Reasons of PIAs decline into near bankruptcy Dawn Editorial

High fuel prices cannot explain away PIAs disastrous decline into near bankruptcy. If anything, international fuel prices fell sharply in the last few months of 2008 but Pakistan International still managed to post an annual loss of Rs39.88bn by December, a staggering increase of more than 200 per cent over the previous year. Net revenues increased by nearly 27 per cent but these gains were more than offset by a 58 per cent spike in operating expenses. In a report presented to the National Assemblys Public Accounts Committee, the auditor generals office echoed the widespread view that PIAs problems run deeper than fuel costs alone. As many as 29 audit objections were raised in the AGs report. Loose internal controls are the root cause of the malaise afflicting the national carrier according to the report, which also recommends a thorough review of the way in which PIA is run. Indeed, it is high time such an exercise was carried out by a professional task force with no vested interest in the airline or personal links with its top management. PIA is overstaffed and saddled with political appointees and an ageing fleet. Many potential customers are kept away by tales of delays and cancellations as well as concerns, real or otherwise, about aircraft maintenance and overall quality of service. Then there is the caliber of the people at the very top of the organization. A skilled and experienced pilot is no doubt an asset in the cockpit but his utility in the boardroom is questionable to say the least. Compared to its competitors, PIA has fared poorly in marketing its product. An airline spokesperson claims that a new marketing strategy has been initiated but its workings, clearly, are not evident as yet to the paying public. Fuel prices will remain unpredictable and cannot be used endlessly as an excuse for continued failure. PIA needs to trim the fat and streamline operations but this may not be possible without

outside help. If need be, professional troubleshooters specializing in aviation ought to be called in to put PIA on the runway to recovery. http://www.dawn.com/wps/wcm/connect/dawn...dive-zj-02 According to the Chairman's Report, total outstanding liabilities and obligations of the Corporation were Rs 183,277 million, as on December 31, 2010. This means that net worth of PIA is negative (Rs 62,244.18 million). The Rs 10 share price was Rs 1.95 (low), Rs. 4.02 (high) and closed at Rs. 2.26. Reviewing PIA's profit/loss picture over a period of last 30 years, it is observed that until the year 2001, the airline incurred losses of eleven billion and had three profitable years with a new management. The rot started when Shaukat Aziz, the then Prime Minister, appointed his friends Tariq Kirmani and Zafar Khan to head the airline. The debacle did not reach a halt till Aijaz Haroon brought it to the point of bankruptcy. An airline observer remarked that IATA airlines had one of the best years in 2010 and many airlines had overcome their financial problems due to reasonable fuel prices. However, PIA drifted into deeper financial crisis triggered by its high cost per kilometer. The outlook does not seem to be any better for 2011, as fuel prices have well exceeded the $100 per barrel for the first quarter and delivery for May 2011 is quoted at $124, the highest since the middle of 2008. According to some reliable information, PIA is currently incurring a daily loss of Rs 65 million. (Staff Report Monday, 11 Apr 2011 10:37 pm) http://www.pakistantoday.com.pk/2011/04/11/news/profit/another-dreadful-year-for-pia/

PIA Managing Director Captain Nadeem Yousufzai said In a case of illegal appointment of 618 employees in the airline, including eight re-hired after retirement, the defence ministry has fixed responsibility on some high-profile officials. The defence secretary said out of 618 employees, eight were hired in violation of rules He said according to the findings, former PIA chairman Tariq Kirmani was mainly responsible

(By Maria Waqar, Published: October 4, 2011) http://tribune.com.pk/story/266260/pia-blues-ii-the-plane-truth-about-flight-safety/ Unfortunately, the problem that afflicts PIA is not lack of passengers or skilled human resources, but mismanagement and massive pilferages due to a corrupt and incompetent management dominated by unqualified cronies. Political interference by the sitting government, and the dictator that preceded it, has destroyed PIA. Gull Zaman (Friday, November 04, 2011) http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=75967&Cat=11 PIA: A crisis of reputation

Author: By Shah Murad November 4, 2011 on 12:44 AM

PIA is entering another potentially dark chapter, as its corporate image has been badly damaged due to continuous violation of air safety regulations, long flight delays, continuous cancellations, emergency landings and technical faults with its aging fleet. Besides, deteriorating air consumer confidence and declining profitability the PIAs flight safety standards are also at lowest ebb and threatening the PIA itself to be put on watch-list of international watchdogs regulating the airline industry. On the other hand, long silence of the national regulator, Civil Aviation Authority (CAA), over the ongoing violations endangers lives of air passengers. Aviation experts argue that CAA is deliberately ignoring

the PIAs violation of air safety regulations because of shared vested interests. Some aviation experts say that maintenance of PIA aircrafts is deliberately being ignored to cause severe delays and cancellation of flights to justify the need for purchasing new aircraft, to the tune of billions of dollars. On the other hand, such violations are cause for serious concerns for the International Civil Aviation Organisation (ICAO), European Aviation Safety Agency (EASA) and other international aviation watchdogs on the reinforcement of standards related to worthiness of PIAs fleet. A more thwarting incident occurred in Paris where PIAs Airbus A 310 (number AP BGO) was returning from Milan via Paris and when it landed at Charles de Gualle Airport, the SAFA inspectors of European Aviation Safety Agency (EASA) checked the aircraft and detected over 40 snags. Secondly, cancellations of numerous domestic as well as international flights have also infuriated air passengers including stranded Hajj pilgrims. Only in October, over 148 flights were cancelled due to technical reasons, 35 due to operational issues and 31 due to other reasons. Pilgrims heavily criticized PIAs management and have also urged the president and prime minister to take notice of the ongoing crisis. Currently, fleet of PIA is based on total 39 aircraft, of which at least 27 are over twenty two years old while remaining 12 are five to eight years old. Five types of aircraft, for catering to domestic and international operational needs including Boeing 737, Boeing 747, Boeing 777, ATR and Airbus 310, are being used. The first two are outdated and the last one doesnt meet ICAOs safety standards. The International Civil Aviation Organisation (ICAO) is a United Nations specialised agency which regulates airline industry globally. Pakistan is a party to the Chicago Convention, 1944. Article 37 of the convention requires that each contracting state undertakes collaboration in securing the highest practicable degree of uniformity in regulations, standards and procedures in relation to all matters of civil aviation in which such uniformity will improve air transport services. It is worth mentioning that ICAOs Standards and Recommended Practices (SARPs) are minimum requirements and state members are encouraged to go beyond existing standards and impose more stringent requirements. In this regard, ICAOs Safety Oversight Manual

states that safety oversight also ensures that the national aviation industry provides a safety level equal to or better than that defined by standards and recommended practices. In Pakistan the Civil Aviation Authority (CAA) is regulating all aspects of commercial aviation activities under the provisions of Civil Aviation Authority Ordinance 1982. Safety oversight is the core function of CAA. Its prime responsibility is to implement ICAO's Universal Safety Oversight Audit Programme (USOAP) and ensure that airlines are operating in compliance with air safety standards and recommended practices (SARPs). The CAA should promote safe, secure and sustainable mode of air transportation services in Pakistan through effective implementation of safety standards and regulations. The writer is an aviation lawyer. He can be reached at shahmurad@live.com PIA under crisis

News Comments (2) Thursday, 22 Mar 2012 9:35 pm | Comments (2)

PIA is facing serious problems nowadays. Flight delays and cancellations have become the norm rather than the exception. The Pakistan International Airlines is also suffering from severe financial crisis. It is, in fact, passing through a critical phase because of poor management, lack of maintenance, corruption and financial issues. There are complaints of terrible service, long delayed flights, emergency crash landings, cancellation of flights, and shortage of planes. These issues create frustration among the passengers. They feel fear and life risk while travelling through PIA. PIA has, in all, 39 aircrafts in its fleet. A number of aircrafts have been grounded due to shortage of spare parts or overhauling. Latest news report claimed that PIA had grounded

18 planes. A recent PIA flight PK 303, from Lahore to Karachi, was 6 hours delayed on 15 March, 2012. The bad governance, poor performance and corruption are the major causes of its failure. Unfortunately, PIA is functioning with costs higher than returns. The airline charges are enormously high for both domestic and international flights. PIA claims that increase in oil prices and devaluation of Pakistani currency are the major reasons behind its deficit. PIA in the past was known all over the world for its excellent performance and superior quality. That was the golden period for PIA. Now PIA is going in loss. A couple of months ago, rumours circulated that the increased frequency of emergency landings by PIA were being orchestrated to tarnish its image and reputation. Investigation should be carried out to find out the truth. PIA should give primary importance to the safety of the passengers and make efforts to avoid any untoward situation. Several untoward incidents have occurred in the last decade. It is necessary to tackle such incidents seriously to minimise the losses. NIMRAH AMJAD http://www.pakistantoday.com.pk/2012/03/22/comment/editors-mail/pia-under-crisis/ PIAs bailout package rejected The government turned down on Friday a Rs20 billion bailout package requested by the management of Pakistan International Airlines (PIA) to help it come out of a financial crisis. The government does not have the capacity to provide cash support. We can help them in loan restructuring but they will have to meet performance indicators, Finance Secretary Dr Waqar Masood Khan said.

According to sources, the government has concluded that the prevailing crisis in the national carrier is because of mismanagement and bad governance and not financial shortcomings. http://dawn.com/2011/11/05/pias-bailout-package-rejected/ PIA crises far from over November 27, 2011 By Sikander Shaheen

The plethora of crises Pakistan International Airlines (PIA) grapples with is not to go anytime sooner while the defence minister admits that it would take another three years to bring the national flag carrier on no-profit, no-loss terms. Lately, the PIA management adequately publicized its much-hyped five-year business plan that became effective from the start of 2010 till 2014. The PIA also announced adding new planes to its operational fleet and doing away with the outdated ones. But despite the lapse of two good years, the business plan appears to have stood far from yielding any worthy outcome. What appears as alarmingly intriguing is that PIA would only be able to stem the unstoppable spree of losses not before the next three years, let alone contributing any profit to national exchequer. Source: http://nation.com.pk/pakistan-news-news ... -from-over Flying low From the Newspaper | Nadia Jajja | 31st December, 2011

First went the greatness, then the people and then, in the end, the flights as well. Illustration by Feica

In 2011, Pakistan International Airlines was plagued by the same affliction as other staterun enterprises: political interference, incompetence and inefficiency, increases in fuel prices, lack of funds. And so almost 50 per cent of its fleet was grounded and flights all but stopped running on schedule. One two-hour flight to Faisalabad scheduled to leave at 7am arrived at 9pm after delays and transits. In one one-month period more than 190 flights were cancelled, delayed or rerouted. Every other day brought news of a technical fault, sometimes resulting in an emergency landing. News emerged that all spare-part purchases had been outsourced to a single agent, no doubt an ingenious way for PIA employees to slack off as much as possible. Saudi VIPs, it emerged, had been showered with gifts from the burgeoning PIA kitty. http://dawn.com/2011/12/31/bizarre-moments-of-2011-flying-low/

PIAs down- hill slide into heavy losses continues during 2010 Posted by sarmad on Apr 17th, 2011 and filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry from your site

The National Airline has been incurring persistent losses for the last six years (2005-2010) despite its claim that it has over come the most turbulent period of its history- a claim contrary to facts and figures published in its Annual Report available on its website. The most glaring feature of the Report is that during the three year tenure of Captain Aijaz Haroon, The Managing Director, the airline incurred a phenomenal loss of over Rs 62 Billion, double the accumulated loss of its 55 years history, violating all Financial Covenants, surviving on Sovereign Guarantees even for short-term cash requirements and yet aspiring for complete replacement of PIAs fleet of aircraft.

An airline observer remarked that IATA airlines had one of the best years in 2010 and many airlines had overcome their financial problems in particular due to reasonable fuel prices, yet PIA drifted into deeper financial crisis due to its high cost per Available Tone kilometer. The out-look does not seem to be any better for 2011 as fuel prices have well exceeded US$ 100 per barrel for the first quarter and delivery for May 2011 is quoted at US$124, the highest since the middle of 2008. According to some reliable information, PIA is currently incurring daily loss of Rs 65 million.

Trembling Airline industry

Published: August 11, 2011

PIA has been the oldest airline, its existence dating back almost fifty years. The airline has had a large share of financial losses in the past six years along with operational and marketing problems. The loss has summed up to around 12 billion in the year 2008 only. There are various reasons being factored by the PIA Board, the major being oil price hikes. They are of the view that since the global oil prices have risen to unconventional levels and the Pakistani rupee has also devalued as compared to the other economies, the recovery of losses has led to a rather stagnant state. But the aviation experts doubt these claims as, despite the injection of loans to the business, there have been no real results of satisfaction in terms of the stabilization of financial losses. Also the dubious continuous management changes of PIA in the Shaukat Aziz regime have added to the problems of PIA rather than getting it to a better position. The executive positions have been given to non-aviation people. The switching of executive positions has been so consistent over the last 3-4 year that the proper understanding of the PIA problem has not been handled by any one of them, and in fact was being disguised by presenting the whole bleak scenario in the garb of new incentives and technologies rather than acknowledging the root causes of failures. The likes of Ettihad, Emirates and Qatar Airways are earning more revenues as compared to PIA in spite of the increasing fuel prices as PIA claims its losses on. These airlines have introduced more than 50 flights per week to the USA and have captured the bulk of the market on long haul routes. The EU sanctions on PIA actually boosted the other airlines as the customers were automatically redirected for other options. In terms of services and time efficiency, they are rating better than PIA. These carriers have started building a better image and attracting more customers. So, the customer retention is also at a slight decline for PIA. If the present situation continues, a healthy and successfully future for PIA seems likely to remain in doldrums. In the current scenario, there have been no initiatives of new carriers in recent years in the aviation, the last being Air Blue, 2005. This shows that the foreign investors show apprehension in injecting funds to launch new carriers. The chronicle of terror attacks dating back to 9/11 to 2007s Benazirs assassination, Pakistan does not represent a market of investment. The political instability and inflation rates have affected all walks of life and the airline industry is no exception. The instable security practiced in Pakistan adds to the defected image since the tourism industry has been plagued by the on going military actions in the northern areas of Pakistan.