View from Islamabad: New aircraft alone won't take PIA to new heights

The approval given by the Pakistani government to Paki-stan International Airlines (PIA) this week for a major restructuring worth at least $1.5 billion has finally begun lifting the uncertainty surrounding the company's long-term future.

For months, reports have poured in over PIA's discussions with Europe's Airbus and the U.S.' Boeing for the purchase of at least three new aircraft by next year, but a final decision is yet to be made. The planned acquisitions are part of a plan to revamp its fleet in a decade.

For many analysts, the pertinent question remains, has PIA begun turning the corner. It has been reporting losses for several years. This year, analysts expect it to post its first operating profit in years, mainly due to expenditure cuts and rising passenger traffic.

The airline's fortunes recei-ved a long-awaited boost after last year's terrorist attacks which provoked many airlines to suspend flights to and from Pakistan. That forced more passengers to use PIA.

The airline owns 40 aircraft and has 22,000 employees. Its operating costs have risen due to increasing cost of maintaining its fleet, which includes some dilapidated aircraft.

While the first bit of good news may have emerged for PIA, mainly as a consequence of the government's success in building up large liquid foreign reserves for the first time in Pakistan's history, paving the way for higher expenditure, the challenge ahead will not be an easy one.

PIA has suffered from declining standards of service with the performance of its cabin and ground crew continuously deteriorating.

It's a story which is not too different from the maladies affecting Pakistan's corporate structure. Moreover, airlines have become extremely competitive with cut-throat competition forcing many companies to retrench, merge or even shut down.

So, the success of PIA's restructuring will depend on two vital factors.

First, the restructuring must include large lay-offs to make PIA a compact operation which responds to customers' demands. Pakistan's corporate sector has suffered badly with successive governments using large-scale recruitments to garner political support.

As Pakistan gets ready for elections in October, its legacy of large-scale and politically-motivated hirings could sound the death knell for its reforms.

Second, PIA's management would have to be realistic about the extent to which it can capture a portion of the tough global market, where passengers travelling from Europe, North America and the Far East would prefer top-class airlines, which offer superior service than PIA.

Yet, the untapped potential could well come in the shape of promoting services to the Middle East and Central Asia, in a way which is integrated with Pakistan's tourism development strategy.

The road ahead would not be easy but PIA would have to persevere to lift itself out of its deepening financial hole.