Business plan

IATA’s business plan predicts that PIA will turn a profit by 2026

PIA reported a loss of Rs 34.6 billion in financial year 2020.-File photo

KARACHI: International aviation firm IATA Consultancy has presented a business plan for Pakistan International Airline (PIA), which if implemented would see the loss-making state-owned company break even by 2025 and record profits of 3.4% next year.

The full business plan covering the period 2022 to 2026 was presented to Finance and Revenue Minister Shaukat Tarin and Aviation Minister Ghulam Sarwar Khan on Tuesday.

The Secretary of Aviation, Secretary of Finance, Secretary of EAD, Board and Members of PIA, CEO and Senior Management of PIA also attended the meeting.

Implementation of the plan would see PIA assets grow from the current $1.196 billion to $2.183 billion by 2026.

PIA reported a loss of 34.6 billion rupees in the financial year 2020. Experts believe that the losses increased significantly in the financial year 2021 due to the pandemic and more importantly the chain of events following the fake pilot license scandal, which saw Pakistani pilots ineligible. fly to USA and Europe.

The finance ministry was tasked with preparing the plan last year following a report by the prime minister’s former special adviser on state-owned enterprise reforms, Dr Ishrat Hussain.

Dr. Ishrat’s report has also been described as a comprehensive restructuring plan for PIA to make it profitable, but also to make it a true business unit, focused on its core business.

The plan involved financial restructuring to the tune of hundreds of billions of rupees, officials at the head of the finance ministry and the planning commission demanded a business plan prepared by an international consultant for PIA.

The consulting services of IATA have been engaged for this purpose, which after a year has drawn up a five-year plan for the transformation of the company’s activities with the current year 2022 as the reference year until 2026.

The key points of the business plan include financial restructuring, independent decision-making, reorganization of the corporate structure, restrictions on core activities, financial discipline, cost control of rationalization of human resources, destination review, a fleet planning exercise and network expansion, increasing PIAs. the spread of the network and the increase in the number of passengers.

PIA’s fleet is expected to grow from the current 29 to 49 by 2026, comprising 16 widebody, 27 narrowbody and 6 turboprop aircraft. The fleet will be used to expand on the current productive routes of the UK, Saudi Arabia, UAE and Gulf sectors, as well as operate in the identified markets of Baku, Hong Kong, Istanbul , Kuwait, Tehran, Urumqi and Singapore.

As a result, PIA’s passengers would grow from 5.2 million per year to 9.0 million per year, and revenues would increase to $1.7 billion per year by 2026. These initiatives would help the carrier reach the threshold profitability by 2025. PIA, which currently operates 359 return flights per week, would operate 581 return flights by the end of the program.

As GDP and traffic recovery rebound, the propensity to travel is expected to follow, and is expected to return to 2019 levels by 2024. According to IATA’s traffic forecast for Pakistan, compiled by Oxford Economics, traffic domestic is expected to recover faster than international, returning to 2019 levels by 2022 and 2024, respectively. For this reason, the domestic market should be a priority for PIA in the short and medium term.

The outlook also takes into account global aviation scenarios and challenges, most notably Covid-19 pandemic-related travel restrictions and reduced demand, as well as macro-environmental and economic challenges facing the country. confronted.

However, the plan was conditional on certain factors, the most important of which is the commitment of the Pakistani government to undertake the financial restructuring of PIA for debt inherited from its balance sheets and which exceeds the airline’s service capacity.

It would also ease the burden on its cash flow, allowing it to undertake product improvement initiatives, essential for its long-term livelihood.

The plan also urges the government to ensure compliance with the National Aviation Policy, providing a level playing field for Pakistani carriers.

IATA is of the opinion that the PIA can be managed according to private management rules, also concerning procurement practices.

It also suggests that external influence on company affairs can be reduced and consistent public scrutiny is reduced, as it not only hinders the core responsibilities of leaders, but also creates negative public relations for the company. .

Tarin appreciated the consultant for the comprehensive report. He stressed that PIA was a national flag carrier and should be a world-class airline. He added that the current government believes in reviving and restoring PIA to its past glory and turning it into a profitable business.

He further underlined the need to focus on the Pakistani diaspora, improve customer services and consider the possibility of direct flights in the business plan to make PIA a thriving organization that could contribute to the economic development of Pakistan. and serve communities at home and abroad.

PIA’s share price rose 6% to 4.27 rupees on Tuesday.