PIA business segments: FAs preparing restructuring plan

Financial Advisors are preparing a restructuring/implementation plan in consultation with the Pakistan International Airlines Corporation (PIAC), which would be presented to the Privatisation Commission (PC) Board and Cabinet Committee on Privatisation (CCOP) for requisite approvals next month. This was revealed by PIA officials while briefing the Senate Special Committee on the performance of PIA, which met with Mushahidullah Khan in chair here on Monday.

The committee was informed that on September 29, 2016 a meeting was held among the Privatisation Commission, Aviation Division, PIACL, Civil Aviation Authority, Securities and Exchange Commission of Pakistan and Financial Advisors, wherein it was recommended that the PIACL should update the detailed assessment carried out on its various business segments with the assistance from the financial advisors. Further, the meeting underscored the need for formulating a detailed restructuring/implementation plan, focusing on the proposed segregation of core and non-core business segments of PIACL.

Presently, the financial advisors are preparing a detailed restructuring/implementation plan in consultation with PIACL. The said plan will be presented to the PC Board and CCOP for requisite approvals, the officials added. Secretary Aviation Division Muhammad Irfan Elahi said that PIA owes Rs 40 billion to Civil Aviation Authority (CAA) under different heads and may ask anytime for service suspension. The committee was informed that the PIA also owes Rs 14 billion to the PSO, which seriously affects the PIA flights.

The meeting discussed serious issues pertaining to the national carrier’s performance and operations including revenue target of 21 per cent, impacts of the Premier Service, defaults in payments to Civil Aviation and PSO, and renovation/up-gradation of PIA fleet.

The committee recommended for devising a recovery plan and making a deal with the PSO and others for paying back the outstanding amount. The committee was further informed the PIA is incurring a loss of Rs 2.5 billion per month and is not in a position to pay back the outstanding dues unless the government intervenes.

The committee during briefings by the PIA directors (who were present in the meeting) was told that the PIA has outstanding payments to the PSO and Civil Aviation for many years, which occasionally leads to delay in flights and other hurdles. The committee directed the PIA to finalise an agreement with both. The committee also asked the PIA to focus on the core business of the company – flying people across the country. A third party evaluation based on value-chain analysis was suggested by the committee to enhance the operations’ quality and generate revenue.

The representatives from the PIA told the committee that although the company is going in loss, there is a trend of increased percentage (37 percent) of passengers. The PIA has also increased capacity of aircraft by 17 percent and the number of aircraft is now 38. The committee also asked PIA to see if the 19,000 people working for airline, having 38 aircraft, is a viable option.

The committee sought a detailed report along with all documents containing approvals and correspondence of the tender process of obsolete 310 aircraft of PIA. The committee sought the details as to who approved sending aircraft to Malta for exhibition and permitting its use in a film shoot, which might have political and religious implications.

The committee was also briefed about the steps being taken in the PIA to improve the crew, their trainings, workshops, up-gradation of seats and other facilities in the aircraft, and terms and conditions of the wet lease with Sri Lanka. The members expressed concerns regarding people working at senior positions in the PIA, having no experience of administrative and human resource management.

The committee constituted a sub-committee to report on administration and operations of the PIA and recommend a revival plan. The sub-committee will be headed by Senator Muzaffar Hussain Shah and will have Senators Farhatullah Babar and Abdul Qayyum as members.

The committee expressed extreme displeasure over absence of chairman and chief executive officer of PIA, who are out of the country, despite having intimation of the committee schedule. The committee observed that chairman and CEO should be able to prioritise things according to their importance, adding the parliamentary committees need to be given priority over other meetings. Observing the non-seriousness of the senior PIA administration, the members of the committee agreed on formation of a sub-committee to see specifically the administrative and operational issues of the PIA.