Unravelling The National Airline – PIA

As the government of Pakistan struggles to revive PIA persists, the suggestions and advices pour in from special interest groups as well as “experts” with inexplicable agenda. Some suggest to minimize inflight service by eliminating food and some suggest to sell the airline as it is. The suggestions are numerous but each one pitching to their position close to their interest. It is a fact that the government has no business in running an airline. It is best to be privatized. However, the proponent for selling the airline completely ignore the fact that the current status of the airline can only bring in 40 cents on the dollar with the amount of debt and losses accumulated. It is far better to revive the airline to the point of breakeven and then present it to potential buyers. Revitalizing the national airline is certainly a challenge but not impossible. The Government with a political will must strike a balance between human obligations and commercial interests. Unfortunately, recent aviation policy does not address such basic but important issues. Without a vision and plan, pouring more money into an ailing carrier may prove to be a futile effort in the long run. In this paper, I have attempted to introduce new approach with novel idea of taking a step back plus traditional corporate changes required to unravel established and outmoded emotions with respect to the national carrier Pakistan’s International Airlines.

Instead of trying to recreate the old grandeur, an adjustment in basic thinking is needed among all the stakeholders. From insisting on being an international player, aviation policymakers may attempt to focus towards existing accessible regional opportunities. As they say “pluck the low hanging fruit” first. Success in the region shall help stabilize the airline giving the officials a breathing space for future planning as Sri Lanka has just announced its five-year plan.

Investing in regional aviation is the key to building sustainable airlines: With stability taking hold in the country, and the present government encouraging tourism and business investment, more and more travelers shall be heading to Pakistan. The airline, initially, with its present resources and assets need to respond to this growing demand. That means connecting all the major cities of Pakistan with the outside world, specifically Europe, SE & Central Asia, and China through hubs such as Istanbul, Dubai and K L in Malaysia. Internally arriving travelers then need to be connected with Northern Pakistan from almost every major city. Both business travelers as well as a growing class of adventurous tourists from around the world, can take advantage of a regional and an internal network. This strategy requires GoP to review and renegotiate all open sky policies.

The recent rate of Foreign Direct Investment (FDI) into Pakistan is encouraging, and those who benefit from the resulting economic growth will want to take full advantage of a convenient regional network. Istanbul’s new airport can serve as a suitable hub for the international travelers because of the two countries relationship. Similarly, KL in Malaysia facilitate travelers and tourists from SE Asia whereas Dubai continues its role for the passengers arriving from the western hemisphere destined to Pakistan. As the economy takes off, many Pakistanis will increase their propensity to travel within Pakistan while strengthening relations with SE Asian countries will increase travel within the region. It is critical then to take a holistic approach to development, including expanding routes, types of aircraft and developing more infrastructure in northern Pakistan.

Choice of equipment, choice of comfort: As noted, the main driver behind the increased air transport demand shall be primarily business travel. The passengers travelling on business and for tourism shall need the right combinations of destination, and choice of equipment for fast and efficient connections. PIA using Istanbul and Karachi as the gateway to and from Central Asian countries can create productive market ensuring competitive fares. According to Innovata, 70 percent of current regional routes (sectors of 1, 500 nm or less) are monopolies, operated by a single airline, in Pakistan’s case by Emirate. Such exclusivity needs to change because Travel in Pakistan and in the region shall require frequent service and comfort. Synchronized frequencies from the regional hubs to major cities and hourly domestic connections within Pakistan can provide the service level these tourists’ passengers and future businessmen shall expect and demand. Still, as the building blocks for a successful regional airline come together, obstacles are anticipated. Continuing corruption, nepotism remains a problem. Old equipment requires efficient maintenance. Ground services, recovering taxes and fees, fuel costs, heavy regulation, require investment as well as a meritocracy.

The right tools for the right routes: To build something that can serve Pakistan and South Asia on long-term, PIA will need to operate the right size of aircraft. The reasons are simple: As noted, the frequency is needed to attract new travelers, and to ensure a competitive market share. Current wide body aircraft are not suitable for the increased frequency demand and the adequate load factor. That means aircraft size is the key to minimizing the risk of operating empty aircraft. Regional aircraft are the most appropriate tools to provide the backbone of a sustainable PIA. The current fleet of ATRs can enable access to communities which may not have adequate infrastructure for larger aircraft or no service at all. PIA’s top objective should be to “create a network that provides feeder traffic to existing and future regional and international operators to the remote areas of Pakistan promoting tourism.

In communities where such infrastructure development has been possible, regional jets become the obvious choice for an airline fleet planner. They are cheaper to operate, with comparable seat-mile costs, but much lower trip costs. All that adds up to an ability to offer the frequencies needed to develop a route and raise the PDEW (Passengers daily each way) figure. Some of the more successful carriers are already using regional aircraft in just such a manner. The fleet at Ethiopian Airlines, for example, includes both wide bodies as well as 23 Bombardier Q400s. These have been used to develop services to the country’s hinterland, which also, of course, bring traffic to the hub for long-haul flight connections. Similarly, other smaller airlines around the world have opted for regional aircraft. These carriers understand the importance of using regional aircraft to begin its operations and build the foundation for a future long-haul network.

Adopting a regional aviation focus: Most carriers that make regional aviation as a pillar of their operations, have resulted in constancy of their International operation by achieving commercial balance capturing increased PDEW. Therefore, it is strongly suggested that PIA needs to shift their attention similarly, because airline sustainability across the globe is now becoming an imperative goal and Pakistan needs that as its economic backbone to realize sustainable progress. With the vast amount of investment predicted coming into the country due to CPEC projects, as well as the considerable growth in foreign regional trade, a strong regional route network must develop alongside the growth that such investment brings. The network needs to reach beyond the major cities, which means that regional aircraft —which provide all the necessary comfort and economics—must be at the heart of Pakistan’s aviation strategy for sustainable growth policy.

New business model: The management should transform PIA into a strong regional airline servicing not only Pakistan but become a feeder for larger airlines operating in Asia utilizing single-aisle airplanes. Most travelers, specifically tourists are price and demand frequent and efficient connections. For that new routes and markets within Pakistan and in the region should be explored. Flight schedules with increased frequency from each major city should help tourists and businessmen in their international travel. For the capital to procure/lease more single-aisle airplane, PIA may dispose of four out of 9 of their widebody 777s as the long-haul operation is reduced. Remaining five 777s shall be immediately updated with new seats and IFE – inflight entertain system along with connectivity. This modification or retrofit as it is known in the aviation industry is a must to sustain current long-haul operations to London and Canada. New special cargo services could generate increased revenue and shall provide exposure to local skills, fruits and handlooms to the outside world. PIA has an opportunity to offer cargo services through its older aircraft.

Restructuring: Due to economic and financial strains, PIA should keep most of its aircraft and increase its maintenance budget. Most aircraft in the fleet are in conditions that can sustain the airline while it strives to get hold its foot in the region. Any new single-aisle airplanes can be acquired under a dry-lease arrangement keeping the cost at the minimum. New single-aisle aircraft plus other smaller airplanes could serve well the SE Asian region and within sub-continent market.

Changing Corporate Culture. Leaders across the aviation industry know that the most challenging—and rewarding—aspect of re-sizing would be achieving a balance by exploiting two different markets. For that corporate cultures have to be changed leaders often don’t give corporate culture the attention it warrants, but 95 % describing culture change as critical to the success of the re-sizing exercise. Yet current management at PIA lacks cohesion and alignment that could result in struggle.

Culture is defined as the vision that drives a company; the values that guide its workforce; and the management practices, norms, and mindsets that characterize how the work gets done. To put it simply, culture is the soul of any business. When re-sizing exercise takes place a new modified culture catering to small & efficient business model must be clearly defined by the leadership team and reinforced by middle managers, communication teams, IT departments, and so forth. And the faster the better.

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1 Comment

  1. Saad says

    Well, I think PIA needs to attract travelers with widebody aircrafts while updating the IFE and seat comfort at the same time. The flight load from the gulf and that too UAE & Saudia are quite packed and despite the shorter flights people like traveling on a wider and more comfortable planes. PIA could justify charging a premium price like it already does at times on par with Etihad & Emirates and that would do well with a nationalist marketing campaign. The idea is to create a brand and the loyalty would eventually follow. Even when comparing between Etihad & Emirates people prefer flying with Emirates a tad bit more since the aircraft offers more comfort and service. Not to forget the excellent airports that DXB boasts. Inspiration could be drawn from Turkish airlines ambition and their excellent selling strategy.

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