Challenges and opportunities for the national flag carrier
The now debt-ridden Pakistan International Airlines once ruled the skies, with its aircraft taking off or landing every 6 minutes on its world-wide network. It may be a surprise to many that it was PIA that had helped establish Emirates Airlines in the mid-1980s by leasing two of its airplanes. Safety & Security Today talked to Air Marshal Arshad Mahmood Malik to better understand the efforts being made to revive the national flag carrier.
Safety & Security Today (S&ST): You had an accomplished career in the Pakistan Air Force and served as the Vice Chief of Air Staff. You have been the CEO of PIA for just over two years now, how was the transition from the Air Force to PIA and how has your experience been so far?
Arshad Mahmood Malik (AMM): Air Force is my alma mater, Air Force was a way of life, and whatever I am today, it is because of my God Almighty and the training, grooming and progression given to me by one the best forces in the world. Serving in the forces gives you certain discipline and insight into things, it helps to see things in context enabling us to plan proactively and take decisive actions. The transition did not take much time as aviation dynamics are pretty similar, however, having a commercial sense was the key. By the grace of God Almighty, we have achieved a lot in such a short time, and we are set to bring PIA back to the glory it so deserves.
S&ST: When you took over PIA what were some of the key challenges that you identified? How far has the airline come since due to the initiatives taken by the new management?
AMM: When we took over the reins of PIA, before taking any radical steps or acting in haste, we ran a complete diagnostic of the ailing national flag carrier. We identified that PIA would need a complete overhaul, in the way it conducts business, both internally and externally. Internally we devised a comprehensive business plan. In the first phase, we went towards fixing the governance issues which were a result of strong influence of outside stakeholders while keeping the boat afloat by negotiating with the government for support and cutting losses.
In the second phase, we went into the operational side and by learning from the experiences of Mr. Idris Jala (former CEO and reformer of Malaysian Airlines) we conducted route diagnostics to review and fix even the smallest cost heads, renegotiated services contracts and changed routes and schedules.
In the third phase, we went towards the revenue generation side. We focused on main areas and expanded our productive routes, opened new markets, increased our selling base and put special focus on the ancillary and alternate revenue sources. By the grace of God Almighty, the results have started coming in and in the very first year, we achieved gross profit, for the first time in eight years by 43% increase in revenue on a year-over-year basis. We also managed a whopping 76% reduction in costs, which was a huge achievement considering all of it was achieved in just a single year. In 2020, unfortunately, the coronavirus pandemic caused havoc in the aviation industry and PIA bore its brunt too. Due to the pandemic, a lot of our expansion has been put on hold due to low demand and we are back in survival mode. However, fortunately, the results are not as bad as expected and our reform process is still on track.
S&ST: What are some of the reforms/restructuring plans that are under consideration to make the airline self-sustainable?
AMM: Briefly, while focusing on fixing the core operations areas, some of which have been mentioned before, we are now in second stage of reforms which means that we are seeking support from the owners i.e., Government of Pakistan to restructure PIA’s balance sheet which is plagued by legacy loans accumulated over the last 17 years. Over the years barely any effort was put in to stop the hemorrhaging. Now, this part has become critical to make PIA a going concern again and to generate much needed funds, from existing cash flows and from external sources. The other part is segregation of core functions from the non-core functions, which will not only make PIA a leaner organization, but will also help us to focus on the main areas while at the same time making non-core functions as profit centers.
Work is underway and as per our plans, we intend to complete that by second half of 2021.
S&ST: What is the current status of operational losses of PIA?
AMM: The operational losses are being audited and will be reported once finalized. However, the results are encouraging and we sincerely hope that the bite of Covid-19 will be milder than initially expected.
S&ST: Coming to an issue which is of utmost importance i.e. safety. Nate Silver is a famous American data scientist who writes for the New York Times. He analyzed data safety records from 1985 to 1999 and 2000 to 2014 and PIA stood out to be consistently high risk prone over the two periods. The PIA ATR-42 and PIA Airbus A320 (Karachi) crash happened after that period. How do you view the safety record of PIA and what measures have you taken to ensure highest safety standards?
AMM: PIA, unlike popular perception, strictly adheres and complies with international safety standards and regulations. We are audited virtually every day and we are consistently maintaining our historic best safety index.
PIA operates in a very diverse terrain, most of which are very difficult to negotiate and are prone to weather.
S&ST: Improvement of airports is not your domain but how do you view the facilities available at airports in Pakistan? What sort of benefit can it provide to PIA if facilities at our airports are on par with some of the other international airports in the region?
AMM: People generally perceive Aviation and PIA as interchangeable terms and quite frankly we get flak for a lot of things that are beyond our control, Airport Services, facilities and amenities being among those.
We have to go a long way in developing Pakistani airports at par with world standards, even with some of our neighbors.
Pakistani airports lack amenities that are found elsewhere including but not limited to transit setups, food courts/stalls and shopping areas. This often restricts us from carrying passengers beyond our hubs and our airports are not a hub of choice for passengers.
S&ST: The issue of ‘suspicious’ pilot licenses caused a lot of embarrassment for Pakistan and even serious repercussions. How has the pilot licensing issue affected PIA? What is your take on the issue?
AMM: The matter has affected us badly, not just in terms of repute but also financially. The licensing issue was immediately followed by European Union Aviation Safety Agency (EASA) ban which grounded us from our most productive routes.
We had high hopes to resume our United States operations by flying directly into the mainland from Pakistan, for the first time in our 67 years old history. United Kingdom and Europe contribute around 37% of our total revenue mix and that is a huge revenue loss that came as a consequence of the licensing issue.
However, we now have to look forward. We are closely coordinating with Pakistan Civil Aviation Authority (PCAA) and EASA to sort this issue out as soon as possible and have also offered assistance in that regard.
European Union Aviation Safety Agency (EASA) and International Air Transport Association (IATA) Operational Safety Audit have recently declared our efforts as satisfactory and greatly compliant to their standards and we can use this experience to benefit others.
S&ST: The Covid-19 pandemic has had a severe impact on the airline industry globally. PIA was already under massive debt. How has Covid-19 impacted the airline?
AMM: As I have already pointed out, due to the coronavirus pandemic most of the airlines around the world are suffering, with major names filing for bankruptcy. International Air Transport Association (IATA) has projected a revenue shortfall of around $500 billion already and for a $900 billion industry, it is unprecedented. However, PIA by the grace of God Almighty is staying afloat and we have not obtained any bailout from the Government, our operations are continuing and we are managing within our own resources.
S&ST: What is your vision about PIA 10 to 15 years down the line?
AMM: My vision is simple, for PIA to become the pride of the nation like it was a few decades ago.
S&ST: Lastly, realistically how hopeful are you that PIA’s glory days could return in the coming years?
AMM: It is a long and tedious journey, but we have all the essential ingredients at hand. We just need focus, dedication and consistency and Insha’Allah we will get there if we continue on the current trajectory.