KARACHI: The world’s largest international aviation firm, IATA Consultancy has presented a business plan for Pakistan International Airline (PIA), which if implemented would see the loss-making state-owned enterprise making its operations break even by 2025 and record 3.4 percent profits the next year-2026.
The comprehensive business plan covering the period 2022 to 2026 was presented to Minister of Finance and Revenue Shaukat Tarin and Minister of Aviation Ghulam Sarwar Khan last week.
The meeting was also attended by the Secretary of aviation, the secretary of finance, the Secretary of EAD, the PIA board of directors and members, the PIA CEO, and the senior management of the airline.
The implementation of the plan would see PIA assets going up from the current $1.196 billion to $2.183 billion by 2026.
PIA reported a loss of Rs34.6 billion in the financial year 2020. Experts see the losses to have increased significantly in FY2021 because of the pandemic and more importantly the chain of events that ensued following the fake pilot licenses scandal, which saw Pakistani pilots ineligible to fly to the US, Europe, and the UK.
The Ministry of Finance was commissioned to prepare the plan last year consequent to the report by the former special advisor to the prime minister on public enterprises reforms Dr. Ishrat Hussain.
Dr. Ishrat’s report was also termed as a complete restructuring plan for PIA to make it profitable but also making it a proper business unit, focused on its core operations.
IATA’s consultancy services were hired for that purpose, which after one year has developed a five-year corporate business transformation plan with the current year 2022 as the base year to 2026.
The key points of the business plan encompass, financial restructuring, independent decision making, re-organization of the company structure, restrictions to core business, financial discipline, HR rationalization cost controls, review destinations, a fleet planning exercise, and network expansion thereby increasing PIA’s network spread and passenger uplift.
PIA’s fleet is expected to grow from the current 29 to 49 by 2026, comprising 16 wide bodies, 27 narrow bodies, and 6 turbo propeller aircraft. The fleet will be used to expand on current productive routes of the UK, Saudi Arabia, UAE, and Gulf sectors as well as be operated on identified markets of Baku, Hong Kong, Istanbul, Kuwait, Tehran, Urumqi, and Singapore.
Resultantly PIA’s passengers would grow from 5.2 million per annum to 9.0 million per annum, and revenues would grow to $1.7 billion per annum by 2026. These initiatives would help the carrier achieve break-even by 2025. PIA, which currently operates 359 round trip flights per week, would be operating 581 round trip flights at the end of the program.
As GDP and traffic recovery bounce back, the propensity to travel should follow, expecting to recover 2019 levels by 2024. According to IATA traffic forecasts for Pakistan, compiled by Oxford Economics, domestic traffic is expected to recover faster than international, coming back to 2019 level by 2022 and 2024, respectively. For this reason, the domestic market should be a priority for PIA in the short- and medium-term.
The outlook also takes into account the global aviation scenarios and challenges, most specifically the Covid-19 pandemic-related travel restrictions and reduced demand, and the macro-environmental and economic challenges faced by the country.
However, the plan has been made conditional to certain factors, the most important of which is the commitment by the government of Pakistan to undertake the financial restructuring of PIA for the legacy debt on its balance sheets and which are beyond the serviceable capacity of the airline.
IATA is of the view that PIA may be run under private management rules, also pertaining to procurement practices.
It also suggests that external influence on company matters may be curtailed and consistent public scrutiny scaled back as it not only hinders the critical corporate responsibilities of the managers but also creates negative public relations for the company.
