Amidst government announcement that it would offer 26 percent shares of Pakistan International Airlines to strategic investors with management control, as a first step towards its privatisation and stiff resistance by the employees, Chairman, Pakistan International Airlines (PIA) Muhammad Ali Gardezi has formed a “Way Forward” committee to provide solutions for revenue enhancement and cost curtailment with the aim of rejuvenating the airline to move towards regaining its past glory.

The committee will be headed by President, Pakistan Airline Pilots’ Association (PALPA), Captain Suhail Baloch as the team leader while First Officer, Chakar Ali Shah will be the secretary, according to a notification issued here. The committee has been formed by the chairman after due deliberations over the multifaceted challenges confronting PIA today. ‘Its committee would define the way forward plan for PIA. Our aim is to find solutions to enable PIA enhance its revenues, cut costs, and improve organisational efficiencies,’ said Suhail Baloch.

Committee’s objectives include: to recommend methodologies for effective implementation of the ‘Fly Smart’ programme; to define the contours of the ‘Flight Watch’ programme and recommending its effective implementation in PIA; to recommend changes to the current PIA website management, and develop mobile applications to facilitate to and fro communications between PIA and its valued passengers/customers.

As per rules, the team leader of the committee would have the mandate to co-opt additional members, as and when deemed necessary and would be administratively facilitated by providing it with suitable office space within the head office premises to start work from the first week of next month. PALPA had presented excellent programmes named ‘Fly Smart’ and ‘Flight Watch’ aimed at saving billions of rupees by optimising the usage of resources. One of the main aims of the committee is to implement these programs. The fly smart programme was presented to management early this year but it was not given any importance until Secretary Aviation, Muhammad Ali Gardezi took over as Chairman PIA and didn’t waste time in constituting this committee.

The programme consists of different cost saving issues:

— Minimisation of turnaround time, which will increase aircraft availability for proper maintenance.

— Training and procedural instructions for one engine taxi after landing for fuel conservation.

— Minimum use of APU, (aircraft’s back up power generating systems)

— Reduce contingency fuel, to 3 percent from 5 percent to bring practice to international norms

— Smart alternate airport selection

— Persuade Civil Aviation Authority (CAA) to install Instrument Landing Systems (ILS).

The biggest challenge for the committee will be the fuel saving measures’ implementation, as Pakistan International Airlines (PIA) burned 207.83 million gallons of fuel in a year (from January 2012 to December 2012) which cost Rs 62 billions, 56 percent of the total expenses of the national airline. With exchange rate going out of the roof around 106 PKR to a dollar it is likely to impact the airline’s payment procedures, while the airlines revenue in foreign exchange will provide some relief, its fuel payments will inflict a huge blow.

Talking to Business Recorder Captain Suhail Baloch said that the huge fuel consumption due to aging fleet is making the national airline a failing entity, therefore, the need of the time is to take immediate steps towards reducing fuel cost through adopting various measures.

‘The phase one of Fly Smart program, beside focusing on fuel saving, will help maintain schedule integrity and punctuality as per industry practice, and similar type of aircrafts with similar engines should be inducted which will result not only in substantial savings in recurring maintenance cost but will also save on the crew conversion cost. In the second phase, after the consolidation and maintaining at least a breakeven level, the airline could embark on a fleet modernisation/expansion plan for the medium term period.

Under the initiative the committee is also likely to review different contracts which PIA needs to review/evaluate and then renegotiate some of its agreements to favour the national flag carrier. The agreements that need to be revised include: SABRE Agreement, Insurance Agreement, Loan/Financial Cost Agreement, B-777 Purchase Agreement, Fuel Purchase Agreement within Pakistan and abroad, Technical Handling Agreement, Lease/Rental Policy for Equipment, Interline Agreement, Ticket Sales Agency Agreement, Cargo handling Agreement, Courier Service Agreement, Clearing Forwarding Agreement, and Engine PW 4127 Overhaul Agreement.

Deliberating on the reasons of revising the agreements, a source in PIA said ‘if all insurance agreements (below access policy) are renegotiated, saving of Rs 100 million per annum is expected. Similarly, if the said loans/financial liabilities are restructured we expect a saving of Rs 500 million per annum for 10 years.’

Furthermore, regarding B-777 purchase agreement, the deal was signed between Boeing Company and Axiom Bank and a guarantee was given by the two that direct routes will be available for PIA to and from North America/Pakistan. ‘PIA should now claim compensation against not getting the direct routes or at least ask that the loan should be restructured as the homeland security has declined direct flights of PIA,’ the source said.

Also, at present PIA is paying approximately Rs 62 billion per annum with regard to fuel purchase. ‘If the contracts are reviewed and if the market is explored aggressively, we could surely save 5 percent of the total amount ie around Rs 3.1 billion per annum. Similarly, PIA needs to review its technical handling agreement at out stations and we should make ourselves capable of giving technical/ground handling to other airlines in Pakistan,’ source suggested.

PIA could easily save Rs 15 million per annum if it negotiates its lease and rental agreements, claimed the association. ‘Through revising ticket sales agency agreement PIA could have Rs two billion per annum savings on sales commission. Besides, at the moment PIA is generating only Rs five billion on cargo handling which could very easily be increased to Rs 10 billion with proper marketing strategy.’ The fly smart programme also envisages an overhaul and repair capability developed in house which could save $10 million per annum for the national airline.

Source: Business Recorder