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Report of the Sub-committee of Senate special committee on the performance of PIA

Senate of Pakistan

The Senate Special Committee on the Performance of PIA in terms of rule 183 of the Rules of Procedure and Conduct of Business in the Senate, 2012 constitute a Sub-Committee in its meeting held on 5th December, 2016 in order to evaluate the performance and operational efficiency of PIA and also to recommend concrete guidelines covering National Aviation Policy, governance, maintenance, structural flaws and issues of human resource as well as the politicising of the airline. The composition and ToR’s of the Sub-Committee are as under:-

Composition:-

1. Senator Syed Muzafar Hussain Shah Convener

2. Senator Farhatullah Babar Member

3. Senator Lt.Gen. (Recd) Abdul Qayyum Member

Terms of Reference:-

1. To realistically evaluate the present state of PIA including its financial, operational and administrative issues.

2. To identify the underlying reasons for its present deterioration in terms of its performance.

3. To recommend guidelines covering National Aviation Policy, governance, operational efficiency, maintenance, structural flaws and issues of Human Resource including politicization of the airline.

2: Consequently the Sub-Committee considered the issues in view of the ToR’s in the meetings held on 4th & 5th January, 2017 at PIA Head Office, Karachi. Besides having presentation made by the PIA management, the Sub-Committee also interacted with the former Chairmen and MDs/CEOs in order to ascertain their views in relation to the shortcomings that had lead to the deterioration of PIA’s performance and invited suggestions from them for the revival of PIA. Their viewpoints are also included in the recommendations formulated by the Sub-Committee.

3: The Sub-Committee after being briefed by the PIA management during the meeting and visits to the various sections of PIA and had also interacted with the Secretary Aviation and former Director Generals of Civil Aviation Authority as well as with office bearers of CBA, identified the following challenges/issues:-

i) Inadequate attention by successive governments, lack of political will, poor governance, frequent changes in PIA top leadership and induction of cronies, lacking strategic vision and ability to make a credible business plan

ii) Unsuitable selection given birth to imbalanced and non professional Board of Directors, some of which are totally unaware of Civil Aviation concepts and lack HR and financial acumen.

iii) PIA is suffering from crises of confidence and leadership. Even today we don’t have a permanent CEO. Acting CEO who actually is Chief Operation Officer complained of undue interference by the board and the government in operational and administrative matters of PIA which should be the sole prerogative of CEO/MD.

iv) One big reason for the destruction of our SOEs (State Owned Enterprises) including PIA is their politicisation. Thousands of unqualified and totally unsuitable employees were inducted by successive governments based on political affiliations. Surplus untrained manpower running in thousands is a big liability in every SOE including PIA. Manpower required to manage one civil airline carrier far exceeds the international standards.

v) It is an unfortunate reality that behind every union, in all SOEs in Pakistan, there is one political party or the other. Most of these unions therefore resort to misuse of facilities, blackmailing and instead of confining their official responsibilities, they pressurise senior management and want to have their say in every posting, promotion and even assignment of staff for operational duties. The Committee was informed that in addition to CBA there are seven other associations which have been involved in unlawfully paralysing PIA operations in the past and at times they even decide which crew will be detailed on which route.

vi) Some of the directors are unfit for the posts they are holding. The committee noted that three of the directors were drawing more than Rs. 300,000/- salary per month and had not been assigned any work and no action has been taken against them despite of the fact that they have been drawing salaries without work for more than one year.

vii) Corruption in buying spares, allocating space for freight, purchase of tickets, in enrolments and postings and in catering and engineering departments is rampant. Salaries structure is on the higher side in some senior management cases as compared to the input. Retired PIA employees are however living a miserable life due to very nominal pension.

viii; Technical Ground Support (TGS) needs up gradation, aircraft interior in all aircrafts lack proper up keep and in some cases need replacement after financial situation improves. Catering has improved but more attention needs to be paid on its quality and cost benefit ratio.

ix) The Aviation Policy needs to be revisited with inputs from the PIA. Till the policy is revised we should discontinue forthwith permission for additional destinations to foreign airlines. if renegotiating ASAs with ME3 and withdrawal of undue privileges is politically and diplomatically difficult, we may employ ‘SLOTTING’ of foreign airlines so as to protect the legitimate interests of PIA. While deciding on the ‘slotting’ for foreign airlines the CAA should also consult the PIA.

4. The Sub-Committee after detailed discussions and deliberations made following recommendations for kind perusal and approval of the Special Committee on the Performance of PIA:-

a) Immediately dissolve present Board of Directors (BoDs) on account of in efficiency and appoint new BoDs which include Civil Aviation Experts, Legal Experts, Ex-Director Generals Civil Aviation, Financial /Revenue wizards, HR professionals, renowned experienced PIA Ex-Chief Operating Officer/ Director Marketing, relevant security director of Civil Aviation and sitting Vice Chief of Air Staff as Ex-Officio member as was practice in the past. The board should elect its own chairman. The government should immediately post a permanent CEO.

b) The board should only deal with conceptual aspects and broad policy matters and devolve operational and management authority to a permanent Chief Executive Officer who should have free hand in picking up his team of experts. Salary structure and privileges should be rationalized and approved by the Board.

c) Board and the Chief Executive Officer must never entertain any political meddling and the CEO should have full powers of hiring and firing of employees based on merit and efficiency.

d) CBA should restrict its activities only to the welfare of grade 1 to 4 employees, and Associations which have illegally assumed the role of CBA should be kept in their shoes and not allowed to black mail the management.

e) PIACL should only deal with core operational issues and privatize services departments.

f) The Government must constitute a Board of Financial Experts under the chairmanship of Ex-President of State Bank Dr. lshrat Hussain to propose financial restructuring of PIA as they did for Steel Mill in 2002-2003.

g) New board of directors should also evolve and approve a plan for manpower restructuring ensuring that experienced technocrats /skilled manpower are retained as an asset.

h) For revenue enhancement, the management must plan fleet expansion. network integrity, route rationalization, net work expansion, system automation, cargo revenue and ancillary revenue earning.

i) Cost reduction should be ensured by creating a lean organization through financial discipline, debt restructuring, off loading aging fleet, contract renegotiation and automated crew roster.

j) PIA should carryout a value chain analysis to determine loss making sectors so that appropriate decisions are taken.

k) For improvement in services, management should take innovative steps like cabin crew up-gradation_

I) Need immediately to carve out non essential departments like Hotels, Real Estate and Precision Engineering Complex (PEC) as first step.

m) Besides, Aviation, Engineering and Technical Ground Standard (TGS), all other services including landing and handling of Cargo and Passengers and flight kitchen can be off loaded/out sourced on contract.

n) PIACL must have a state of the art IT Section headed by a professional who should work on website, self check-in, on time booking and auto scheduling, cancellation and anything related to passengers. Hiring of the professionals should strictly be made on merit.

o) Marketing and Sales departments should be separated and headed by a professional having vast experience in the respective fields.

p) Ticketing and cargo, both national and international, may be outsourced after conducting proper feasibility studies.

q) Inventory management system needs to be computerized.

r) Only Flight Operation and Safety Departments may be headed by the Pilots.

s) Absence of reciprocity in the Air Services Agreements, particularly the aggressive onslaught of Middle East3 against PIA, has impacted adversely on the airlines viability.

t) Legislation is needed to prevent capacity dumping to stop price war.

u) Need for drawing up of a structured training program for pilots and flight crews.

v) Consider involvement of private sector in the Maintenance, Repair and Overhaul (MRO) functions.

w) For increasing revenues the following measures need to be seriously considered:

❖ Code sharing with other airlines.

❖ Allowing risk free chartered flights like Rayyan Airlines in the past operating between Islamabad-Kashghar-Islamabad and onwards to UAE.

❖ Revamping the existing reservation system. The existing system of reservation has been described as too costly, unsafe and a black hole in the profit/loss of PIA.

❖ Need for effective monitoring of spares inventory by introducing computerised inventory management system.

❖ The losses posted by Precision Engineering Complex (PEC) should not be reflected in the balance sheet of PIA, The rightful place for Precision Engineering Complex (PEC) is the Ministry of Defence Production.

❖ Revisit and streamline the procedure for emergency purchase of spares under the rubric of AoG (Aircraft on Ground).

5 The matter of the crash of PIA flight PK-661 occurred on 7th December, 2016 while flying from Chitral to Islamabad also came under discussion. The Sub-Committee was informed that investigations of the incident are underway and the report in this regard will be submitted as and when the inquiry/ investigation is complete

Signed by:

Senator SYED MUZAFAR HUSSAIN SHAH, Convener Sub-Committee of the Special Committee on the Performance of PIA

Senator FARHATULLAH BABAR, Member Sub-Committee

Senator GEN. (RRTD) ABDUL QAYYUM, Member Sub-Committee

HAFEEZUL AH SHEIKH, JS/Secretary Committee

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