View From Islamabad: Excess baggage weighs heavily on PIA bid to fly high

The successful launch of a new phase in relations between India and Pakistan is set to give an impetus to prospects for the state-owned Pakistan International Airlines (PIA) as it embarks on plans for acquiring new aircraft.

The first of up to eight new Boeing-777 aircraft will be delivered to PIA at the end of this month, marking the first step towards the eventual replacement of its ageing fleet of Boeing 747 aircraft.

The newer aircraft could not have come at a more opportune time, just when India and Pakistan have agreed to allow over-flying rights to each other's aircraft. PIA expects to receive the rest of the Boeing-777s in the next two to three years, helping the airline to use newer aircraft for destinations to North America, Europe, the Middle East and the Far East.

Improvement

The revived hopes for PIA's higher revenue follow continuing improvements its profits in two to three years. Pre-tax profits for the first nine months of last year at Rs2.43 billion were almost 14 per cent higher than the pre-tax profit of Rs2.1 billion for 2002. The results for the last quarter of 2003 are still to be announced.

PIA officials hope that some of its relatively captive markets such as the annual passenger traffic for the Haj or, indeed, the traffic of expatriates returning home from North America and Europe during vacations, will receive a further lift on the back of newer aircraft and improved efficiency levels.

The next stage for PIA's revamp now comes with plans to buy smaller aircraft to replace the fleet of ageing Fokker F-27 planes serving smaller Pakistani cities. At least three companies are in the run to sell new fleets to PIA. Besides, PIA is also drawing up plans to buy used Airbus aircraft to replace some of its old Airbuses, now in use for well over a decade.

With so much emerging in the form of positive factors for PIA, exactly what are some of the deterrents to the airline's improving profitability? Most analysts point towards at least three vital factors, badly in need of resolution.

First, PIA's workforce has become bloated in the past two to three decades, as hiring of new staff has been done as a way of offering political patronage.

PIA management appears to continue with a policy of a gradual reduction of staff, relying on measures such as stalling the replacement of retired personnel. Ultimately, the hope is that PIA's workforce will become leaner.

Efficiency

Second, PIA remains under criticism for shortcomings in its efficiency. Many analysts argue that a policy short of large scale firing of excessive personnel will not help improve profits. Such an approach may well be in sharp contrast to the airline's preferred option of gradually reducing the number of employees.

Last but not the least, PIA's management is keen to seek the government's support for tightening up the country's so-called 'open skies' policy which over the years has seen a large number of foreign airlines making inroads.

Ahmed Saeed, PIA's chairman and managing director, says such freedom of access for foreign airlines to the Pakistani market is not necessarily reciprocated by the home governments of those airlines, which often raises questions over the extent of fair competition available.

The author is a Pakistan-based journalist