Pakistan's airline near collapse, heading for privatisation

World Wednesday 11/October/2023 14:35 PM
By: DW
Pakistan's airline near collapse, heading for privatisation

Islamabad: Pakistan's national carrier, Pakistan International Airlines (PIA), is on the verge of financial collapse, prompting the government to begin privatization plans, along with outsourcing airport operations.

Amid Pakistan's ongoing economic problems, the government argues it cannot subsidize loss-making entities. The move comes after Pakistan agreed in June to fiscal discipline plans as part of a €3 billion International Monetary Fund (IMF) bailout.

PIA spokesperson Abdullah Hafeez Khan told DW that the airline is on the active privatization list, adding it could be privatized quickly. Khan admitted that the national carrier is incurring billions of rupees in losses.

Airline workers are worried for the future. PIA currently has around 11,000 employees.

Rubina Khan, an employee who retired from PIA last year, told DW she is concerned that her pension would be stopped and dues of other workers who might be laid off would also not be paid.

Another retired employee, Jawaid Akhtar, told DW that millions of people in Pakistan are already jobless and the privatization of PIA would cost more jobs.

"Naturally employees are extremely worried about the future wondering how they would feed their families without jobs amid severe economic hardship," Akhtar said.

A current employee from the airline's engineering department told DW on condition of anonymity that PIA executives received hefty salaries and were "showered with lavish perks and privileges" and now employees are paying the price.

Launched as Orient Air by private investors, PIA was taken into government control during the 1950s.

It became one of the best airlines in the region but today it is in a deep crisis. The company has been facing divestment for years now and has not carried out much recruitment since 2017 despite the retirement of many employees. Out of 30 aircraft, only 19 are operational.

Pakistan State Oil is also threatening to stop oil supply to the national carrier for non-payment of dues. The airline faced litigation in Malaysia over non-payment of dues and threat of confiscation of its planes.

PIA flights to Europe and the UK have been suspended since 2020 over a fake pilot license scandal.

Retired employee Khan believes imprudent policies by executives were responsible for the gradual destruction of the airline. This included leasing aircraft at inflated rates.

Suhail Mukhtar, a trade unionist, told DW two examples of PIA securing aircraft from Sri Lanka at exorbitant rates.

He said that while a private airline acquired an aircraft for $4,500 (€4,250) per hour, PIA got it for $7,500 per hour. "We got two aircraft at this rate, incurring around a 17 to 18 billion rupee [$64 million] loss because of this."

Mukhtar added that PIA also bought extremely expensive engines, which also ended up developing faults.

Khan believes that bringing in external contractors to handle catering and maintenance resulted in heavy losses.

"PIA insiders charged the national carrier exorbitantly draining its finances," she said.

She added that hefty salaries of executives, cronyism and non-payment of dues owed to PIA by other government departments also added to the aitline's financial woes.

Qais Aslam, a Lahore-based expert, said owners of private airlines with political connections "who intended to launch their own airlines" were made executives at PIA. "Consequently, PIA declined and their own airlines are profitable now," Aslam told DW.

Shahid Mahmood, an Islamabad-based economist, said that state owned entities like PIA or Pakistan Steel Mills, have been used by governments — both military and civilian — to install favored bureaucrats and party members and for their own self-interest.

"Consequently, they are bleeding the economy. Therefore, they should be privatized," he said.

Pakistan's minister for privatization, Fawad Hasan Fawad, rejects the impression that the government's decision is meant to benefit vested interests.

Fawad told DW the privatization process is being carried out strictly in accordance with law, adding that every step has adequate safeguards and absolute transparency.

He added that the legal structures and valuation of assets is being carried out by world's top investment banks.

"Valuation experts are not under the control of the government. The bidding process after valuations is open to all," he said.

"It isn't possible for the government, in its present economic stress, to bridge the huge deficit of around 150 billion rupees every year for flying about 10 to 12 aircraft on average."

However, trade unionist Mukhtar told DW that PIA employees will continue to resist privatization and are mobilizing to offer stiff resistance.

Aliya Bukhshal, a left-wing activist, said her People's Workers Party is in contact with PIA employees and that they are working on a joint strategy to resist PIA's privatization.

"The government is pushing PIA workers towards hunger and starvation," she told DW. "We will not sit idle and will fiercely oppose this move."