IATA’s business plan sees PIA making profit by 2026

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 enterprise making its operations break even by 2025 and record 3.4 percent profits the next year.

Minister of Finance and Revenue Shaukat Tarin and Minister of Aviation Ghulam Sarwar Khan were briefed with a complete business plan covering the years 2022 to 2026.

The meeting was also attended by Secretary aviation, secretary finance, secretary EAD, PIA board of directors and members, PIA CEO and senior officers.

The implementation of the plan would see PIA assets going up from the current $1.196 billion to $2.183 billion by 2026.

PIA reported a loss of Rs34.6 billion in the financial year 2020. Experts see the losses to have increased significantly in FY2021 because of the pandemic and more importantly the chain of events that ensued following the fake pilot licenses scandal, which saw Pakistani pilots ineligible to fly to US and Europe.

The Ministry of Finance commissioned to prepare the plan last year consequent to the report by the former special advisor to the prime minister on public enterprises reforms Dr Ishrat Hussain.

Dr. Ishrat’s research was also referred to as a comprehensive restructuring strategy for PIA in order to not only turn it profitable, but also into a viable business unit centered on its core tasks. 

Because the proposal required financial restructuring worth hundreds of billions of rupees, officials at the top of the finance ministry and the planning commission requested a business plan for PIA from an international consultant.

For that reason, IATA’s consultancy services were employed, and after a year, they prepared a five-year corporate business transformation plan, with the current year 2022 as the base year and running through 2026.

Financial restructuring, independent decision-making, reorganisation of the company structure, restrictions on core business, financial discipline, HR rationalisation cost controls, review destinations, a fleet planning exercise, and network expansion are among the key points of the business plan, which will increase PIA’s network spread and passenger uplift.

By 2026, PIA’s fleet will have grown from 29 to 49 aircraft, with 16 wide-body, 27 narrow-body, and 6 turboprop planes. The fleet will be utilised to expand on existing profitable routes in the UK, Saudi Arabia, the United Arab Emirates, and the Gulf, as well as to serve markets such as Baku, Hong Kong, Istanbul, Kuwait, Tehran, Urumqi, and Singapore.

As a result, PIA’s annual passenger numbers would rise from 5.2 million to 9.0 million, with revenue rising to $1.7 billion by 2026. These strategies should allow the carrier to break even by 2025. PIA will be operating 581 round-trip flights every week by the end of the program, up from 359 today. 

Travel inclination is predicted to return to 2019 levels by 2024, when GDP and traffic both recover. According to IATA traffic estimates compiled by Oxford Economics, domestic travel is expected to recover quicker than international traffic, with both returning to 2019 levels by 2022 and 2024, respectively. As a result, in the short and medium term, PIA should focus on the local market.

The projection also considers worldwide aviation possibilities and concerns, namely the Covid-19 COVID-19 pandemic-related travel limitations and reduced demand, as well as the country’s macro environmental and economic challenges.

However, the plan is contingent on a number of conditions, the most crucial of which being the Pakistani government’s resolve to restructure PIA’s debt, which is beyond the airline’s operable capacity.

This would also free up cash flow, allowing it to invest in product improvement projects that are crucial to the company’s long-term survival.

The strategy also calls on the government to guarantee that the National Aviation Policy is followed, ensuring that Pakistani airlines have a level playing field.

IATA believes that PIA may be operated under private management principles, including procurement processes.

It also implies that outside influence on company matters should be limited, and that constant public scrutiny should be reduced, as it not only obstructs the managers’ vital corporate obligations, but also produces terrible public relations for the organisation.

Tarin expressed his gratitude to the consultant for the full report. He emphasized that PIA was the country’s flag carrier and that it ought to be of international standing. He went on to remark that the new administration is dedicated to restoring PIA to its former grandeur and making it into a successful functioning company. 

He also stressed the importance of focusing on the Pakistani diaspora, improving customer service, and considering the possibility of direct flights in the business plan in order to make PIA a flourishing organization that can contribute to Pakistan’s economic development and serve communities at home and abroad. 

The PIA’s stock price increased by 6% to Rs4.27 on Tuesday.