Summary
Highlights
PIA, after 20 years of losses borne by taxpayers, has surprisingly become profitable in recent months. Ijaz Haroon, former MD of PIA, discusses the reasons behind this turnaround.
Ijaz Haroon credits Khawaja Asif for identifying and addressing the core problem: debt servicing. The burden of interest payments was crippling PIA, regardless of revenue.
Like removing an organ affected by cancer, the accumulated losses (600 billion rupees) were transferred to a separate holding company. This allows the operating airline to genuinely be profitable.
The current management must remain vigilant and avoid complacency. They need to prepare meticulously and not assume success. The fact that they became too relaxed affected their attempt to get UK clearances.
Employee costs were not the primary issue. The main problem was the heavy interest payments on bank loans. Successive governments failed to address this, leading to accumulated losses.
The accumulated 600 billion in debt is now being financed via loans taken by the holding company, effectively burdening the taxpayer through taxes. Proper investment and management of assets (hotels, plots) is crucial.
Currently, the holding company's liabilities exceed its assets. It needs skilled management to convert assets into profitable businesses, requiring expertise beyond airline operations.
A proposed alliance with Turkish Airlines 15 years ago was rejected due to political interference. Had it been implemented, PIA could have mirrored Turkish Airlines' global success.
The speaker doesn't believe it is phasing. Pakistan has commitments to IMF which will affect the future of PIA.
The biggest impact on profitability comes from no longer having to cover interest payments, as these alone were around 30 billion in prior years.
The old fleet of 747's and tripple 7's gave way to smaller planes so less passengers were transported. Air lines such as Air Asia and Air Blue have taken hold and PIA should re-evaluate its fleet.PIA lost 25-30% of the country's marketshare and this should be addressed.
The main challenge is to bring in people who know the business and a free hand to operate. Many are claiming to bring in outside people, when there are plenty of experienced hard working people who exist in Pakistan.