After months of planning, the government came up with a solution to rescue the ailing Pakistan International Airlines.
It launched a subsidiary of PIA.
Top-of-the-line service Premier took off amid much fanfare on August 14 last year, on the 70th Independence Day celebration for the country. PIA Premier marketed itself as a new product. Beguiling flight attendants from existing staff fitted out in a new aquamarine and eggplant uniforms walked the aisle. Much ado was made of working entertainment systems and courteous staff.
So when the first Premier flight landed in London, the expectation was that the management would boast about profitability, telling us how every seat had been sold out and how customers were willing to pay more for the new experience.
Instead what followed was a complaint about the mess Pakistani passengers left behind in the aircraft—and a bottle of hand moisturizer that someone took home.
PIA spokesperson Danyal Gilani vented on Twitter by sharing photos of what looked like leftovers of biscuits scattered on the carpet. “This is how (our) new A330 [jet] looks like upon arrival in Lon(don) yest(erday),” he tweeted. “Litter. Lotions stolen.”
One many find some sympathy for his chagrin, but in all honesty, what was PIA expecting? When families and especially children take an eight-hour long flight, litter is bound to be generated. It happens on flights all the time. But as competition has stiffened in the air, airlines have encouraged cabin crew to start picking up— wrappers, cups, earphones—before the flight lands even though it is not necessarily part of the job manual, the bible airline staff use to decide what they must do and not do. This simply means less work for the cabin cleaners who come onboard after the flight has landed and in the bigger picture, it is one of the many ways being employed to ensure a quick turnaround time for a jet. The quicker the aircraft is cleaned, refueled and loaded, the more time it has to fly on profitable routes.
The spokesperson’s take on the maiden Premier flight is indicative, in part, of where the airline is headed and how real issues become confused with those that are less than urgent.
Tough competition
Last year was supposed to be a watershed for PIA. But then, the airline ran into one of the most sustained protest movements by the employee unions against the government’s plan to privatize the state-run airline. Protests ended terribly with two employees being shot dead, marking the first time someone was a lost life during a protest in the 60-year long history of PIA. As a result of these events, the parties never got around to properly discussing how the government had intended to sell the airline.
It had come to this because the past 12 years have been the worst for PIA in its life. Never before has it continuously recorded financial loss in such a long stretch. Cyclic ups and downs are common in the aviation industry, but losses year after year have forced PIA to mount huge debt. It keeps on borrowing from banks to pay off its previous debt. One attempt to turn this tide was Premier. But if its purpose as a subsidiary was to prove that a subsidiary with a fancy name could turn the airline around, it has backfired. Reports and company officials say it is already beset by cost overruns.
The new service is being run on a wet leased Airbus A330 jet from the Sri Lankan airline. A wet lease is expensive since the cost of maintaining the jet is the responsibility of its owner. The pilots and some of the cabin crew also belong to the Sri Lankan airline. This type of lease is traditionally meant as a short term fix, such as when PIA needs extra aircraft to supplement its Hajj flights.
The airline business is not for the faint-hearted. In the last 15 years or so, dozens of airlines have gone bankrupt. Leasing or buying a $300 million aircraft and making it turn out a profit is not easy. This becomes especially difficult when there is competition.
PIA’s misfortune is often attributed to mismanagement, corruption, political interference in appointments, unions and the high number employees. Hardly ever have policymakers talked about the business dynamics that have come to define the aviation business when they have discussed all of the above.
Airlines thrive on the hub-and-spoke business model, basically a clever way of spreading the costs over a large number of flights. Passengers are brought from various locations to one hub city before they are flown to a final destination. This eliminates the need for a direct flight between two points that is difficult to fill.
But the problem is that airports in Karachi, Islamabad and Lahore are in a despicable state, which is why passengers have no incentive to pick them even if PIA tried using them as hubs. (Add to this the international perception of security in Pakistan and there goes the market for tourism flying out the window.)
For years, PIA relied on Pakistanis ethnic traffic, that is, the people who live and work in the Middle East, United Kingdom and the United States. Slowly, though, a large chunk of these passengers have been flying in and out on other airlines, especially from Lahore, Islamabad and Peshawar, otherwise known as the northern gateways considered vital for the airline’s survival.
That is where PIA has taken the hit. In 2005, foreign airlines operated around 100 flights a week from Pakistan. They now have more than 400. Indeed, successive PIA managers have complained that Pakistan’s Civil Aviation Authority has succumbed to political pressure when it comes to handing out flying rights to foreign airlines.
Pakistan’s aviation policy was liberalized in the early 1990s in tandem with what countries around the world were doing. Competition, it was believed, would give passengers the option to choose from many airlines and in turn fares would come down. But PIA was never in a position to face that competition. It took the government, the majority owner of the airline, eight years to give money to induct newer planes in 2015.
Historically, most of PIA’s revenue has come from selling seats on international routes. Its share of the international traffic was 60% in the 1990s. Now it barely manages to fly 20% of that traffic.
The damage has been irreparable in a few instances. In 2008, PIA had 28.9% of the US-Pakistan average daily bookings while Gulf carriers had 38.9%, according to Partnership for Open and Fair Skies, a coalition of various US airlines. But the Gulf carriers’ massive subsidies allowed its airlines to dominate the US-Pakistan routes, with 73.8% of the average daily bookings in 2015. Bookings on the same route on PIA have dropped to just 11.4%.
PIA has long complained that Gulf carriers dump their seats; for instance they drop the fare on the Karachi-Dubai route and then recover it from what they charge on the onward journey. The competitors have bigger and newer aircraft, more connections around the world, bigger and more comfortable airports, booze and they have the financial muscle to undercut PIA’s fare.
If the intention of PIA Premier was to let go of all the legacy costs, the backlog of higher salaries and debt, then it wasn’t a bad idea. But it’s hard to see it competing with some of the best airlines in the world, especially when they have cash-rich governments to finance their expansion.
The writer is a digital business desk producer at the Istanbul-based TRT World and has authored a longform investigation ‘PIA’s 70-year-old Descent’ published in The Express Tribune in 2016
It launched a subsidiary of PIA.
Top-of-the-line service Premier took off amid much fanfare on August 14 last year, on the 70th Independence Day celebration for the country. PIA Premier marketed itself as a new product. Beguiling flight attendants from existing staff fitted out in a new aquamarine and eggplant uniforms walked the aisle. Much ado was made of working entertainment systems and courteous staff.
So when the first Premier flight landed in London, the expectation was that the management would boast about profitability, telling us how every seat had been sold out and how customers were willing to pay more for the new experience.
Instead what followed was a complaint about the mess Pakistani passengers left behind in the aircraft—and a bottle of hand moisturizer that someone took home.
The new Premier service is being run on a wet leased Airbus A330 jet from the Sri Lankan airline. A wet lease is expensive since the cost of maintaining the jet is the responsibility of its owner. It is meant as a short term fix, such as when PIA needs to supplement its Hajj flights
PIA spokesperson Danyal Gilani vented on Twitter by sharing photos of what looked like leftovers of biscuits scattered on the carpet. “This is how (our) new A330 [jet] looks like upon arrival in Lon(don) yest(erday),” he tweeted. “Litter. Lotions stolen.”
One many find some sympathy for his chagrin, but in all honesty, what was PIA expecting? When families and especially children take an eight-hour long flight, litter is bound to be generated. It happens on flights all the time. But as competition has stiffened in the air, airlines have encouraged cabin crew to start picking up— wrappers, cups, earphones—before the flight lands even though it is not necessarily part of the job manual, the bible airline staff use to decide what they must do and not do. This simply means less work for the cabin cleaners who come onboard after the flight has landed and in the bigger picture, it is one of the many ways being employed to ensure a quick turnaround time for a jet. The quicker the aircraft is cleaned, refueled and loaded, the more time it has to fly on profitable routes.
The spokesperson’s take on the maiden Premier flight is indicative, in part, of where the airline is headed and how real issues become confused with those that are less than urgent.
Tough competition
Last year was supposed to be a watershed for PIA. But then, the airline ran into one of the most sustained protest movements by the employee unions against the government’s plan to privatize the state-run airline. Protests ended terribly with two employees being shot dead, marking the first time someone was a lost life during a protest in the 60-year long history of PIA. As a result of these events, the parties never got around to properly discussing how the government had intended to sell the airline.
It had come to this because the past 12 years have been the worst for PIA in its life. Never before has it continuously recorded financial loss in such a long stretch. Cyclic ups and downs are common in the aviation industry, but losses year after year have forced PIA to mount huge debt. It keeps on borrowing from banks to pay off its previous debt. One attempt to turn this tide was Premier. But if its purpose as a subsidiary was to prove that a subsidiary with a fancy name could turn the airline around, it has backfired. Reports and company officials say it is already beset by cost overruns.
For years, PIA relied on Pakistanis who live and work in the ME, UK and
the US. Slowly, these passengers have been flying on other airlines. In 2005, foreign airlines operated around 100 flights a week from Pakistan. They now have more than 400
The new service is being run on a wet leased Airbus A330 jet from the Sri Lankan airline. A wet lease is expensive since the cost of maintaining the jet is the responsibility of its owner. The pilots and some of the cabin crew also belong to the Sri Lankan airline. This type of lease is traditionally meant as a short term fix, such as when PIA needs extra aircraft to supplement its Hajj flights.
The airline business is not for the faint-hearted. In the last 15 years or so, dozens of airlines have gone bankrupt. Leasing or buying a $300 million aircraft and making it turn out a profit is not easy. This becomes especially difficult when there is competition.
PIA’s misfortune is often attributed to mismanagement, corruption, political interference in appointments, unions and the high number employees. Hardly ever have policymakers talked about the business dynamics that have come to define the aviation business when they have discussed all of the above.
Airlines thrive on the hub-and-spoke business model, basically a clever way of spreading the costs over a large number of flights. Passengers are brought from various locations to one hub city before they are flown to a final destination. This eliminates the need for a direct flight between two points that is difficult to fill.
But the problem is that airports in Karachi, Islamabad and Lahore are in a despicable state, which is why passengers have no incentive to pick them even if PIA tried using them as hubs. (Add to this the international perception of security in Pakistan and there goes the market for tourism flying out the window.)
For years, PIA relied on Pakistanis ethnic traffic, that is, the people who live and work in the Middle East, United Kingdom and the United States. Slowly, though, a large chunk of these passengers have been flying in and out on other airlines, especially from Lahore, Islamabad and Peshawar, otherwise known as the northern gateways considered vital for the airline’s survival.
That is where PIA has taken the hit. In 2005, foreign airlines operated around 100 flights a week from Pakistan. They now have more than 400. Indeed, successive PIA managers have complained that Pakistan’s Civil Aviation Authority has succumbed to political pressure when it comes to handing out flying rights to foreign airlines.
Pakistan’s aviation policy was liberalized in the early 1990s in tandem with what countries around the world were doing. Competition, it was believed, would give passengers the option to choose from many airlines and in turn fares would come down. But PIA was never in a position to face that competition. It took the government, the majority owner of the airline, eight years to give money to induct newer planes in 2015.
Historically, most of PIA’s revenue has come from selling seats on international routes. Its share of the international traffic was 60% in the 1990s. Now it barely manages to fly 20% of that traffic.
The damage has been irreparable in a few instances. In 2008, PIA had 28.9% of the US-Pakistan average daily bookings while Gulf carriers had 38.9%, according to Partnership for Open and Fair Skies, a coalition of various US airlines. But the Gulf carriers’ massive subsidies allowed its airlines to dominate the US-Pakistan routes, with 73.8% of the average daily bookings in 2015. Bookings on the same route on PIA have dropped to just 11.4%.
PIA has long complained that Gulf carriers dump their seats; for instance they drop the fare on the Karachi-Dubai route and then recover it from what they charge on the onward journey. The competitors have bigger and newer aircraft, more connections around the world, bigger and more comfortable airports, booze and they have the financial muscle to undercut PIA’s fare.
If the intention of PIA Premier was to let go of all the legacy costs, the backlog of higher salaries and debt, then it wasn’t a bad idea. But it’s hard to see it competing with some of the best airlines in the world, especially when they have cash-rich governments to finance their expansion.
The writer is a digital business desk producer at the Istanbul-based TRT World and has authored a longform investigation ‘PIA’s 70-year-old Descent’ published in The Express Tribune in 2016