Thursday, February 4, 2016

PIA PRIVITIZATION


PIA is the national carrier of Pakistan and has about 15,000 employees.
            
Most of the airports in Pakistan are witnessing a travel chaos these days as protesting employees of the PIA blocked operations in protest against proposed privatization of the organisation. Situation took an ugly turn a day before yesterday when three protester employees were killed in a shooting incident, which they blamed on security officials but the rangers and police denied opening fire and told that butts found on spot were not that of security forces' guns.

PIA which was one of the world’s leading airlines until the 1970s now suffers from frequent cancellations and delays and has been involved in numerous controversies over the years, including the arrest of a drunk pilot in Britain in 2013. PIA has also faced problems acquiring security clearances to the European Union for cargo flights. The airline has also traditionally handed  thousands of free tickets each year contributing to its big losses.

PIA’s financial statements reveals that the airline has suffered losses worth Rs.119.84 billion over the last ten year. Flight delays and cancellation has become the norm of the airline as its flight delay ratio is more than 35% which is very high and especially due to this reason its passengers are now shifting to other airlines.

The government claims that it has increased the fleet size from 18 to 38 which has brought down its losses significantly but still the employees to plane ratio is 390 which is still very high as  compared to global average ratio of 120. The other major problem is huge loans of more than 250 billion rupees so the finance cost is very high which erodes its trading profits.
However the government has made it clear that neither any employee will be sacked nor their facilities withdrawn but it has  warned the protesting employees that the government would use its authority against all those elements who had locked the airline offices without any reason.Many flights were delayed and passengers could not get their boarding passes. Federal Minister for Finance Ishaq dar on Sunday said that the government would not privatize the airlines but would get a "strategic partner" which would have 26 percent shares. the government has given a fresh commitment to the International Monetary Fund (IMF), promising it will sell the national carrier to a strategic investor by March next year.
“The timelines to sell a minimum 26% of PIA shares were discussed during the on-going eighth review of the $6.60 billion IMF programme,” said Privatisation Commission Chairman Mohammad Zubair.
PIA’s cumulative losses were Rs 227 billion ($2.2 billion) as of June 2014. The government has to inject Rs 12 to Rs 15 billion annually to keep the airline alive and pay employees.According to the audited financial statement for January-March period of 2015, the accumulative losses of the airline increased to Rs228.7 billion – a net addition of Rs2.1 billion in three months. The total liabilities grew to Rs329.7 billion as of March 2015 while its assets were recorded at Rs186.7 billion.
Adviser to Prime Minister on Aviation Captain (Rtd.) Shujat Azeem is said to be in opposition to the privatization.He is in favor of restructuring and revival of the entity and under the same strategy, PIA is in the process of acquiring ten narrow-body aircraft, five ATRs and two wide body aircraft on lease. Few of these planes have already joined the fleet.
PIA has yet not been converted into a public limited company despite the National Assembly having passed the Pakistan International Airlines Corporation (Conversion) Bill, 2015...it is a must to hold the first board of directors meeting of the airlines to convert it into a public limited company.  
The government has invoked the Essential Services Act of 1952 to break the strike of PIA unions against the proposed privatization plan appeared to be an act of panic but it also shows that the government is determined to privatize the organisation as promised to IMF. IMF has now allowed 10 more months for the completion of the task.
The whole nation has to bear losses of badly run public sector businesses.Privatization is necessary as it is evident from empirical data that it is government intervention that causes economic inefficiencies which are removed in private hands. It is no rocket science to conclude that incapable, incompetent and corrupt person if appointed to head any public corporation, would result into losses and bankruptcy of that organization as has been done in most of the public companies. Private administration safeguarded its interests and runs the organisations profitability as it is their own money they invest to acquire any entity. 

Better late than never.

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