. Do It, by having absorbable debt on aviation part of PIA, and rest to be settled against sale of other assets.
The question is whether any private party would be interested in PIA. The answer is probably yes as the attraction is its landing rights on key routes. Over the time, PIA has closed its flight to many of these routes due to operational losses, it is time to use these for revamping the airline; if the government still wants time for privatization, at least outsource unused routes to the private sector.
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