A History of Corruption: Can Pakistan save its National Airline?

AFP photo

By

Zeeshan A. Shah

PIA-Pakistan International Airlines was reportedly one of the top five airlines in the world back in the 60s –leading by example. And now it has been cut down to a white elephant with no tusks. From the Glorious Lion to a toothless tiger, it has been a tedious journey for the airline and the aviation industry. Chronicles from the past indicate a history of flourishing times before corporate corruption ate away this airline.

Karachi was the city of lights where the world of diplomats, business executives, travel junkies and holiday makers used to throng the sparkling beaches of the city, filled with discos and bazaars. The then capital city was also a training-hub for airlines like Aeroflot, Royal Jordanian Air, Lufthansa, Saudi Airlines and eventually Emirates where they learnt about the best practices in cabin crew services and in-flight catering from the world class service providers at PIA.

As PIA slowly crept towards the road to progress, it forgot to analyze the right road to take. With a lack of a comprehensive National Aviation policy and corporate vision, PIA started to lose a huge chunk of profits and share of the wallet, eventually losing out on key commercial flight routes to other more competitive carriers impacting its standing within the Global Aviation Industry. Globally, its standing slumped since the early 60s where it was regarded as the ‘Pioneer Player’ both in terms of brand image as well as service delivery. The downfall stated in the 80s whereby PIA lost out on its competitive edge due to bad management practices, nepotism, political intervention and poor governance.

Despite huge travel potential with less than 8% of the total population having access to air travel, the airline poses the biggest challenge to the country with huge debts and losses accumulated over the decades. The general practice it follows is to ignore past mistakes. Bad governance has been the core issue within the airline industry of Pakistan. Combine that with nepotism, bribery, illegal appointments and bad loans, this was the perfect recipe for disaster.

Here, the lack of legislative measures by the regulator-CAA, as well as poor checks and balances by higher authorities further resulted in airline losses, reducing airline efficiency and increasing barriers to entry in competing with other airlines globally.

The Open-Sky policy was not effectively implemented with SAARC and ASEAN countries where it could have benefited within Asian markets, taking up flight routes through liberalization of policy agreements by enforcing traffic rights and offering incentives through mutually reciprocal policy measures with other Asian countries like Malaysia, Turkey, China and so forth. Nothing was achieved.

Today, it is the world’s most corrupt airline in aviation history.

Over the years, much more would have to be done to induce more revenue generation policies that reflect positive growth. This has not happened as yet as Pakistan Aviation is on a negative growth variance, much below the average growth of 1.5 % across the board. They need local hands-on expertise and experienced crew, whether retired or serving, to be given additional roles of revamping the airline, instead of relying on foreign consultants, charging exuberant fees without any genuine interest in the development of the local industry.

The need to create a ‘level playing field’ is for them to compete internationally as the need of the hour which has not been addressed through policy. Encouraging public private partnership is also another success strategy, if put into place effectively, in order to conduct a more transparent review of the operations and management of airports, outsourcing of services at small airports making the right partner selection, identifying any reputational risks and ensured service excellence. The SLA’s –service level agreements have not been effectively reviewed through concrete auditory checks every six months to ensure consistency.

Corporate nepotism, a phenomenon that has plagued this once fantastic airline, has been the single primary reason for the downfall to date. Lack of development of key management training programs and mandatory performance management benchmarks have not been revisited leading to poor business performance management. A lack of competent resources with senior management ranks remains another barrier to progress, which this airline must also address under the new government.

A leading political party of the country was the first corrupt entity to infiltrate the ranks in the early 90s, by ensuring illegal contracts were given to sub-standard agencies, unlawful recruitments made bypassing merit and technical competency as finally, uneducated and crude lower level staff were forcefully inducted through unions, demanding perks, privileges and absolute power silently supported by the corrupt portions of leadership of the country-both military and elected governments.

Another feature of rampant corruption in the airline is in the policy implementation on the ‘Developing State of the Art Infrastructure’ – by far one of the toughest challenges faced by the industry. Until the government puts investments into the airline, instead of wasting precious funds “elsewhere”, it would be extremely difficult for the airline to sustain itself.

Growing consumer demands and international standardization across the aviation world has left PIA way behind on being top of the line in terms of operational efficiency, maintenance, reliability and service delivery. Costs are always rationalized by proficiency and not aggravated through failed policies of inexperienced and dishonest management philosophies.

For example, it is a good policy measure to ensure aircraft shelf-life to be 20 years and not more. What the airline failed to address was how to increase customer bookings whether through an incentive policy, a staff and recognition scheme, or through enhanced training and development. Grey areas identified were left to rot or were thrown under the carpet.

PIA has also been involved in buying sub-standard aircrafts through major corruption deals in the past, putting lives at risk.

Another vital component that was never investigated due to negligent and corrupt leadership on top of the food chain was the area ‘Real Time Automation’. Recent setbacks like the Lion Air crash and past vanishing of Malaysian Airlines flight and other horrifying air disasters have further highlighted the high-risk for PIA on safety standards, multiplying high costs that are affiliated with the lack of effective automation within the aviation industry of Pakistan. With taking on longer routes comes the risk of being stuck with inefficient and unreliable hardware and software access that can be the difference between life and death in a critical crunch scenario up in the sky.

What happens when the regulators are as corrupt as the management?

CAA-Civil Aviation Authority being the regulation body was also destroyed through nepotism. A competent CAA team would have successfully mobilized a comprehensive strategy by investing in state of the art software-accessory-suites to be integrated with airline systems. This in itself would have formed a substantive industry. Pakistan had the talent to excel here and capitalize had they kept management talent pool alive. Again, we need honest ranks within the CAA to ensure due diligence, hard to attain due to unjust political influence from corrupt senior armed forces and government officials. Hence, overall governance of the aviation sector is dying today and PIA is the worst airline.

The CAA needs to be rectified – both in terms of its work ethics and its accountability culture. The improvement of governance and oversight has been proposed to be done by making the Safety Investigation Board report directly to the Minister holding the portfolio for aviation. It was also proposed that the CAA will be made the regulator through necessary legislation or otherwise be a service provider as a dual role cannot be feasible as recommended under the new policy.

How can the CAA be a regulator and a service provider? This case of zero accountability was devised to further ruin the operational capabilities of the airline. The ministers were directly appointed by corrupt rulers, influencing the board of directors and then with excessive authority to officially undertake corrupt practices in the billions each year. The rest was in the Panama Paper leaks.

PIA is a huge reputational risk today rejecting policy measures like personal healthcare, staff literacy, food quality, sanitation and professional communication as per global standards instead of using ad-hoc methods and reinventing the same wheel unsuccessfully. Education and merit has been compromised resulting in recruitment of poor talent and a failure on the overall service promise that is the right of each and every individual who pays to travel by air both within and outside Pakistan.

Pakistan is the sixth most populous country in the world with a population of around 173 million people. The growing trend of 35% annually can take the tally to mammoth proportions by 2020. By 2050, Pakistan is expected to have around 309 million people and we have to track our analysis on how many people will be able to decide whether they wish to take a PIA flight to Dubai or Emirates. This will purely be based on their buying power, comfort level, safety, brand and service perceptions that we generate through our policy being a success. Pricing is a key component, combined with excellent in-flight services, cleaner airports, effective ticketing and a commitment to compete for growth in the international market. All this can only happen if we improve the governance aspect within the airline, riddled with massive corruption.

The airline has been buckling under losses for years, caused by mismanagement that included overstaffing, fewer flights, a decrease in revenue and market share, it being plagued by allegations of corruption and nepotism despite an 87% government stake in the entity, this not speaking well for the last government or the last few, to say the least.

In the midst of multimillion-dollar losses and accusations of large-scale corruption at Pakistan International Airlines (PIA), Pakistan’s former Prime Minister Nawaz Sharif appointed a committee to restructure the country’s once proud national carrier. They proposed privatizing this once great airline. Then, another private airline owner was elected Prime Minister of the country who made sure that his airline Air Blue took away what remained profitable at PIA, forcing further downfall of the national carrier through use of power and official mismanagement.

None of the plunderers have been taken to task on this mega-corruption scandal, as the judiciary faces the huge pile of unsolved high-level corruption cases, including money laundering cases of over 10 billion dollars every year, through connivance of PIA staff and aviation employees over the years.

According to one of the board of directors, PIA is just like any other airline with problems that can be rectified and that it has been hurt by the global economic recession and high jet fuel prices. No one believes this version, terming it as a cover up.

In addition, the company has to make do with a limited number of airworthy planes – some time back, out of its fleet of 42 planes, only 24 were operational, and the rest are grounded because of technical problems. Some planes were sold at scrap through dubious deals while some were used for entertainment travels by the so called leaders for family weddings and holidays- which of course included fuel losses in the billions to the national kitty.

A 10-year special audit report of the Pakistan International Airlines (PIA) presented in the Supreme Court last month attributed the national carrier’s chronic losses to a lack of “professional and experienced leadership”. Prepared by the Auditor General of Pakistan (AGP), the 500-page report identified the last decade’s worth of losses incurred by the PIA, and also ascertained the reasons leading to it.

The carrier’s accumulated losses in 2009, according to the audit report, were Rs73bn, which had snowballed into Rs 360.39bn by 2017 with factors such as inefficient fuel management, unnecessary expenses on crew, performance of subsidiaries, poor supply chain and contract management, inefficient engineering and maintenance department among others that have led to YOY annual losses and the worst financial crisis.

In 2016, Pakistan International Airlines Corporation posted a net loss of Rs45 billion ($433 million), a jump of 36 per cent over the loss of Rs33bn ($310m) incurred in the previous year. This year, an accountability court sentenced on two men, including an official of Pakistan International Airlines, to five years’ imprisonment in a corruption reference within the PIA cargo division. Initially, the national accountability bureau had authorized investigations against the then director finance, marketing head, general manager revenue and other senior officials of PIA. However, the investigating officer left out the senior officials during the investigation and came up with a reference against the low-ranked officials. A classic case of illegal use of powers to hide away tracks of corruption. The media also has mostly failed to uncover facts and force collective pressure to ensure transparency.

How can a Minister of Defense also hold a dual portfolio as Managing Director of the national airline? Such blatant measures and many other corrupt practices by previous governments in Pakistan have completely destroyed the airline, breaking down its wings to the core.

As we take the journey through time and space, we celebrate the great people that fly our national carrier while missing out on the greatest hits and misses that shape one of the biggest epic tales that remain untold. PIA’s devastating loss-making journey has intrigue, action and shocks. Some take it as inspiration while others are biting their tongues, but most have simply used this organization to their personal advantage and motive.

Like an epic tale of deceit and sorrow, PIA s story has its share of horrors with one of the greatest chapters of corruption depicting a classic case study in the history of Pakistan’s dynamic and corrupt aviation industry; the rise to glory and the fall from grace.

Past managements also made significant claims including making some drastic strategic decision for the benefit of the airline, like increasing pensions for retired staff and their widows, establishing employee children, quota for jobs, reducing the lifetime travel facility of the BODs, not bowing down to unfair demands of the union staff, and further reducing the number of directors from 13 to 9, while cutting down GMs slots from 58 to 51; all claims were fake and lies.

Can the new government break down the walls of corruption? Hope against hope.

Will Pakistan be able to raise its once profitable star airlines out of the jaws of corruption or will PIA become the jawbreaker for the nation, drowning the deeper pools of greed and gluttony? Time will tell.

Until they no longer standardize globally, we cannot compete or match our revenue or growth targets with other airlines in the foreseeable future. That’s the biggest policy challenge to resolve. The recovery of bad monies gobbled up by the people at the helm of affairs is yet another daunting task. PIA must rely on a rapid-fire strategy to contain corruption and enforce global best practice rather than local bad practice with a mature leadership team to take it to the next level out of crisis.

Zeeshan A. Shah

The writer is a Director at CNNA Pakistan – a leading advocacy institute and is an expert on International Relations and Education Policy.

With over 150 publications in major local and global social media & newspapers, he has been instrumental in producing over 5000 radio broadcasts aired globally.

A thought leader, environmental journalist, media broadcaster and a change maker with an acute focus on development affairs & education for Pakistan.