Dr. Strangelove
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KARACHI:
Pakistan International Airlines (PIA) has claimed that it has come out of losses at the operational level after quite a long time as its revenues slightly exceeded the operating cost in the quarter ended March 31, 2019.
“PIA has achieved breakeven at the operational level,” Adviser to PIA CEO Air Vice Marshal Noor Abbas told The Express Tribune. “It, however, may take three to four years to report a net profit.”
The state-owned airline’s revenue surged to an average of Rs8-8.5 billion a month in the January-March 2019 quarter compared to around Rs7 billion a month in the same period of last year. “The operating cost was slightly lower than the monthly revenue or was almost equal,” he said.
18 new planes, new routes planned for PIA
The adviser said a notable improvement in financial management came after the seat occupancy rate per flight increased to around 90% in the period under review compared to less than 70% in the corresponding period of previous year.
Moreover, the addition of four planes to the operational fleet after repair, which took more than a year, reduction in the number of employees, drastic reduction in the ticket reservation cost, increased load factor of cargo and increase in the number of flights on profit-making routes helped achieve these results.
“Such improvement in operations came following the change of management in November 2018 when Air Marshal Arshad Malik took charge as CEO of the airline,” he said. “PIA is doing well under the five-year business plan, which got approval of the cabinet very recently.”
He revealed that PIA had been saving roughly Rs1 billion a month since it acquired the new ticket reservation software from Turkey-based firm Hitit in October 2018. “The new reservation software is costing half of what PIA was paying to the US-based firm Saber.”
“The saving is playing a major role in turning around the airline,” he said.
Grounded planes return to air
The adviser said seven aircraft had been grounded for repair and maintenance at the time the new management took over the airline. Some of them had remained in the hangar for over a year due to lack of finances. “We have now put four of them in the operational fleet,” Abbas said.
PIA business plan to be ready by March
It became possible after the government extended sovereign guarantees for commercial loans worth Rs5.6 billion for repair and maintenance in February 2019.
“Another two grounded aircraft – Boing 777 AP-BHV and A-320 AP-BLV – will start flying by mid-May,” he said. “The required parts have arrived from original equipment manufacturers (OEMs) in the US and Europe.”
Cargo load improves
He said the cargo load factor had also increased to over 70% these days compared to less than 50% about six months ago. “Accordingly, the share of revenue from cargo operations has increased to 7-8% in the total revenue compared to around 5% earlier,” he said.
New planes
He said the management had planned to increase the fleet to around 45 aircraft under the five-year business plan from 32 at present. “First of the new aircraft is expected to be acquired in the current calendar year.”
He, however, said it had not yet been decided whether the first aircraft would be narrow or wide-body plane. However, 60% of the 13 new aircraft would be narrow-body and the remaining would be wide-body.
HR rationalisation
He said the state-owned airline had started the process of human resources rationalisation. “We need to cut human resource by 25-30%. We may do so in the next two to three months. The rationalisation drive kicked off in January,” he said.
There are around 13,000 regular employees and another 3,000 outsourced employees of PIA.
He added the impact of HR rationalisation would not be at the mass level as 500-600 employees were leaving the organisation themselves every year including around 400 who were reaching the retirement age.
Routes rationalisation
He said PIA had increased the number of flights and started flying on around eight new international routes, mostly in the Middle East, since the change in management in November 2018. “PIA is also going to start flights on the Islamabad-Muscat route on April 23. This will be the ninth new route in less than six months.”
Besides, it has stopped and suspended flights on a couple of loss-making routes under the rationalisation programme.
Published in The Express Tribune, April 20th, 2019.
https://tribune.com.pk/story/1954858/2-pia-reaches-break-even-operating-profit/
