Can Pakistan's state airline fly through tough times?

ISLAMABAD Wed Feb 15, 2012 2:37pm IST

A Pakistan International Airlines (PIA) plane prepares to take-off at Alama Iqbal International Airport in Lahore February 1, 2012. REUTERS/Mohsin Raza

A Pakistan International Airlines (PIA) plane prepares to take-off at Alama Iqbal International Airport in Lahore February 1, 2012.

Credit: Reuters/Mohsin Raza

Stocks

   

ISLAMABAD (Reuters) - On a recent Pakistan International Airlines (PIA) flight, water flowed from the toilets through the aisles during the entire journey from London to Islamabad.

"What if it reaches some electrical wires and puts us in danger?" said one concerned passenger to another after flight attendants brushed off repeated complaints.

"This could be a catastrophe."

PIA, like Pakistan, always seems to be on the brink of disaster. But now that seems closer than ever for the national flag carrier, once a source of pride for the country.

The airline is hemorrhaging hundreds of millions of dollars a year while being pummeled by competition from sleek Gulf giants like Emirates, Etihad and Qatar Airways.

A quarter of its 40 aircraft are grounded because the airline can't find enough money to buy spare parts. Flights are regularly cancelled and engineers say they are having to cannibalise some planes to keep others flying.

"The situation has worsened to the extent of rendering this airline almost financially unviable," said the State Bank of Pakistan in a report on the state of the economy.

In many ways the airline mirrors the way Pakistan -- a strategic U.S. ally often described as a failing state -- is run.

The same inefficiency, nepotism and corruption that critics say have prevented the government from tackling a Taliban insurgency, crippling power cuts, ethnic violence and widespread poverty also threaten to bring down the airline.

PIA lost 19.29 billion rupees in the first nine months of 2011, almost double the losses in the same period in 2010.

The airline, like the Pakistani economy, has relied on bailouts to stay in the air, and is negotiating with the state for another rescue package.

"Just like PIA has the potential to do well, Pakistan's economy does too. But both haven't because of mismanagement. In the end that is the story -- mismanagement," Salman Shah, a former Pakistani finance minister, told Reuters.

PIA officials declined to comment on the challenges facing the airline.

HUGE WORKFORCE WEIGHS DOWN AIRLINE

Over the years, critics say, governments have manipulated state corporations like PIA for political and financial gain, giving jobs to so many supporters that the size of the workforce has become unsustainable in the face of mounting losses.

"We don't have people in the right places in typical Pakistani fashion. It's about who you know not what you can do," said a PIA pilot, who like other employees asked not to be identified for fear of being fired.

Today, PIA has a staggering employee to aircraft ratio of more than 450, more than twice as much as some competitors. In the first nine months of 2011, employee expenses drained 16 percent of turnover.

"Politically motivated inductions have been the major cause of the significant increase in human resource burden in this organisation," said the central bank.

"It cannot be corrected without taking drastic steps for rightsizing and increasing operational efficiency."

That is unlikely in a country where political expediency and interests often undermine efforts to make everything from governments to corporations successful.

Frustrations with those realities are palpable at PIA.

Employees accuse supervisors of looking for kickbacks instead of trying to save the company. Some contracts are signed with companies for equipment they don't even possess.

"Management's concern is not with what planes and parts are good for the airline but what is good for them," said a senior PIA engineer.

Things were not always so gloomy. PIA used to be considered one of Asia's elite, a model for other airlines, the first on the continent to offer a jet service.

These days, flight cancellations and technical glitches are regularly reported on cable news channels, with irate passengers calling with a long list of complaints.

It has become the butt of jokes on television comedy shows. In one sketch, a young man grows old at the airport waiting for a PIA flight to arrive with his relatives.

Pakistani television channel Geo News reported that the captain of an overbooked domestic flight accommodated two passengers by making them travel in his aircraft's toilets.

A PIA spokesman denied the report.

"I wouldn't fly on PIA even if they gave me free tickets," said businessman Younis Ibrahim, 40, who regularly flies from Pakistan's commercial hub Karachi to Oman on Emirates.

"They are never on time."

Others have more serious concerns about the airline.

Just before takeoff, one PIA aircraft had to abort because smoke started to rise in the cabin.

"There was a strange smell. We immediately told the crew and they had to put us on another plane," said passenger Haroon Ali.

With little financial muscle, PIA has few chances of improving its services and many of its best pilots and engineers are joining competing airlines.

"People that PIA invested in decades in are leaving. This is what happens when you don't have a culture of merit," said a PIA engineer at Karachi airport.

Demoralised pilots and engineers say the airline desperately needs to replace its ageing fleet.

The European Union banned PIA from flying to the bloc for eight months in 2007 because of concern about maintenance and the age of some aircraft. The ban was lifted after PIA addressed the concerns.

The chances of purchasing new aircraft are slim given PIA's financial predicament.

"You can't fly an airline like this," said a senior PIA pilot. "You can run it into the ground, but you can't fly it."

(Additional reporting by Imtiaz Shah in KARACHI; Editing by Michael Georgy and Robert Birsel)

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