Pakistan International Airlines faces bankruptcy threat

The national carrier Pakistan International Airlines (PIA) last week published advertisements in all leading newspapers in Pakistan looking for its next Chief Executive Officer (CEO). Among the qualifications required of applicants was expertise in warfare .

Whether it was the government's interpretation of the need to address the airline's relentless loss-making on a war footing, or a battle cry for one last shot at redeeming the flag carrier, the advertisement is being seen as the latest example of the Pakistan government's negligence towards what it might take for PIA to recover.

For many experts, the airlines is beyond salvation. It has mustered a cumulative loss of over 365 billion Pakistani rupees [USD $2.63 billion], with current liabilities standing at over 400 billion rupees [USD $2.88 billion]. In comparison, its assets are reportedly worth a little over 100 billion rupees, and monthly operational losses are running at around two billion rupees.

Among many controversies affecting the airline, it recently banned in-flight entertainment for pilgrims traveling to Jeddah and Medina, declaring that it will only play Quranic verses and naats during such flights.

The decision was taken 'in light of the peoples' sentiments,' PIA spokesman Mashhood Tajawar told Press Trust of India.

The primary cause of losses is said to be over-staffing. The airline currently has around 18,000 employees for an operating fleet of 32. Thus meaning over 550 workers per aircraft, which is, for example, over five times that of Air India . In 2016, PIA had the second highest number of employees per aircraft, behind Syrian Air.

This week, the incumbent CEO Air Marshal Arshad Mahmood Malik, confirmed that routes that have been generating the majority of losses will be shut down . However, this won't even provide a stop gap solution for the airline, which was placed on the defaulters list by the Pakistan Stock Exchange last year.

Among those who see little point in the government investing in PIA is the airline's CEO himself, and he knows the task is a daunting one.

'We are currently working on both long-term and short-term plans to revive PIA. But launching a new airline [would be] easier than salvaging PIA,' said Malik.

Given the losses that the airline has been relentlessly accumulating since 2005, its growing inability to sustain itself and the stock exchange reconfirming its default status, experts have urged the government to declare PIA bankrupt.

The question of whether to declare bankruptcy or privatize PIA has gained further momentum due to Pakistan's current state of economic crisis. It has prompted Islamabad to go on a borrowing spree to avoid a 13th bailout by the International Monetary Fund (IMF), as the rupee continues to hit new lows owing to a balance of payment crisis.

With the Tehrik-e-Insaf (PTI) government coming to power on a manifesto that included an austerity drive beginning with the government itself, calls to either declare bankruptcy or privatize the airline have increased.

Government insiders have told Asia Times that both options have been explored. One government official said: 'Yes, those options have been considered, but we want to first ensure that all attempts for PIA's revival are exhausted before that step is taken. Also, currently we have our hands full dealing with so many other crises, before we eventually come to PIA.'

Similar claims have been made by those who were at the helm of the previous government. Former Finance Minister Rana Afzal Khan maintains that the previous Pakistan Muslim League-Nawaz (PML-N) government was ready to privatize PIA.

'But we faced political resistance in the shape of the opposition parties. Also, we were engrossed in tackling other challenges which were terrorism and the energy [crisis].' he told Asia Times.

In January 2016, the PIA Corporation (Conversion) Bill 2015 was passed by the National Assembly. It resulted with members of the opposition walking out to distance themselves from the move saying that the bill was going to be shot down by the Senate.

Following the passage of the bill in the National Assembly, PIA employees staged protests against privatization plans, halting airline operations and eventually resulting in clashes with security officials which killed two protesters .

'After the protesters were killed, we had to drop the idea. But yes, the issue should've been given due importance. Our privatization ministry under-performed,' confesses Khan.

PIA insiders reveal that the status of currently employed workers is the biggest hindrance in the government's bid to privatize the airlines. This has been made especially hard with workers' groups becoming allied to various political parties, resulting in the national carrier's future becoming hostage to politics, within the company and in parliament.

Former Finance Minister Salman Shah said that such political patronage is harming the national airlines and the exchequer. 'What is needed is political will. If the matter continues as they are no one will have to declare PIA bankrupt, it will do so itself. It's only the removal of government subsidy away from formalizing bankruptcy,' he says.

Shah maintains that the only way to save PIA is to run it as a commercial outfit. 'Given the strong competition in the industry, [PIA] needs to function as a commercial airline, which needs cost-cutting measures, a professional management and a rational road map.'

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