Daily Times

To show how inefficient PIA is, on 28 Sept. 2018, Federal Information Minister Chaudhry informed the media that PIA had a ratio of more than 500 employees per aircraft. Chaudhry provided the following statistics:

* Permanent employees: 14,800

* Employees on daily wages: 3700

* Employees per jet: More than 500

* Financial loss in 2017: PKR45 billion (USD360 million)

* Overall loss: PKR356 billion (USD2.8 billion)

The primary cause of the losses is said to be over-staffing, and most of whom are unqualified. CNN reported (June 29, 2020) that 141 of its 450 pilots have fake licenses, and some of them may be responsible for the crash in Karachi. I predict that there will be even more pilots with fake licenses as there are many unqualified executives.

The airline currently has around 18,000 employees for an operating fleet of 32, i.e., over 550 workers per aircraft. That is five times that of Air India. It is the second-highest number of employees per aircraft, behind Syrian Air. It is hard to make sense of the financial statement of PIA; however, if one takes just the losses for 2017, it means that PIA lost Rs. 25,00,000 per employee.

The website profit.pakistantoday.com.pk (Nov. 2019) reported that “The SECP board was informed about the recent many false claims about its performance made by PIA’s chief that caused an increase in market transactions and prices of the shares. SECP took serious notice and considered it a ploy to manipulate the market.” Making a false statement about a company’s financial performance is a violation of fiduciary duty and the law. But, what is new, PIA is a fake organization existing with the support of corrupt politicians, bureaucrats, and incompetent and pathological lying executives. In an honest country, people making false statements will be fired and sued, but not in Pakistan.

In another report, thenews.com.pk (Nov. 2018) stated, “The audit of the PIA reveals that the institution has been run like a non-business entity, governed by non-professional board of directors and managed by CEOs lacking industry-specific management experience and exhibiting a total absence of prudence, due diligence, and best industry practices and decisions are taken on the basis of ad-hocism. As per audit findings, the losses by PIA were also incurred due to bad decisions regarding hiring, procurement of different material including spare parts, operation expenditures, hotels, sale of routes to other airlines, and in the operation of premier flights from Pakistan to the U.K.” An Oct. 2018 report in thefrontierpost.com stated that “The audit report also listed poor financial performance due to inefficient fuel management, unnecessary expenses on the crew, the performance of subsidiaries, poor supply chain, and contract management, inefficient engineering, and maintenance department, non-professionalism, untrained staff, overstaffing, fake-degree holder staff and pilots, out of turn favors by the government to competitors and lack of modern industry-specific knowledge.”

The airline currently has around 18,000 employees for an operating fleet of 32, i.e., over 550 workers per aircraft. That is five times that of Air India

And steelguru.com (Nov. 2018) reported that “The audit report also revealed that the PIA BoD was routinely nominated without any criteria as none of the members possessed aviation industry experience or real business qualifications. As a result, the BoD could not even finalize financial statements or fix timelines for policy decisions and route opening/closing and determine airfare. Similarly, the BoD performance was never evaluated, while Secretary Finance of the BoD remained absent from 71 percent meetings for evaluation.”

The tribune.com.pk (Oct. 2018) reported that “The audit report suggested that the National Aviation Policy needs to be reviewed. It suggested further that an efficient Board of Directors (BoD) needs to be constituted, appointing CEOs/M.Ds based on merit, unnecessary interference from the government, as well as interference of various staff/officers associations, must be ended. All posting must be merit-based, and a better control system must be implemented.” The report also stated that “PIA will never make money unless it is run by a team of qualified executives with professional experience in commercial aviation with powers to hire and fire people without political interference. Further, to be efficient and profitable, all interference by incompetent, corrupt politicians and bureaucrats must end.” Despite the many assurances that PIA will be profitable if given a chance, every government has provided billions in support, but it has never made a profit. The government still supports a failing, bankrupt organization despite the company’s promises of becoming profitable. As reported in pakistantoday.com.pk, “Despite this horrendous management debacle and incompetence, the government of Pakistan still gave an enhanced guarantee limit on loans to PIA from Rs178.085 billion in 2017 to Rs222.107 billion in 2019 to meet the cash deficit, further encouraging the CEO and the board to continue their incompetent business practices resulting in more losses and theft.”

Everyone knows that PIA is a dinosaur, eating up the nation’s wealth and encouraging theft and corruption, so why not declare bankruptcy? Some say that the main reason is strong opposition from the unions and the opposition parties. It is hard to understand why the government has allowed 17,000 employees to cause billions in losses. It would be cheaper to pay them their salaries after closing PIA. This is not a new idea; after all, the government closed the Pakistan Steel Mill; it is still paying the mill’s employees.

Another reason for the government failing to close PIA is interference by the courts. The courts get involved in cases it has no expertise in or legal control over, and that encourages people to keep on stealing, wasting the nation’s wealth. DAWN (13 April 2018) reported that the Supreme Court directed the federal government not to privatize the PIA without its prior permission. The court directed the PIA management to submit a formula to calculate the exact losses suffered by the national carrier during the last decade. This order by the court shows its naivety as losses and all other failures of PIA are publicly known and available.

Another naive order of the court is barring all PIA’s managing directors who served from 2008 to 2018 from leaving the country without the court’s permission even though they have not been accused of any crimes. Strangely, their names have not been placed on the Exit Control List (ECL). So they can leave the country anytime. These types of decisions happen only in Pakistani courts. The court hinted that it would form a judicial commission to inquire into the PIA’s alleged privatization and ascertain the reasons behind the accumulation of its losses. The court-appointed person informed the court that the airline earned a profit of over Rs 1 billion in 2002, and has been losing since then. In response, the chief justice “regretted and added that a permanent solution to the issue was a must.” As usual, the chief justice “inquired who was responsible for Rs 360 billion losses to the national carrier, adding that the court would like to know the cause of the losses and viewpoint of PIA’s employees on the issue,” and claimed that “those who have destroyed the national asset were enemies, oppressors, and traitors”(fp.brecorder.com, May 2018). What good is this statement without any consequences? Sadly, all losses are publicly available, and the reasons for losses are well known, but the court interference, as usual, will result in delay without solving the problem.

If the court has stopped interfering, then why hasn’t that the question of bankruptcy or privatization gained momentum due to the economic crises in Pakistan? Sadly, a government official has said recently that, “Yes, options of bankruptcy or privatization have been considered, but we want first to ensure that all attempts for PIA’s revival are exhausted before a step is taken. Also, currently, we have our hands full dealing with so many other crises, before we eventually come to PIA” (Asia Times, Jan 2019). What a stupid statement; how many chances should be given before the country’s bankruptcy is accelerated further?

These excuses are not new; they show continual stupidity or corruption in keeping PIA operational so that the friends of the politicians and bureaucrats can continue to enrich themselves. For example, similar claims had been made by the previous government. Former Finance Minister Afzal Khan told the Asia Times (Jan. 2018) that the previous Pakistan Muslim League government was ready to privatize PIA. “But we faced political resistance in the shape of the opposition parties. Also, we were engrossed in tackling other challenges, which were terrorism and the energy [crisis].”

In another failure of the Pakistani government, in January 2016, the National Assembly, from which members of the opposition walked out to distance themselves, passed the PIA Corporation (Conversion) Bill 2015, but the Senate rejected the bill. That means that the government in control could not pass its legislation.

Former Finance Minister Salman Shah has said that such political patronage is harming the national airlines and the exchequer. “What is needed is political will. If the matter continues as they are no one will have to declare PIA bankrupt, it will do so itself. It’s only the removal of government subsidy away from formalizing bankruptcy” (Asia Times, Jan. 2019). Shah has provided the solution: why not just implement it?

How long can Pakistan (a bankrupt country) keep this failing organization running without any chance of being profitable? I wonder, are they so naive not to see how much this organization is costing the country? Is there any Pakistani, politician or bureaucrat, who has enough guts to say we need to save the country first and kill this dinosaur devouring the wealth of the nation and damaging the image of the country? I wonder and will probably continue wondering for another 10 years; something is wrong when Pakistanis cannot see such an obvious problem and its obvious solution. This problem can be solved easily.

As I am writing this Op-Ed, COVID- 19 is happening, which has caused all airlines, including PIA, to stop operating. It gave the PIA executives an excuse to ask the government for more loans to help it through the COVID 19 period. However, to measure the viability of the airlines, Bloomberg.com calculated the Z-score., which measures an organization’s liquidity, solvency, profitability, leverage, and other performance indicators. A Z-score of less than +1.8 indicates a bankruptcy, and over 3 means it is sound. The Z-score can predict bankruptcy with 95 percent accuracy.

Based on the Bloomberg calculation, PIA received a Z score of -6.83, the lowest (the bottom) score among all the airlines in the world. The second-lowest Z-score of -1.51 was received by Air Asia Indonesia. It further proves my point that in a good or bad economy or natural disaster, PIA has no future and should be liquidated without wasting more national wealth to save an organization that can never be saved.

CNN (June 29, 2020) reports that many PIA pilots have fake licenses. It will further accelerate the bankruptcy of PIA as it will probably be held responsible for the death of 95 passengers and its employees, making it pay two to ten times the standard compensation. In addition, with this negative publicity, not many people are going to fly PIA, further accelerating its bankruptcy. Therefore, if PM Khan has any common sense, it is the best time to pull the plug and save the sick organization from its suffering and the bankrupt nation from accelerating disaster.

The writer is Ph.D. (USA), Professor Emeritus (USA)