The International Air Transport Agency (IATA) Consultancy presented a comprehensive business plan for Pakistan International Airlines (PIA) covering the period 2022 to 2026 to the Minister of Finance and Minister of Aviation on Tuesday.
The business plan preparation was commissioned by the Ministry of Finance last year consequent to the report by the then Former Special Assistant to the Prime Minister (SAPM) on Public Enterprises Reforms Dr. Ishrat Hussain to the Prime Minister and the federal cabinet. Dr. Ishrat’s report was also termed as a complete restructuring plan for PIA with the objective to not only turn it around towards profitability but also convert it into an agile business unit, focused on its core operations.
Consequently, Federal Minister for Finance and Revenue Shaukat Tarin chaired the meeting on PIA’s Corporate Business Plan 2022-26 at Finance Division, today. Ghulam Sarwar Khan, Federal Minister for Aviation, Secretary Aviation, Secretary Finance, Secretary EAD, PIA Board of Directors and Members, CEO PIA, and senior officers attended the meeting.
A detailed presentation was given by a foreign consultant of IATA to the meeting on the PIA’s corporate business plan for 2022-26 covering PIA’s current situation, market dynamics, and corporate strategy. A five-Year recovery roadmap with a network strategy was also highlighted to make PIA a viable and profitable organization focusing on increasing efficiency and profitability by considering the domestic market, Pakistani community abroad keeping in view internal and external challenges facing the entity.
As the plan involved financial restructuring to the tune of hundreds of billions of rupees, the officials of the finance ministry and the Planning Commission demanded a business plan prepared by an international consultant before committing the huge amount.
The International Air Transport Agency (IATA)’s consultancy services were hired for this purpose, which after one year of spadework has developed a 5-year corporate business transformation plan with the current year 2022 as the base year and going all the way to 2026.
While appreciating the hard work done by the consultant, the chair emphasized that PIA is a national flag carrier and needs to be a world-class airline. The present government believes in reviving and regaining the past glory of PIA and making it a profitable going concern. He further stressed focusing on the Pakistani diaspora, better customer services, and considering the possibility of direct flights in the business plan to make PIA a flourishing organization that may contribute to the economic development of Pakistan and services our communities at home and abroad.
The key postulates of the business plan encompass financial restructuring, independent decision making, re-organization of company structure, restrictions to the core business, financial discipline, HR rationalization cost controls, review of destinations, a fleet planning exercise, and network expansion thereby increasing PIA’s network spread and passenger uplift.
Under the plan, PIA’s fleet is expected to grow from the current 29 to 49 by 2026, comprising 16 wide-body, 27 narrow-body, and 6 turbo propeller aircraft.
The fleet will be used to expand on the current productive routes of the United Kingdom, Saudi Arabia, United Arab Emirates and the gulf sector. The fleet will also 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 pax per annum to 9.0 million pax per annum. Similarly, revenues would grow to $1.7 billion per annum by 2026. With these initiatives, the PIA will potentially break even by 2025. The assets of PIA will also increase from the current $1.196 billion to $2.183 billion. PIA, which is currently operating 359 round trip flights per week, will be operating 581 round trip flights by the end of the program.
The outlook also takes into account the global aviation scenarios and challenges, 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 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.
This will also ease the burden on its cash flows, enabling it to undertake product improvements initiatives, critical for its long-term sustenance.
The plan also urges the government to ensure compliance to the National Aviation Policy in its true spirit, providing a level playing field to the Pakistani carriers, which often find themselves at a disadvantage in their own country. Additionally, IATA Consultancy is of the view that PIA may be run under private management rules, also pertaining to the procurement practices.
It also suggests that external influence on company matters may be curtailed and the consistent public scrutiny may be scaled back as it not only hinders the critical corporate responsibilities of the managers but also creates a negative PR for the company resulting in its corporate repute and revenue streams.