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Towards privatisation?

Amid protests and strikes, the future of PIA remains uncertain

Towards privatisation?

The workers of Pakistan International Airlines (PIA) have been up in arms over the looming privatisation of the national flag carrier.

They have gone on strike for a limited number of hours every day since. Certain moves such as the appointment of a consortium to do diligence regarding the sale of PIA shares and the promulgation of a presidential ordinance that would convert the organisation into a private limited company have intensified their fears.

Though Prime Minister Nawaz Sharif has met the representatives of PIA workers and reassured them that privatisation shall be halted in case they struggle for its revival, there is a concern that it is just a tactical move to pacify the aggrieved party. Interestingly, the workers have been asked to come up with suggestions on how to set the house in order and the government has not given any assurances about giving operation autonomy to the highly politicised organisation.

The presidential ordinance mentioned above was issued on December 6, just two days ahead of the joint session of the parliament. This shows the government did not want to table the bill in the parliament for approval, especially when the Senate is dominated by members belonging to the Pakistan People’s Party (PPP) which is totally against the privatisation of PIA.

On the other hand, top government functionaries including Finance Minister Ishaq Dar have been giving reassurances that the fears of the workers are unfounded and that there shall be no changes in their job structure or retrenchment in the organisation.

Dar has also reiterated that the conversion of the organisation into a private limited company is only meant to improve its workings and give it a corporate look.

However, these assertions are in a way challenged by none other than Shujaat Azeem, former advisor to the prime minister on aviation, who recently tendered his resignation, denying any role in the privatisation process.

Azeem took the decision after the Supreme Court stopped him from taking part in the sale process of PIA on December 14. Prime Minister Nawaz Sharif did not accept his resignation and, in fact, asked him to continue till the court’s final order.

There seems to be a clear divide, as far as the top leadership is concerned. The fact that Azeem has admitted that PIA’s privatisation process is being overseen by the Privatisation Commission (PC) and that he has no role whatsoever in the whole exercise adds weight to the perception.

Though PM Nawaz Sharif has met the representatives of PIA workers and reassured them that privatisation shall be halted in case they struggle for its revival, there is a concern that it is just a tactical move to pacify the aggrieved party.

Azeem is, actually, against the privatisation of PIA and strongly advocates a restructuring of the organisation. In a recent talk with media, he said that at the time when he was appointed advisor, in February 2014, the airline had a small fleet comprising 18 airplanes only, but today the number has risen to 38, and it is likely to go up to 40 by the end of this year.

He also announced that PIA had made a profit of Rs2.38 billion in the first quarter of the current fiscal year and it would show higher profits soon. Why, then, is the government taking drastic steps related to PIA if it does not want to sell it off? Wouldn’t it be better if they had presented a bill regarding PIA’s conversion into a limited company?

The answer comes from an official in the federal finance ministry who does not want to be named for fear of punitive action. He says that the PIA Act 1956 had no provision to transfer shares and management control to investors which is why there was a need to amend it or bring in a new law.

The ordinance, he says, was an easy way to achieve the goal as the government could not afford to go through a lengthy process in the parliament and face the opposition parties.

The official further says that the decision was not taken on the spur of the moment. In fact, the consortium, led by Dubai Islamic Bank, appointed as financial advisor by the government to carry out due diligence process, had pointed out that the existing PIA Act needed amendments. IATA Consulting (Aviation Expert), Deloitte Pakistan (Accounting and Taxation Expert), Freshfields Bruckhaus Deringer (International Legal Adviser), Abacus Consulting (HR Consultants), APCO Worldwide (International PR Advisers) and Prestige Communications (Domestic PR Advisers) are some other partners of the consortium.

The rush to introduce a new law, the official adds, is because Pakistan is bound under a condition placed by the International Monetary Fund (IMF) programme to invite investors to participate in PIA’s privatisation by December 31 and sell off a minimum of 26 percent shares by June next year.

“They didn’t want to miss the deadline, as IMF loans are the lifeline of the sitting government,” he concludes.


Shaukat Ali Chaudhry, Deputy Secretary General of Pakistan Workers Confederation (PWC), challenges the government claims of bringing efficiency in the state-owned enterprises (SOEs) after privatisation. He says privatisation has hardly worked in Pakistan: “Twenty-six percent management shares of Pakistan Telecommunication Company Limited (PTCL) were sold to Etisalat. Besides, it laid off 30,000 workers and tried to sell off assets. This was despite the earlier assurances that no staffer would be shown the door.”

According to Chaudhry, “Industrial units like PECO Factory were privatised but instead of running them the buyers developed plots and sold them.

“Business Express is one such recent example where a private operator agreed to pay Rs3.3 million to the Pakistan Railways at the outset but defaulted and obtained interim orders from courts. In the end, they just disappeared with a liability to around Rs3 billion.”

“It is often said the staff-to-airline ratio is quite high in PIA but nobody bothers to find the reasons. When the number of operational aircrafts comes down, the ratio will automatically be affected,” he explains. “The salary bill of the workers is not more than eight percent of the total expenditure, and the strength is not comparable to airlines of developed countries, where most of the tasks are automated.”

Shaukat Ali Chaudhry further suggests the best way to rescue PIA is to allow it to work independently and come out of influence of the federal government through secretary defence who apparently calls the shots. “Nepotism and political patronisation of the workers has ruined PIA,” he adds.

In another development, the pilots are expected to join in the protest, says Capt. Amir Hashmi, President, Pakistan Air Line Pilots Association (PALPA). He tells TNS the prime minister has taken notice of the situation and invited representatives of different departments of the airline in Islamabad to discuss the situation.

“We will devise our future course of action in the light of negotiations held at the prime minister’s house,” he adds.

Shahzada Irfan Ahmed

shahzada irfan
The author is a staff reporter and can be reached at [email protected]

One comment

  • PIA-Pakistan International Airlines Corporation has a legacy behind it. Its a race you’ve to run alone – no joint venture would keep your pace or us keep their pace – learn to be on your own! A Pakistani Airline needs another big step indeed.

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