How Pia Got In To This Money Crisis And How It Can Turn Around?
Is it a good idea to infuse liquidity in an air line
, which is in extreme financial crisis? It totally depends on the utilization of that rescued amount, where one can be using that money, in problematic areas or to feed the executives. In the case of PIA, everyone knows PIA is suffering from extreme financial crisis from the past few years. Air line lost Rs. 4.4 billion in 2005; Rs. 12.8 billion in 2006 and Rs. 13.6 billion in 2007. These figures were even most terrible for the year 2008, ended on triple net loss of Rs. 35.8 billion, which were almost equal to Federal Public sector Budget for development. Due to these loses; PIA becomes one of the eight airlines of the world functioning with costs higher than returns.In 2007, PIA had 18,231 employees, which makes 434 employees per air craft; no major airline in the world has that kind of ratio. The average ratio of the industry is 170 employees per air craft and best are 70 employees per air craft. Its a big question: airline with such overpopulated human power not doing well? Why the chairman increased number of permanent staff at a time, when PIA already incurring higher level of fixed cost? Why thousands of contractual employees have been regularized at a time when airlines around the world practicing downsizing, to cut their cost by minimizing the employee per air craft ratio? What are the criteria of hiring these people? Why PIA is not turning around? All questions are needed to be answered. The answer is simple, loud and clear; nepotism and corruption.
PIA is not the only major airline with the financial crisis; Air India is also suffering from extreme financial crisis. The annual loses of Air India is almost Rs. 7,200 Crore ($1.5 billion approximately) at the end of May, 2009, where as their market share declined in the domestic sector by 9% in last 36 months and in the international sector it is 5%, Air Indias accumulated debt is around Rs. 16,000 crore ($ 3.2 billion approximately), Air India owes a lot of money from local air port operators and fuel companies, which is around Rs. 1400 crore ($700 Million approximately). The contribution of Air India in global airline loses is 10%. Both the airlines need a big amount of money from Government to improve their financial health and invest this money into problematic areas, it is clear both airlines are in extreme financial crisis, reasons may differ but both need turnarounds to get back into the business.
Everyone knows that PIA needs a turnaround, but its really difficult to turn around a giant like PIA with 15000 employees, straight away. First they need right leadership, qualified staff, un-biased and merit based hiring, clear vision, right direction for a business, better technology, service quality and good public image. These are the main areas to give serious and immediate attention, in order to improve performance of PIA. Although this is not an easy task to change the whole system right away, but we can do little, to start anything big, and someone has to take the initiative, before its too late. Virtually, PIA is already bankrupt and now is the time to start taking actions, rather sit idle and waiting for miracles.
The Bottom Line:
The bottom line of the debate is that, Both PIA and Air India is in extreme financial crisis and both need some hard decisions and actions to pull them into business. PIA however, suffering from a crisis because of poor management, nepotism, corruption, and lack of technology. Some serious and quality leadership and firm decision making is needed; to save the PIA from complete destruction.
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