PIA Privatization: Yay or Nay?

A vast majority of Pakistan’s political parties, that stand in opposition to the ruling PML-N (Pakistan Muslim League Noon), favor Pakistan International Airlines employee demands that want a halt to privatization.

A national carrier under the ownership of the nation is what fuels both patriotism and a fear of what may unfold should privatization yield a deathly blow to the already hemorrhaging airline.

Peaceful Protest Turns Red

A demonstration, against privatization, turned violent seeing the deaths of two employees of the Pakistan International Airlines on Tuesday the 2nd of February 2016. Security personnel were forced to clash with protestors who launched a march towards Karachi’s Major Airport “Jinnah International”.

Police officers, in riot gear, used a water cannon, lobbed teargas shells and baton-charged the remonstrating employees of PIA.

Army rangers were called in to assist against charging protestors as they made vain efforts to reach the airport. It was in the midst of this frantic struggle that shots were fired, taking the lives of an aircraft engineer Saleem Akbar and Inayat Raza of the PIA’s communications department.

The PIA Chairman Nasser Jaffer announced his resignation in the evening following the deaths of his employees.

The police along with the military personnel in charge of crowd control denied any affiliation with the shooting of the two employees. The bullet shells were collected and an inquiry into the grave incident has been initiated by The Director General Sindh Rangers Major Bilal Akbar. An investigation committee has been setup since then, to dispense much needed justice to the culprits behind this possible act of political instigation. Major Bilal stated that the committee will be headed by a Brigadier ranking officer to look into the case keeping in view all the aspects which resulted in these deaths.

Flights Cancelled?

The protest, on this day, was like many others held on a consistent basis in a month long series officially stated to have begun under the leadership of the Joint Action Committee of PIA. As informed by the JAC-PIA [encompassing union groups of the airline] to The Express Tribune, these protests commenced on Tuesday 26th of January 2016 along with full blown threats to halt flight operations from the 2nd of February should the government eventually not repeal its decision to privatization.

These two deaths made the federal government, which had enforced the Essential Services (Maintenance) Act, 1952, in the PIA for six months, face stern, hard hitting and relentless waves of opposition as PIA employees in Lahore, Rawalpindi, Peshawar and other cities suspended all work.

This effectively stopped flight operations while adding to the inundated levels of debt the organization was already drowning under. Protest demands now entailed justice for the deaths of their colleagues as well.

The Prime Minister Nawaz Sharif warned that protesting employees of PIA would be terminated from service along with the possibility of seeing over a year’s worth of jail time.

“Whatever one’s own opinion of the unions, the protesters and the health of the airline may be, allowing peaceful demonstrators to be killed or injured is a grave tragedy and should be acknowledged as such by the leadership which clearly resorted to threating the livelihoods of government employees that where voicing their opinions.” —Stated by DAWN editorial on the 4th of February.

Protests; Warranted or Not?

The current plans to liquidate 26% of PIAs shares and enter into a “strategic partnership” with a competent private stakeholder, may have not been received with such a push back had the process been a transparent and participatory one.

A series of protests had started from December 5, 2015 against the planned privatization of the airline. These halted only after the ordinance to convert the carrier into a corporation was defeated in the Senate. Three different committees in the country’s National Assembly were overseeing the airline’s affairs during this period.

The federal government was forced to covert the ordinance into a bill and it subsequently passed in the National Assembly during Mid-January 2016, after which the joint action committee decided to hold nationwide protests.

The plans should’ve been marketed nationally in proper light given how truly uncertain a firm’s future can be under privatization.

Latin America, Russia and Eastern Europe bare testament to the possibilities of further corruption, asset stripping, cronyism and monopolistic destruction of market integrity. All under the cloak of privatization. Mismanaged and unsupervised liquidation of PIAs assets while handing them over to inadequate “strategic partners” may lead to just that; feeding the likely reality of a much deteriorated version of PIA than that before us today.

Why Privatize?

Mismanagement. A single word; covering the demise of a once exemplary airline that now lives off public exchequer revenues. Multiple governing parties played their fair share throughout the decades following 1980s, in what can only be described to be a synchronous state of obliviousness. Shedding light on the current government, it is apparent that the exercise to find a ‘strategic investor’ for The PIA was victim to unclear roles of the privatization minister and aviation advisor.

The aviation advisor saw his power restricted when the Supreme Court restrained him from taking any independent decisions. His subsequent resignation to the Prime Minister was rejected and his role in the national flag carrier’s affairs remained unclear yet again.

Numbers are seldom disingenuous towards the veracity of a company’s current state. PIA is effectively a host to Rs300 billion in debt.

The government plans to invite private firms with two basic qualifications: world class management experience and significant capital investment possibilities to reinvigorate the national flag carrier’s competitive capabilities.

“In the last two-and-a-half years, we tried to fix the situation. But PIA needs massive investment and we barely manage to pay for its losses.” —Mohammad Zubair, chairman of the Privatization Commission.

Foreign airlines offered competitive rates, and all too often, better services than the national airline once they were given access to the state’s market; in the early 2000s. Airlines such as Emirates and Gulf Air reduced PIA’s market share and its revenues began to fall. Despite limitless prospects and an empty playing field up until the early 2000s, the carrier failed to generate sizable profits. When competitors entered the fold, it began to crumble.

To make matters worse PIA has one of the highest employee per plane ratio, which stands at above 700 employees per aircraft, while Emirates, in comparison, has around 220. The massive difference originates via the range of services the national carrier keeps under its belt. Be it engineering services, ground handling, cargo management or maintenance to name a few, PIA, disparate in this aspect to other successful international airlines, runs all operations including non-core segments. To put this into perspective; Dnata, one of the leading airport service providers, offers ground handling services to Emirates in its home base. In contrast, PIA is overloaded with departments and runs like any other bureaucratic government office in the country, inefficiently, to say the least.

Privatization—The Only Way Out?

The organization undoubtedly requires intervention on a level that ensures investments aren’t lost at the hands of corruption amidst its famously notorious management hierarchy.

PIA’s inconsistency and variant behavior for decades can be attributed to the way it was handled by successive governments.

“The decisions made about PIA were never meant to serve the organization.” —Irshad Ghani, CEO Aviation Business Consultants.

Aviation Business Consultants is a firm that advises companies in the aviation sector. Mr Irshad states that decisions made regarding PIA were almost always beyond PIA, often made behind closed doors.

Irshad Ghani has served PIA for over 35 years in multiple capacities. He states that political interference within the organization had reached levels that ensured “real employees” were never given proper chances to perform. However, he is against the ‘sell off.’

“The political appointments and the culture of unaccountability bottom up can be dealt with if the government appoints a foreign chairman with vast experience from abroad and allow him/her to run the airline.” —Irshad Ghani CEO Aviation Business Consultants.

Dr. Niaz Murtaza-A political and development economist, states, with respect to privatization that, even for companies facing consistent losses, privatization to strategic investors would not be the default option but only one option amongst many. A few examples include autonomy and professionalization of the board of directors along with the senior management; establishing the firm as an employee-owned company; and selling off shares to the general public.

The best option for each loss ridden enterprise is identified through a clear set of economic, social and managerial criterion; and an overwhelmingly transparent process is needed to ensure impartial decisions are made in this aspect. It remains to be seen whether the current PML-N can find adequate personnel to facilitate or even recommend such procedures.

About Ahmed Moin

Ahmed has always found solace in good literature and has relished any accumulation of words, versed in a manner that surprises him. He has always found passion in writing and works on honing his skills while freelancing professional content for a little over a year now. He’s currently volunteering at a local animal shelter in Lahore, Pakistan. Their activities can be followed via the following Facebook page. Donations are always needed and highly appreciated!

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