PESHAWAR – Knee-deep in a financial crisis due to the coronavirus pandemic, fake pilot license issues and general mismanagement, Pakistan International Airlines (PIA) is set to lay off 3,000 employees and sell its non-core assets abroad in a bid to cut down the bulging deficit.
The government, however, claims the steps are being taken as a part of its reform program to revamp the ailing industry, which has been eating into the fast-depleting resources of the country.
Prime Minister Imran Khan is reported to have approved a comprehensive plan to restructure PIA and the Civil Aviation Authority (CAA) by putting a reform agenda on fast track. The steps, including assets disposal and the retrenchment of staff, the government believes, would make the airline self-reliant and bring in financial discipline.
The year-on-year accumulated losses of Pakistan International Airlines Corporation Limited (PIACL) reached a staggering Rs360 billion (US$2.2 billion) as of June 30, 2018.
The company is yet to make its latest balance sheet public. The airlines’ total liabilities are projected at Rs558 billion ($3.4 billion) against total assets of Rs150 billion ($920 million). The total accumulated losses show an increase from Rs93 billion ($570.6 million) in 2009 to Rs360 billion ($2.2 billion) in 2018.
Being massively overstaffed with about 15,000 employees for a fleet of 32 aircraft, PIA’s employee-to-aircraft ratio is one of the highest in the world. Against the average percentage of about 150-200 employees per aircraft, PIA had a ratio of more than 480, which speaks volumes for the perennial losses and financial viability of the airline.
During a hearing in the Supreme Court on PIA’s losses, the airline’s Chief Executive Officer Musharraf Rasool Cyan remarked that “the airline is only able to continue operations due to the government’s financial support, which is not sustainable.”
After injecting billions in cash bailouts year after year to build up the company’s falling finances, the government has finally turned its attention to job cuts and assets disposal to scale down the operating losses of the PIA.
A Voluntary Separation Scheme (VSS) to lay off more than 3,000 workers is on the cards pending approval from the PIA board, economic coordination committee and the federal cabinet.
The VSS, if implemented, would expectedly save PIA Rs.4.7 billion ($28.8 million) annually. The separation process is targeted to materialize next month.
In late June, aviation minister Ghulam Sarwar Khan startled the global aviation industry when he revealed in parliament that 262 pilots from more than 860 in the country had “suspicious flying licenses.”
These pilots, he disclosed, would be grounded immediately. During his press conference in Islamabad, the minister told the media that the licenses of these pilots were doubtful due to certain reasons. Some pilots, he said, had managed to get questionable licenses.
The aviation minister’s revelation tipped the airlines from crisis into full-blown catastrophe as the European Union Aviation Safety Agency and the US Federal Aviation Administration banned flights from Pakistan.
An official in the aviation ministry said the national airline incurred an estimated loss of more than Rs45 billion ($276 million) due to the cancellation of flights on the license issue and the Covid-19 pandemic.
Details reveal that the airline incurred a loss of Rs12 billion ($73.6 million) on the suspension of the Hajj and Umrah flights to and from Saudi Arabia, while a ban on flights to Europe resulted in an estimated loss of Rs33 billion ($202.4 million) as 32 weekly flights to Europe and other western countries were suspended.
A local TV channel reported that PIA authorities have approached the foreign office in Islamabad and asked it to file an appeal with the EU Safety Agency. The PIA planned, the channel said, to raise the issue at the diplomatic level by mobilizing ambassadors to European countries and the UK to restore PIA’s flight operations.
Some reports suggested that UK authorities had agreed to allow regular PIA flights from October 30, provided the airline to acquire new European aircraft and cabin crew. Although a European cabin crew and aircraft would jack up the operational cost of PIA, the airline has no other option if it wants to secure its slots at UK airports.
The Roosevelt Hotel, a PIA asset in the heart of Manhattan, also announced it would close up the shutters at the end of October, citing financial constraints.
“Due to the current economic impacts, after almost 100 years of welcoming guests to The Grand Dame of New York, The Roosevelt Hotel is regretfully closing its doors permanently as of October 31, 2020,” an announcement posted on the hotel’s website said.
In July 2020, the Cabinet Committee on Privatization recommended developing the site into a commercially viable multi-purpose building through a joint venture. However, there have been reports that one of Imran Khan’s confidants was interested in acquiring the ownership of the Roosevelt building, an accusation which Federal Minister for Aviation Ghulam Sarwar Khan denied last week.
He said the government had no intention of selling the historic Roosevelt Hotel in New York and the news about its sale was “speculative” and “misleading.”
A high-placed source in the aviation ministry, however, told Asia Times that the hotel was being sold at a time when the hospitality sector was massively hit by the Covid-19 pandemic and prices of real estate were falling.
The hotel, he said, was a moneymaking unit until 2018. However, it started making losses in 2019 when the building needed renovation and Khan’s government refused to line up funds for the face-lift of the building and fixtures.
“Deteriorating infrastructure and the outbreak of corona pandemic are the main reasons for its downturn that could be averted had the government taken timely decisions,” he said.