PIA Misses Revenue Targets by 21%

Pakistan International Airlines (PIA) has missed revenue target of Rs 54.77 billion budgeted for the first six months (Jan-July) of the current calendar year 2016 by a wide margin of 21 percent and was recorded at Rs 43.19 billion.

Revenues Down in 2016

Top PIA officials revealed while briefing the Senate Special Committee on Performance of PIA, the revenue is 6.4 percent lesser than Rs 46.15 billion, collected during the same period last year.

The officials stated that the decrease in fares, after decline in oil prices, and tough competition with other airlines caused the decreased revenue.

However, not to be mentioned, PIA only reduced fares by 18-19 percent while other competitors reduced prices by about 30-35 percent, said officials when Parliamentarians raised questions and asked for comparisons.

Committee’s Instructions to PIA

The committee, under Mushahid Ullah’s chairmanship, raised questions on PIA’s financial matters, services, lack of professionalism and directed the management to give due attention towards capacity building of its flight crew, ensuring improved facilities and services to passengers to establish PIA as a strong competitor in the market.

The committee was further informed that cash support to PIAC from government of Pakistan during the period, June 2013 to December 2014, is Rs. 20.6 billion. ECC, in its meeting held on December 6, 2014, approved $52 million for induction of 15 aircraft in PIA’s fleet on dry lease. This amount would be injected as equity by the government of Pakistan. PIAC have already received the said amount from GoP. Further approval of GoP guarantees from June, 2013 till now is Rs 28.8 billion against loans obtained by the PIA.

PIA Chairman Azam Saigol, while briefing the committee said the government had 91.7 percent shares in the airlines (PIA was converted into a company on April 19, 2016 and being governed under the Companies Ordinance 1984) while public/others’ shares are 4.4 percent and PIA employees Empower Trust shares stand at 3.9 percent.

Senator Nauman Wazir directed PIA officials for inquiry into the fire incident in engineering department and fixing responsibility. He said that PIA has been politicized which resulted in its deteriorating conditions. Senator Lt Gen (Retd.) Abdul Qayyum said that Rs 20 million of medicines are being purchased from a specific medical store and directed for sharing details in next meeting.

Current PIA Situation

He apprised the body that the PIA fleet consisted of 38 aircrafts including 11 A320 Airbuses, five A310 Airbuses, 11 Boeing 777, six ATR 42 and five ATR 72, adding that currently PIA’s permanent staff strength was 14,317. “Employees to per aircraft ratio is 376,” he added.

Saigol said efforts were being made to further expand the fleet and hopefully it would be 42 aircrafts by the end of the current financial year and 60 by 2020.

He said domestic market shares of PIA had increased from 42 percent to 65 percent during January to May during the last fiscal year.

Presently, he said, PIA flights were operating to 49 destinations, including 27 international and 22 domestic. “It has a market share of 24 percent in international and 47 in domestic air travel market during 2015 whereas for 2016, it has been projected at 27 percent and 68 percent respectively,” he added.

The chairman said PIA was introducing its premium service brand, titled “PIA Premier”, aimed at restoring the confidence of passengers in the airlines. Initially, he said, PIA launched the service with improved features and facilities at par with leading airlines.

The chairman said performance of the national flag-carrier was improving gradually, citing that top companies were now approaching PIA to offer their best aircrafts.

When the panel was informed that PIA was answerable to the Security and Exchange Commission of Pakistan, Farhatullah Babar said parliamentarians had the right to exercise their oversight role as the public money was involved in PIA and “It is our responsibility.”

He regretted that a foreigner had been appointed as the chief executive officer of PIA, which was tantamount to discouraging its senior management. The PIA management could not satisfy the committee members about financial matters of the company. Mushahid Ullah directed the PIA management to come with full preparation and relevant officers in the next meeting to respond to all queries of the Senators.

Answering a query of Mushahid Ullah, the PIA authorities informed the body that they had a plan to operate flights on new international routes including Barcelona, Milan and Bangkok besides increasing flights to New York.

PIA officials admitted that it is passing through dire financial state. However, the present government is very keen to make it self-reliant. Efforts are underway to improve the financial health of the Corporation by reducing its losses through various means and modes. Stringent action is being taken against corruption and mismanagement.

Improvement in PIA Operations

Flight punctuality has increased to 85.6% during 2016. PIAC have recently signed agreements for acquisition of 20 aircraft on dry lease, i.e. thriteen A-320s and five ATRs-72s with prop-turbo, out of which two A-320s and five ATR-72s and 2 Boeing 777s have already joined PIAC’s fleet while the remaining two A-320s will join PIAC fleet very soon. The average age of the fleet has also been reduced to 10 years, which will further reduce to 8 years after grounding of over-20 year old A-310.

Additional flights have also been scheduled to increase international operation on viable routes. In this regard, PIA has started twice weekly flights between Dubai and Karachi, daily flights between Dubai- Lahore & Dubai-Islamabad and resumed flights between Dubai-Peshawar.

The airline has also been involved in taking various steps in cost reduction and productivity improvement. This includes contract re-negotiations, route rationalization, restructuring by discontinuing loss making routes.

PIA has entered into Code Share agreement with Etihad Airlines which has helped in expanding its network. The airline is also in negotiations with other airlines for mutual cooperation which will certainly increase its customer base to a greater extent. Through Code Share, PIA and Etihad benefited with additional 2,000 passengers during last two months (Jul-August 2015) and around 5,000 more reservations/bookings from September 2015 onwards, the officials briefed the committee.

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