PIA Resuming Normal Operation: Underlying Problems Still Unaddressed
PIA, once a symbol of pride and leadership in the aviation industry, has been on a steady decline for the past 25 years due to issues of incompetence and vested interests, putting the airline in a precarious situation.
The airline‘s condition is indicative of a weak capital structure, insufficient planning, fleet limitations, accountability and discipline problems, flawed policies, and undue influence from various associations. It currently faces a liquidity crisis. Effective improvement is unlikely without proper management, a conducive culture, and the right operating environment.
The development comes after the airlines pledging to pay 1.35 billion Rupees (USD 16.18 million) for fuel supplies. In addition, PIA has also secured a credit of 500 million Rupees (around USD 6 million) from PSO.
The protracted dispute between PIA and PSO has been resolved, and fuel supply will soon return to normal. The airline will operate 15 flights today, and flight operations will return to normal tomorrow after resolving a fuel supply issue with PSO.
Pakistan International Airlines: Root To The Widespread Cancellations
Pakistan International Airlines has faced major disruptions in its flight service over the past two weeks, resulting in the cancellation of over 350 flights. This situation arose when PSO stopped fuel supply to PIA due to unpaid dues.
Even though Pakistan International Airlines had already used up a credit of 15 billion Rupees (180 million USD) from PSO, the state oil company continued to provide fuel for a limited number of daily flights prioritized by PIA.
These widespread cancellations have caused distress among passengers.
Impacts of Politics on Pakistan International Airlines
Decades of mismanagement by the Pakistani carrier have strained the government and necessitated an International Monetary Fund (IMF) bailout to prevent loan defaults. Pakistani Prime Minister Anwaarul Haq Kakar is expressing concerns about the airline’s current condition and is actively pursuing its privatization.
Kakar believes that selling PIA would enhance its reliability, bringing it up to the standards of neighboring international carriers like Air India or Vistara. Additionally, privatization could make the airline profitable and enhance its connectivity to remote areas of the country.
Kakar assumed office in August 2023 preceding Shehbaz Sharif after Pakistan’s National Assembly was dissolved. However, the privatization plan needs approval from Pakistan’s Economic Coordination Committee.
Bloomberg reported that PIA had liabilities of 743 billion rupees (around USD 2.5 billion), which is five times greater than its total assets.
Recent Credit Boost From PSO
PSO has offered PIA a 500 million rupee credit to support the airline, and they reached an agreement on October 27, 2023. With the financial dispute resolved, PIA will soon see an increase in fuel supply. This credit extension aims to help PIA overcome its financial challenges, ensuring the continuity of its operations and the availability of fuel for its flights.
Despite its own financial challenges, the state-owned oil company (PSO) has reaffirmed its commitment to providing fuel to the airline, even though PIA has a significant overdue balance. PSO intends to work in a manner that benefits both entities.
Rumors emerged in September suggesting the possibility of PIA being grounded or shut down, but the airline has continued to operate.
However, the management team has faced turmoil as their revenue only covers operating costs and staff salaries.
Additionally, in September, the Finance Ministry of Pakistan rejected PIA’s request for a 23 billion PKR ($78 million) bailout.
Issues wth PIA Fleet
Just in August, PIA grounded 11 of their aircrafts due to lack of funds to buy spare parts.
There are a total of 11 grounded aircraft, consisting of three Boeing 777s, two Airbus A320s, four ATR 42-500s, and two ATR 72-500s.
Among these, three planes are irreparable due to the lack of engines and other necessary parts.
The grounding of PIA’s aircraft highlights concerns about the age and maintenance of its fleet. Many of the aircraft have been in service for over 20 years, leading to challenges related to aging equipment. The airline’s maintenance record has faced criticism, indicating the need for frequent maintenance due to the aging fleet.