Pakistan bets billions for sale of world’s best ever airline

ISLAMABAD: The national carrier Pakistan International Airline (PIA) is currently facing a loss of nearly Rs850 billion compared to Rs750 billion recorded in the previous year.

This loss is considered a significant burden on the national treasury. Despite the loss, the government spent an additional Rs2 billion in an attempt to auction the PIA. After the failure of this attempt, the airline is being refurbished with an aim to sell it again.

The PIA’s top brass claims that the airline’s annual loss will decrease by Rs12 billion this year. If the management’s claim turns out to be true, the expected loss of billions of rupees will be transferred permanently to the newly formed PIA Holding Company.

According to statistics, PIA’s debts have increased by a record PKR267 billion over the past five years. Additionally, the national airline owes PKR350 billion to domestic banks.

PIA’s privatisation mission has also led to a payment of 2 billion rupees from the national treasury to an international firm. Before PIA’s auction last year, experts had estimated that the airline’s domestic and international assets were worth approximately 1.3 billion dollars. During the auction, government experts decided to start the bidding at 8.5 billion rupees, but only a bid of 1 billion rupees was received.

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The Hum Investigates team has examined PIA’s 70-year journey of ups and downs, how an airline with assets worth trillions of rupees, both domestically and abroad, failed to find a buyer. A common belief is that the appropriate time to privatise PIA was 33 years ago.

Before diving into the details of PIA’s prolonged losses, it is essential to understand that PIA has faced not only corruption, mismanagement, and nepotism allegations but also one serious accusation that was enough to destroy the credibility of any institution. The European Union had imposed a ban on PIA flights for four years, and after the 2020 claims made by former Federal Minister for Aviation, Ghulam Sarwar Khan, regarding the alleged fake degrees of PIA pilots, the airline suffered significant damage. The federal government set up a fact-finding committee to assess the damage caused to the national airline by the statement made by the former minister.

The decline of PIA as an institution raises numerous questions as to why a once-profitable organization, particularly one without any notable competitors, collapsed so easily. Initially, PIA was considered a government entity that could be revived through effective strategies, but the real decline began when the losses rapidly escalated, and political hiring practices were introduced within the organization.

Between 2008 and 2015, PIA made 7,000 new hires, with the number of employees growing from 6,000 in 2008 to 13,000 by 2015.

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It is worth noting that for each Turkish Airlines plane, 89 employees are needed; for its 414 aircraft, 37,000 employees are employed. For Qatar Airways’ 202 planes, there are 50,000 employees; for Etihad’s 79 planes, 18,500 employees’ work. In contrast, PIA has over 8,000 employees for just 28 operational aircraft.

PIA’s spokesperson, Abdullah Hafeez Khan, told Hum Investigates team that incorrect statistics are often cited about the airline’s employees. He claimed that the airline previously had excessive staff, but that is no longer the case, with now only 7,000 employees, equating to 250 employees per plane.

In 2004, PIA’s total loss was PKR4.5 billion, but today it has escalated to 850 billion rupees. While the national airline has been in continuous loss for decades, four new airlines have started their services in the country over the last six years. PIA has 301 employees per aircraft, with the price of 22 planes being 14.4 billion rupees, and these planes are between 18 and 34 years old. Additionally, there are 12 billion rupees in extra expenses related to aircraft.

The government has paid USD6.9 million to a foreign financial firm for PIA’s privatization process. Last year, Pakistan hired the services of the foreign firm Ernst & Young for the privatization process, which has so far been the highest amount paid for any company’s privatization in exchange for services.
The total loss for the airline during the 10-month period from September 2022 to June 2023 was recorded at 61 billion rupees. In September 2022, the overall loss was 652 billion rupees, and by June 2023, the total loss had reached 713 billion rupees, meaning the airline’s debts and losses grew 300 times compared to its assets.

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According to finding of Hum Investigates team, PIA’s loss in 2022 reached 88 billion rupees, and its debt stood at 750 billion rupees. According to PIA’s spokesperson, the main reasons for the loss were pensions for retired employees, the impact of COVID-19, and the depreciation of the rupee. Over the last five years, the airline’s debt has increased by a record 267 billion rupees.

Abroad, PIA’s total assets are worth 1.3 billion dollars. The Roosevelt Hotel in New York City has been continuously in losses, while the Scribe Hotel in Paris is facing financial difficulties. In the Netherlands, PIA has a valuable building that has been lying unused for years. Domestically, the airline’s assets are valued at 20 billion rupees.

A history of crashes

Additionally, PIA has a long history of aircraft accidents. According to the information gathered by our investigative team, on March 26, 1965, a PIA plane traveling from Peshawar to Chitral crashed near the Lowari Pass in Dir Valley, killing 22 of the 26 passengers. On May 20, 1965, a PIA plane crashed at Cairo Airport, killing 124 people, including 22 journalists. On August 6, 1970, an F-27 Fokker aircraft at Islamabad Airport crashed during takeoff due to a storm, killing 30 people.

On December 8, 1972, a Fokker aircraft traveling from Gilgit to Rawalpindi crashed in the Jalikot area, killing 31 people. On November 26, 1979, a Fokker aircraft carrying pilgrims returning from Saudi Arabia crashed immediately after takeoff at Jeddah Airport, killing 156 people. On October 23, 1986, a Fokker F-27 plane crashed during landing at Peshawar Airport, killing 13 passengers.

On August 25, 1989, a Fokker plane traveling from Islamabad to Gilgit failed to reach its destination, and despite many years passing, no trace of the aircraft was found. The plane had 54 passengers aboard. On September 28, 1992, a PIA plane crashed during landing at Kathmandu Airport in Nepal, killing 167 people. On July 10, 2006, a Fokker aircraft traveling from Multan to Lahore crashed, killing 41 people, including crew members.

On November 5, 2010, a chartered plane carrying engineers and passengers to Karachi crashed shortly after takeoff, killing 21 people. On December 7, 2016, an ATR aircraft traveling from Chitral to Islamabad crashed near Havelian, killing 48 people, including Junaid Jamshed. On May 22, 2020, a plane traveling from Lahore to Karachi crashed near the airport shortly before landing, killing 7 crew members and 91 passengers. PIA’s martyred pilot, Ahmed Mansoor Janjua’s mother, Shahida Mansoor, also has numerous complaints against the airline, particularly regarding her son and husband.

After the European Union lifted the ban on the national airline and the IMF allowed softening of conditions for potential buyers, the Pakistani government is now actively working to auction PIA, and it is expected that this time better buyers may come forward.

Additional reporting by Mujahid Hussain