ISLAMABAD: The Pakistan International Airlines (PIA) will not initiate a downsizing exercise, even though it is among the most debt-riddled state-owned enterprises (SOEs) whose privatization process has been put on a hold by the ruling administration, confirmed the airlines spokesperson, Mashood Tajwar, while talking to Arab News on Wednesday.
The government has decided to nurse 14 SOEs back to health before selling them off to fetch maximum profit, the Senate Standing Committee on Privatization was told on Tuesday.
To avoid burgeoning circular debit, Privatization Minister Muhammad Mian Soomro told the committee that eight state-owned entities – the Small Medium Enterprises Bank, Haveli Bahadur Power Plant, First Women Bank, Parri Petroleum, Lakhra Coal Mines, Services International Hotel Lahore and Jinnah Convention Center – would be privatized on a priority basis.
Delisted state assets placed on hold that have taken a massive toll on the country’s economy are Pakistan Railways, Pakistan Steel Mills, National Bank of Pakistan, Pakistan State Oil Company, Sui Northern Gas Pipeline, Sui Southern Gas Pipeline, Civil Aviation Authority, National Highway Authority, National Logistic Company, Trading Corporation of Pakistan, Printing Corporation of Pakistan, Utility Stores, Industrial Development Bank and Pakistan International Airlines that continue to gravely hemorrhage the national exchequer.
PIA, which bleeds “Rs. 2.4 billion (USD 34.02 million)” in its monthly operational losses and tops the state’s liability chart told Arab News that the airlines will witness a revival of the struggling carrier and restore the national pride it once enjoyed under its new management that has devised a business plan which has been submitted to the government.
“We are increasing our (flight) frequencies and opening our closed stations, part of our strategy stipulated in our business plan,” Tajwar said while adding: “The management has taken an aggressive position to enhance revenues under its new chief Air Marshall Arshad Malik”.
Downsizing is not part of the master plan, even though the airlines has over 18,000 employees, one the highest ratios in the world against a fleet of “32 aircrafts”, which it expects to increase to 42, if “the government parks the (accrued) interest till (PIA) receives some respite”.
PIA has amassed a colossal debt of Rs. 406 billion ($2.9 billion) up from last year’s Rs. 365 billion ($2.6 billion) in July. It received Rs. 17.02 billion ($122 million) by the government in the form of “sovereign guarantees” and other financial aid — a second bailout in six months from the Economic Coordination Committee in November headed by Finance Minister Asad Umar. Rs.10 billion ($71.8 million) of that is sovereign guarantee for the airline to borrow from financial institutions and an additional Rs. 40.8 billion ($287 million) is allocated in the form of cash by the ministry.
The previous Pakistan Muslim League-Nawaz (PML-N) government tried to privatize the airline along with 44 SOEs to avoid the looming economic crisis after undergoing “a cumbersome and complex process”, said the former Chairman of Privatization Commission of Pakistan, Mohammad Zubair Umar, adding that PML-N met heavy criticism from opposition in its attempt to sell and bring relief to the country’s current account and foreign reserves problem.
Giving a holistic description of impediments in the privatization procedure and explaining Pakistan’s hostile anti-privatization environment, Umar, who is also the brother of the incumbent finance minister, told Arab News that during his term, which ended in 2017, the “due diligent process” down to marketing the entities had been completed to sell the institutions to “potential buyers”, but the “opposition said we simply won’t let this happen”.
He said: “Lets suppose the PIA is rapidly running and its losses end, what guarantee is there that it won’t meet a similar fate in the future? The airline started going into losses in 1986 or 1987 and that trend continued under many civil and military governments. Several outstanding chief executives were appointed, yet PIA failed to be profitable.” He also noted that all this was happening at a time when foreign and domestic competition was at its lowest.
Umar was of the opinion that the state should cut its losses and sell PIA to domestic or international buyers who would help plug the hole that periodically requires governments to give bailout packages to the airlines at the expense of other areas of the country’s economy.
“Parking PIA’s liabilities,” Umar said, “makes no difference because sooner or later that amount will have to be paid. The airlines would continue to be in a loss, though one can make a political statement for public consumption that PIA is in profit” for sometime.