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Cutting Half Its Workforce | PIA To Be Divided Into Two Companies

ISLAMABAD: Pakistan International Airlines Corp. will lay off half of its 14,000 employees, replace some of its fleets, and permanently close loss-making routes in a bid to become a profitable entity.

Pakistan’s cabinet approved the carrier’s restructuring, said Ishrat Hussain, an adviser to Prime Minister Imran Khan. It also requested to explore outsourcing management contract or sale of 26% stake in the airline after improving its balance sheet, he said.

The plan follows revival attempts in the past that were blocked by protesting employees or political opposition. This time, there are “no grandiose plans to become like Emirates or Etihad or Qatar,” Hussain said in a recent interview. It will be “a very lean and efficient organization,” he said. The aim is to return PIA to profit by 2023.

That would be some turnaround for an airline whose finances and reputation have taken a beating in recent times. Even without Covid related border restrictions, PIA was banned from key markets including the U.S., U.K, and Europe after Pakistan’s aviation minister said last year that almost a third of the nation’s pilots had fake or dubious licenses. The claim was enough to further dent the confidence.

The pandemic put PIA in an even more difficult position. More routes were closed off and it missed out on peak travel periods like Umrah and the annual Hajj pilgrimage. Even airlines in good financial health have been left reeling because of the coronavirus, which has caused dozens to collapse and thousands of job losses globally.

PIA had 30 aircraft as of Sept. 30, including 12 Boeing Co. 777s and 11 Airbus SE A320s. Hussain didn’t specify what changes would be made to the fleet, which also includes ATR aircraft, but he said the size would be “kept under 30” and include more fuel-efficient planes. PIA will no longer serve destinations such as Tokyo and Manila, Hussain said.

About 2,000 employees have taken voluntary redundancy already, according to the airline. Meanwhile, non-core operations such as catering and engineering will be outsourced, said Hussain, a former central bank governor.

In a bid to protect the national flag carrier from further financial turmoil, the federal cabinet decided to go ahead with the plan to divide PIA into two separate companies.

The plan has been tried before and failed. The Nawaz Sharif government, which had devised the plan in 2015, was forced to back off because of strong protests from the employees and opposition political parties.

Through such extreme restructuring, authorities are confident that the crisis will be averted, provided that there is no attempt to politicize this issue as was done in 2015 when protests broke out against the privatization of the company.

Information Minister Fawad Chaudhry told the media that the cabinet had in principle approved the plan to divide the national carrier into two companies, but sent the summary to ECC again for a few changes.

Even if the PTI government does not face similar resistance from the airline’s employees and opposition from its political rivals what guarantee is there that the company’s fortunes will revive? With the government paying billions from taxpayers’ money to scrap the bulk of the national airline’s liabilities of Rs460bn, it is crucial that the details of the revival plan are shared with the public for debate and wider consensus. There are still people who believe that PIA can be turned around without having to split it.

PIA has declined mainly because of its flawed aviation policies that gave foreign airlines unfettered access to Pakistan’s market without the country securing reciprocal concessions; poor management; years of little investment; bureaucratic interference; and last but not the least, uncooperative labor unions linked with political parties. But successive governments have chosen the easier course of holding overstaffing in the airline responsible for its downfall instead of focusing on all issues and resolving them. The main theme of the suggested plan does not seem any different. It seeks to divide PIA into a ‘good’ company with fewer financial liabilities and employees on its roll, and its ‘bad’ clone loaded with unwanted staff to be laid off in the future and most liabilities to be paid off later with taxpayers’ money. The ultimate goal remains the same: get rid of excess staff and unburden the company of its existing liabilities. How the ‘good’ PIA will be a better-managed entity than its parent company is anyone’s guess. The proposed options for overhauling the national flag carrier to transform it into a financially viable entity include human resource restructuring through the voluntary separation scheme, engaging aviation industry experts, modernizing the fleet, rationalizing routes, product development, and enhancing revenues. Which part of this plan is difficult to execute within the existing framework? Rather than experimenting anew, the better idea would be to bring in professional management with a sound business plan and allow it full freedom to take the necessary decisions to turn the airline around. Before that, the government needs to engage its employees and other stakeholders to secure their buy-in for the future roadmap.

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