Privatising options for PIA

The writer has served as Director of Administration in PIA

Prime Minister Nawaz Sharif, this week, approved a plan for PIA’s revival to bring it to a break-even level within a year. Last year, the secretary of aviation instituted a ‘way forward’ committee to salvage the national carrier. In the backdrop is the government’s written undertaking to the IMF to privatise 26 per cent of PIA’s shares.

Going beyond the laments of grievances of political interference, rupee depreciation and rising fuel costs, all of which are true, it may be useful at this juncture to divert attention towards how privatisation can be used to restructure PIA and minimise its endemic corruption.

There have been many previous government bailouts, which were made ineffective because instead of using such emergency cash injections for restructuring, the funds were utilised for continuing running expenses. The focus of overhauling strategies remains on fuel efficient airplanes, oil consumption audits and fleet operating options; hence, numerous other nodes haemorrhaging the airline get overlooked.

Ancillary services should be the first on the block for privatisation. Pilferages in these sectors inflate cost by more than 50 per cent and huge kickbacks are involved. The flight kitchens, motor transport and stores and purchase departments are hotbeds of corruption and should be immediately given to private firms. Vested interests have been strong enough to ensure efficiency audits and cost-benefit analysis are not conducted. As a case in point, where else can this happen that garbage collectors pay PIA to allow them to collect its garbage? These are lucrative contracts because with complicity of insiders, unused things worth millions are thrown for the garbage collectors to resell on the market. For instance, hundreds of kilos of ice-packed seafood delivered early morning gets thrown into trash by noon and enters the market by early evening. Similarly, huge amounts of fresh produce, chicken, meat and crates of bottled mineral water are tossed into the trash as being ‘expired’ and are then resold. Privatising PIA’s vigilance department, where people earn significant amounts to look the other way, would be an important corrective measure.

Crucially, recruitment should also be privatised. PIA does not need more than 8,000 people but has over 20,000 of them. Salary bills used to be 17 per cent of the revenue –– now they are about a quarter. In absolute terms, employees were paid Rs9 billion in 2003, and the figure has jumped to over three times that amount to Rs28 billion. Most of the employees are deadwood as their jobs are treated as a handout for political gratification. A private firm should be contracted to solicit candidates and then pass on the three best options for PIA to choose from. Most people balk at retrenchment because of political implications. PIA can still bring in a tough negotiator for the unions, but first it must take the public on board.

Malpractices are not individual illegal acts but a systemic dysfunction. For instance, PIA has few assets and pays rent for everything. It has been renting its head office at Karachi airport from the Civil Aviation Authority since 1955. In the billions paid, it could have purchased its premises 10 times over by now. The same is with all its sales offices across the country. Again, PIA rents and runs dozens of medical centres to provide health services for its staff. Over a decade ago, as director of administration, I had suggested setting up a single PIA hospital on a build-operate-transfer basis and doing away with rentals, but the proposal was refused consideration. This reaction mirrored my suggestion of setting up an IPP, considering the millions spent on electricity bills.

For allowing the private sector to take over these functions, PIA’s by-laws would have to be changed. Certain facilities cannot and should not be privatised. Aviation must be retained because of the sensitivity of precision engineering, air force and national-asset involvement. Along with aviation, ticketing, sales, marketing, accounts management and administration are the only things that should be retained by PIA.

Innovative suggestions can produce out-of-the-box approaches. What PIA is facing foremost is a leadership crisis. It does not need aviation experts at the helm, but superb management. This can be done if the political leadership is serious.