Sunday, March 26, 2023
HomeWorldWhy PIA Airbus crash has reignited questions about viability of the airline

Why PIA Airbus crash has reignited questions about viability of the airline

PIA had just posted its first profit in 8 years, was starting to fly again after Covid lockdown and had proposed revival plans to the government.

Text Size:

Karachi/New Delhi: A deadly Pakistan International Airlines Corp. crash that killed 97 people in May has put a plan to revive the company, which has more accumulated losses than any other publicly-traded carrier in Asia, in jeopardy.

The state-run airline, known as PIA, had just posted its first gross profit in eight years, was starting to fly again after a two-month nationwide lockdown, was on the verge of reviving a direct route to the U.S., and had proposed revival plans to the government. But the Airbus SE A320 jet crash into a residential neighborhood in Karachi has reignited questions about its viability.

“It’s possible that PIA becomes the last choice for travelers,” said Khurram Schehzad, chief executive officer at Karachi-based advisory Alpha Beta Core Solutions. “The public sector airline has a bad reputation with timing and service in the past, and this would impact the airlines business even more. Many people would be inclined to fly competition, for now.”

The malaise at the airline stems from frequent labor strife, changes in leadership — the airline has had six chief executive officers in five years — and red tape. That in turn has added to the woes of the carrier, which last reported a net income a decade and a half ago, and has suffered 52 safety-related incidents in the 54 years of its existence, according to data from Aviation Safety Network.

PIA spokesman Abdullah Hafeez Khan didn’t respond to a request for a comment.

PIA, and Pakistan’s aviation sector in general, is managed by either generalist bureaucrats, or military officers, or a combination of the two, according to Mosharraf Zaidi, a senior fellow at Islamabad-based think tank, Tabadlab. That leads to a highly bureaucratic and unaccountable system in which plane crashes are only the most extreme manifestation, Zaidi said.

PIA had accumulated $3 billion of losses as of last year, hurting its ability to take on rivals. Apart from middle-eastern heavyweights such as Emirates Airline and Etihad Airways PJSC, the ailing carrier also faces new local competition in Airblue Ltd., emerging carrier SereneAir and upcoming AirSial Ltd., and is losing market share in the process.

“A disproportionate number of plane crashes is part of a wider malaise,” said Zaidi. “Without a wider commitment to excellence, to professionalism and to an economic transformation, no one should expect any major changes or improvements.”

Military Links

PIA’s current Chief Executive Officer, Arshad Mahmood Malik, is a Vice Chief of Air Staff at the nation’s air force. That’s partly prompted by a tumultuous history — long-pending plans to sell the airline have seen violent street protests by labor unions fearing layoffs, and political parties in opposition.

The misery of former Deutsche Lufthansa AG executive Bernd Hildenbrand is a case in point. After Hildenbrand joined as the airline’s first foreign CEO, his salary was immediately leaked to the press. Months later, he was stopped from leaving the country, citing an investigation into a plane-lease contract. Another CEO was locked into the bathroom by union members, according to the Dawn newspaper.

Even Malik, the current CEO, was suspended for a few months this year by a court following a petition by a labor union leader. He was allowed to resume work only after the state lawyer said Prime Minister Imran Khan believes Malik was indeed the right man to manage the carrier “on ventilator.” The attorney general also assured the court that he will not be called back to the military anytime soon, according to Dawn.

Lost Glory

The latest crash — the worst for PIA since 1992 in terms of fatalities — comes as demand has been destroyed with countries imposing travel restrictions to check the spread of the coronavirus. The industry is staring at a $314 billion loss in ticket sales this year, with 70% of global capacity idled, according to the International Air Transport Association.

PIA, which owns the iconic Roosevelt Hotel in Manhattan, is the most likely airline in the world to go bankrupt, according to a Bloomberg News analysis. Airline officials in March presented multiple bailout options to the government, as losses and debt have become too much for the company to handle alone. The airline offered to transfer some debt to the government, conduct a debt-to-equity swap or to issue a long-term bond.

PIA, which along with neighboring counterpart Air India Ltd. once stood for the emergence of two infant South Asian nations on the world stage following independence from the British in 1947, now has current liabilities of $2 billion — more than six times the value of its assets. The airline can’t survive without more taxpayer-funded bailouts.

While Pakistan Air Force legend Nur Khan shepherded the airline through its heyday in the 1960s, the current regime led by a military veteran doesn’t seem to have made any difference to the company’s performance, according to Burzine Waghmar, a member of the Centre for the Study of Pakistan at SOAS University of London.

“That their presence has not exactly led to turning such public-sector companies around profitably is acutely evident and puts paid the common assumption that the military is more efficient at managing Pakistani institutions than civilians.” – Bloomberg

Also read: Crashed PIA A-320 had grazed Karachi airport runway at 200 mph without landing gear


Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

Most Popular