News Analysis l
Pakistan International Airlines (PIA) has decided to suspend its flight operations to New York, by December 2017. Though the plan is still not officially announced but bookings for New York have apparently being stopped and have gone down by 50%. PIA sources claim that this decision was long in waiting, and is due to sectoral losses that were now around Rs. 450 million (Rs. 45 Crore) each year. Final decisive step has been taken by the new Chief Executive, Dr. Musharraf Rasool, who has been brought to revitalize and revamp the struggling national airline.
However PIA sources that spoke to GVS also wonder if this is the kind of decision that will help turn around Pakistan’s National carrier. Dr. Musharraf Rasool, the new CEO, with vast experience in public policy sector within Pakistan and abroad, was expected to bring in more revenues by extending operations to new unchartered territories. But this move has certainly put a question mark on the nature and direction of his strategies. PIA, till recent past, used to fly to destinations in Europe like Frankfurt, Amsterdam, Barcelona, Copenhagen, Glasgow and others. Its still flying to London, Manchester and Paris but over the past 10 years is shutting down more and more of its routes to such international destinations, without really accounting for any business advantages or gains in the process.
PIA historically had landing rights at five international airports within the United States: New York, Chicago, Los Angeles, Houston and Washington. But gradually it has stopped flying to these destinations. Its not clear to media, pubic and most inside PIA as to how airline has benefited from the suspension of those routes? Has it gone for “Code Sharing” with other private airlines? What kind of commercial deals it has struck with other airlines if any? Or has it just let those landing rights disappear under long “suspension” and “disuse” of facilities. What will it do to the landing rights it enjoys at New York? These are the important questions which PIA management and its new CEO must address and share with public to gain trust for its decisions.
PIA, till recent past, used to fly to destinations in Europe like Frankfurt, Amsterdam, Barcelona, Copenhagen, Glasgow and others. Its still flying to London, Manchester and Paris but over the past 10 years is shutting down more and more of its routes to such international destinations, without really accounting for any business advantages or gains in the process.
Initially it used to have seven flights to John F Kennedy Airport (JFK) each week, but now it was only flying twice. It acquired its Boeing- 777, with the express intention of flying directly to New York, but due to objections of Home Land Security and Transport Security Agency (TSA) it could not not fly directly and was stopping in Manchester, UK on the way. The only time PIA seriously negotiated with Home Land Security was during the time period when Rao Qamar Suleiman was its MD, and the matter was almost resolved but then Qamar Suleiman left due to illness and his successors were lost in other issues.
PIA has genuine challenges from its ever growing competitors, but, those insiders familiar with the dynamics of aviation, argue: is suspending its routes the definitive answer we expect from its new CEO, Dr. Musharraf Rasool? Will it not dent the finances of the airline more and more if PIA’s keeps on shedding its international routes instead of making itself competitive?
PIA should come up with more prudent strategic decisions rather than repeating the mistakes of his predecessors, otherwise, new lows could further damage this already ailing national carrier
Apparently there is already an ongoing inquiry against the appointment, of Dr. Musharraf Rasool and this latest move has opened the debate on his credentials for such a high profile job in the aviation industry.
Dr. Musharraf Rasool Cyan, his critics argue is a capable technocrat, but has no experience in the aviation industry. Though, trained as an MBBS doctor, he later joined Civil Services of Pakistan, by securing a top position and served in the civil services for fifteen years before resigning and moving to the US. His most notable stint in domestic policy making field was his time as a chief economist of KPK. His friends point to his strong reputation of integrity. However his critics, within PIA, assert that he has absolutely no background in Aviation which limits his ability to understand the challenges airline faces, and makes him a tool in the hands of vested political interests who have their own designs to liquidate and sell PIA bit by bit.
PIA can certainly revisit its strategy regarding these routes. Direct flights should not be suspended as it opens more business opportunities for its competitors
In America, in a career spanning for 20-years, Dr. Musharraf Rasool worked in multiple domains such as fiscal decentralization, tax reform, public services and development planning. However, in the later part of his long career, he ventured into research in public health which primarily focused on finding solutions for underserved populations facing lags in health outcomes.
In addition to this, he also worked on public sector policy and reform in countries such as Rwanda, Nigeria, Macedonia, Egypt, and Nepal. During his long stay in the US, he also obtained the US citizenship. So, he is now another foreign import to improve the finances of an ailing enterprise.
Based on his outstanding achievements abroad, government of PM Khakkan Abbassi and PIA management has shown the tremendous confidence in his ability as a proven winner. PIA spokesperson issued a statement on his appointment that, “Dr. Musharraf Rasool Cyan brings with him a vast experience of more than 26 years in public sector management, service reforms, project planning and economic development programs”.
Sources in the PIA are lamenting the continuous loss in operations which even fails to cover the direct variable cost for the company. It was stated that New York sector was making loss worth Rs 450 million annually
PIA has endured a tough time in recent past and all fields including operations, finance, planning, engineering, and passenger services have been below par.
No one can argue with his past record but for an airline which is losing about 3.1 billion rupees per month and is increasingly facing a daunting competition from foreign competitors, suspending the operation for yet another of its popular flights is not convincing. At this rate, PIA will end up becoming a domestic airline flying to routes inside Pakistan no international airline will find commercially viable. Its already getting restricted to destinations in Middle East, where it is already under pressure from Emirates, Itehad, Qatar and Turkish Airline.
Under tough competition from successful and cash-rich foreign competitors like (Emirates Airways, Etihad Airways, Turkish Airline, Qatar Airways and Singapore Airline), PIA must get its act together to gather momentum to revert its fortunes.
Efficient Management of PIA: a mere Statement
Sources in the PIA are lamenting the continuous loss in operations which even fails to cover the direct variable cost for the company. It was stated that New York sector was making loss worth Rs 450 million annually. One can certainly argue that since it was costing immensely, therefore, shunning the New York route is the right decision. But it cannot be termed a factual choice considering that comprehensive & well-envisioned strategies coupled with sound marketing initiative may pave way for better outcome in the future.
PIA has endured a tough time in recent past and all fields including operations, finance, planning, engineering, and passenger services have been below par
In reality, it is poor management and failed policies which culminated into this loss in direct operations. The policies of the senior management in the past also proved a disaster and opened the route for foreign airlines to cash on PIA’s failure.
Once again, despite recruiting an able technocrat, PIA is pursuing the same old strategy to drop the unprofitable routes. PIA enjoys the edge over its competitors which don’t take a direct flight to New York. Most of the airlines have 2 to 4 hours stoppage/stay at their domestic hubs which do not attract many passengers.
PIA can certainly revisit its strategy regarding these routes. Direct flights should not be suspended as it opens more business opportunities for its competitors. Rather, it should facilitate the passenger further by providing better services than their competitors. For example, it should provide better meals, low fares, efficient and motivated crew members and attractive In-Flight Entertainment.
In coming days, it can potentially have a more acute impact on the consumer confidence. And, it can further jeopardize the brand value of the company
Though, having seen the backlash, PIA sources are denying the suspension of the direct flights. But the decline in the bookings clearly depicts that orders have been passed to authorities for the closure of booking.
Going forward, PIA top management and its new CEO, Dr. Musharraf Rasool must take media and public into confidence as to what is being planned; has PIA sold the rights of the New York route and landing facilities? If so, it should be made public. In addition, PIA should come up with more prudent strategic decisions rather than repeating the mistakes of his predecessors, otherwise, new lows could further damage this already ailing national carrier. National Airline needs to take public into confidence and this is the least expected from its new capable CEO.