FOR several years now, the national carrier has been in the news for all the wrong reasons. It has made headlines because of frequent emergency landings, flight delays and disputes within its senior management. And more recently PIA staff was accused of helping alleged criminals flee the country. The airline is in a total state of disrepair due to decades of political interference, corruption, mismanagement and overstaffing. Half its fleet of 39 ageing aircraft has not been operational because of shortage of funds for maintenance and repair. Some planes have been declared “not airworthy”. The average fleet age for PIA is more than 16 years, the highest in the region. The average fleet age for the far bigger Air India is 8.8 years and for Emirates 6.4 years. No wonder PIA’s revenues are falling and its expenditure and debts rising. PIA’s revenues fell by 21 per cent in 2010-11 and by over 14 per cent in the last financial year. According to the State Bank, the accumulated losses of the last two fiscal years were more than Rs61bn.
It is in this background that the government has approved a bailout package of Rs100bn for the national carrier as suggested in a business plan. The plan will be implemented over the next five years, and will start with the issuance of fresh sovereign guarantees during the current fiscal year to help the airline cope with its liquidity crunch. Funds will also be arranged to help it acquire five narrow-bodied aircraft. The Economic Coordination Committee, which approved the business plan that had been in the works since 2010, believes the measures will help the carrier increase its market share and revenues, separate its core and non-core business and restructure its financial liabilities.
The package will certainly save the national carrier from total collapse, but for a very brief period. The long-term revival of PIA’s past glory hinges on how quickly and honestly governance reforms are implemented, the private sector involved in its restructuring to make it commercially viable and free from political and bureaucratic interference, and new aircraft added to the existing fleet. Comprehensive strategies have already been formulated. The government has time and again reiterated its “commitment” to implement these reforms. Still, it hasn’t been able to muster enough courage to go ahead with implementing them as in the case of other loss-making public-sector entities that are further straining the government’s tight fiscal position. With the ruling coalition completing its term in a matter of weeks, it is unlikely to move further on reforms or even on the newly approved interim business plan.