PIA to narrow budget deficit of Rs10b via cost-cutting measures

Istanbul: Captain Mohammad Aijaz Haroon, the newly appointed managing director of the loss-making Pakistan International Airlines (PIA), said he has inherited a company with a budget deficit of almost Rs10 billion.

Speaking on the sidelines of IATA's 34th Annual General Meeting in Istanbul, Haroon, however, said he has no plans to hedge against rising jet fuel prices and will instead focus on other cost-cutting measures like working with air traffic controllers to optimise flight routes at least domestically, improve the load factor and boost labour productivity.

The airline, which started in 1955, has suffered from high operating costs. For example, in the first quarter of 2007, it achieved five per cent growth in overall revenue fuelled by a 7.6 per cent increase in passenger revenue.

PIA, however, suffered an operating loss of Rs2.5 billion as a salary increase, higher cost of leased aircraft and higher fleet maintenance costs pushed up overall operating expenses by 19 per cent.

Revenue growth was further reduced due to the European Union ban from early March 2007, which meant that only PIA's Boeing 777s were able to operate to Europe.

Haroon insisted that the surging price of crude was not in line with the fundamentals of demand and supply. He blamed speculation for the turmoil.

"I don't believe oil will stay high in the long run and I certainly hope it does not," he said.

Haroon said he was satisfied with his airline's performance in the Middle East despite the growing presence of low-cost carriers.

"I don't see much of a difference in terms of fare structure when we compare PIA to a low-cost carrier," he said.

PIA plans to start a low-cost carrier on the domestic route in the next few months.

On e-ticketing, Haroon said his airline had made significant progress in the domestic sector and was working on its international booking facilities.

He said a large section of the Pakistani population still prefer to book tickets with travel agents as they are not internet-savvy.

"Moving to online ticketing will save us at least 8-9 per cent in costs," he said.

Asked if PIA plans to launch more flights to India, Haroon said it would serve no purpose unless India eased its stringent visa regulations for Pakistanis.