Sunday, January 07, 2018

Pakistan International Airlines has flown into oblivion, but its new chief executive officer wants to steer it back

KARACHI:   Pakistan International Airlines (PIA) epitomises everything right and wrong about the country. From a national pride, able enough to be a role model for other airlines, to a loss-making state-owned entity that is often the subject of debate, and embarrassment, the company has travelled a long way.

Among its several achievements was its instrumental role in establishing what is now among the world’s top airlines. Emirates will forever remain indebted to PIA’s jets and crew as it ascended into glory, while Pakistan’s national carrier flew into oblivion.

Currently, PIA has become a burden on Pakistan’s fiscal operations. The year 2004 was the last financial cycle PIA enjoyed a net profit, which amounted to Rs2.3 billion. Its share price at the end of December that year was Rs13.7.

Since then, PIA’s accumulated losses have soared to reach Rs319.10 billion by the end of March 2017. At the same price, its share price has plummeted to Rs4.53, a massive 67% plunge.

Issues in delivering quality service and involvement of a few staff members in unprofessional, unethical and unlawful activities have hampered its reputation.

But there is a change in the air. The government has recently handed over the wheel to new hands.

Nawaz Sharif, then prime minister, appointed Musharraf Rasool Cyan as PIA’s chief executive officer who took charge in September 2017 and projections on the airline’s future performance are gaining traction.

In a maiden and exclusive interview with The Express Tribune, Cyan says the airline’s turnaround will occur in the next 24-30 months.

“It is an exciting organization,” Cyan said, admitting there was work to do as he said it. “There is lot to be done here. It requires proper economic planning, reforms, and a lot of management.”

The airline seems to have hit issues because of a backlog of issues, said Cyan, adding that the failure to take decisions has made the situation worse.

For example, it has taken some of the aircraft on lease at a higher price than the one prevailing in the market and its IT system remains outdated and obsolete when compared with other players.

It has yet to upgrade softwares at several departments including engineering, reservation, flight planning, for efficient use of fuel, and upgrading cabin environment for passengers. It is not using the latest ‘data analytics’, which the modern aviation industry and other businesses are using to snatch market share.

“I am fixing these things immediately. The benefit of this (data analytics) is that sales have improved in the last three months and revenue has picked up. Then we have started the process of eliminating losses,” he said.

New routes

The CEO said the company has carried out analysis of which routes are causing the most losses, while studying potential ones where a market could be gained.

“As a business, this is our commercial planning. This year, we are going to apply this and minimise losses.”

Cyan said PIA will fly on new international routes in 2018, including Al-Qassim in Saudi Arabia, Guangzhou in China and one more destination in the region, which may be Mashhad in Iran.

On the other hand, it is considering suspending or reducing the number of flights on some routes. The reduction in flight frequency could be seen on the route to Muscat and Kuwait.

Flights to Dubai and Toronto are also incurring losses, but the airline is confident that the routes could be made profitable. Cyan also said Toronto is going to become a connecting flights’ destination for PIA to North America.

“Almost all the North American airlines fly to Toronto,” he said.

Suspension of flights to New York, which was causing PIA a loss of Rs1.5 billion per year, was part of the exercise. Passengers may now travel via Toronto where PIA has increased frequency of flights to five a week.

“Redeployment of the aircraft from the loss-making New York route to Saudi Arabia has started earning a profit,” the CEO said.

PIA flies to around 109-110 destinations around the world every day, including the local ones.

Similarly, aircraft selection will be made according to distance and booking of seats on flights, he said.

Recovery plan working

With the realignment and restructuring, PIA has gradually started recovering. “PIA made additional sales worth Rs1.5 billion in November (2017). They rose to Rs8 billion from Rs6.5 billion (in November 2016). Similar is the situation seen in December 2017.”

Under its project named V1, which means velocity of the aircraft before taking off, the airline has decided to improve services across the board in the next 24 months and generate an ‘operating profit’.

As per the five-year business plan presented to the government, PIA would break even in the third year and would generate profit before tax in the fourth year. “Four to six per cent profit is (considered) a healthy profit in the aviation industry,” he said.

“This is all to be achieved in the given timeframe subject to legacy debt (around Rs200 billion) not to be counted for the time being,” he said, adding PIA is in talks with the government for putting the legacy debt on the side.

Right now, PIA is managing a 36-aircraft fleet. “We aim to take the total number of aircraft to 44 in the next three years,” he said.

Privatization, lay-offs not on cards

Cyan said privatisation of the airline and employees’ lay-off are no more on the agenda. “I have asked the government about its plans for privatization and it replied in the negative,” he said.

He also spoke against the open skies policy and demanded a level playing field.

During his doctoral studies, Cyan took case studies of turnaround of Continental Air of the US and Malaysia Airlines. “CEO of Malaysia Airlines had no aviation industry experience. But he managed to turn around the airline.”

Original article can be found here ➤

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