ISLAMABAD: Pakistan International Airlines is all set to discard some of its non-core functions like catering and ground services and reduce staff by fifty percent to turn the organization into a profitable institution in the next two years, a spokesperson for the airline has said. 

The national flag carrier will implement a restructuring plan by 2023, as approved by the federal cabinet last week, that aims for operational profitability of the airline by increasing revenue streams, plugging leakages and controlling costs through better administrative and financial discipline. 

Under the plan, PIA will offer up its non-core functions such as catering, engineering complex and ground services as joint-ventures or turn them into strategic business units to be run as independent profit centers. 

The carrier posted a net loss of 34.6 billion rupees ($226 million) for 2020.

“It [restructuring plan] is a landmark initiative approved by the stakeholders of PIA, a will that was lacking previously and put PIA in its current quagmire,” PIA spokesperson Abdullah Hafeez Khan told Arab News last week. “If fully implemented as per set timelines of 2023, PIA would see a full turn around into profitability, a dream that has been often talked about in all the circles, but seldom seen the resolve to execute.”

As per the plan, the carrier has banned fresh recruitments and reduced its workforce by one-third in the last two years with regular iteration of 600-700 people per year due to retirements and better opportunities. With the segregation of core and non-core functions, non-core staff would also be off the books of PIA, taking the total reduction in staff to 50 percent, and ideal employee to aircraft ratio. 

PIA has terminated around 900 people on disciplinary issues (including fake credentials), and around 1,900 employees have opted to part ways from it consequent to a Voluntary Separation Scheme launched in the last quarter of this year. 

“There is no mention of splitting the company into two and dumping all the liabilities on the sick unit while making other totally clean, and / or straight-line reduction / termination of workforce in the plan,” Khan said. 

Since 2008, PIA is continuously incurring hefty losses resulting in huge negative equity. To keep the company afloat, the government has been providing guarantees for borrowing and loans for day to day running expenses and previously obtained principal and their markup payments.

Accordingly, as part of the plan, liabilities to the tune of Rs457.1 billion (as of Dec 30, 2020) are proposed to be periodically taken off from PIA’s balance sheet. This amount includes both loans obtained against sovereign guarantees and the receivables of different state institutions such as the Civil Aviation Authority, Federal Board of Revenue and Pakistan State Oil. Along with this, the government will take over ownership of PIA Investments Limited directly, which owns valuable foreign assets, The Roosevelt Hotel in New York and the Scribe Hotel in Paris. The market value of these individual assets will reduce the burden of debt on the government. 

With effective management and strong accountability within the organization, PIA has already reduced the operational losses from Rs37 billion in 2018 to Rs7 billion in 2019 and nearly broke even to merely Rs680 million ($4.5million) in 2020 amid the coronavirus pandemic and the European Union Aviation Safety Agency [EASA] restrictions, which severely dented its revenues.