Pakistan’s national
airline, PIA, is about to raise its domestic and international
fares by 15 to 20 per cent after Prime Minister Shaukat
Aziz refused to provide Rs 5 billion every year as equity
and Chairman Choudhry Ahmed Saeed publicly admitted that
the airline will not be able to achieve its annual targets
for 2004-05.
Saeed’s belated confession
was made on Friday, Jan 7, at Lahore where he told reporters
at the inauguration of the new PIA complex at Allama Iqbal
International Airport, that “meeting budgeted targets
will be impossible.”
Saeed gave the rising fuel
prices as the reason for his failure but said: “We
will hopefully be able to meet our targets from 2006 onwards.
PM Shaukat Aziz had last
week received a briefing from Saeed and his men in Islamabad
but his request to bail out PIA with a Rs 5 billion equity
shot every year was not accepted after the young State
Minister of Finance attacked Saeed for incompetence and
misleading the Government through his tall and deceptive
claims.
Rebuffed, and in a soup,
Chairman Saeed has placed his other option before the
Government, asking for a hefty 15 to 20 per cent increase
in PIA fares, if the airline was to stay afloat.
But before Shaukat Aziz
could approve his demand, Saeed was already boasting before
his friends at a wedding ceremony in Lahore that he had
“got the Government by its balls.”
“General Musharraf
has publicly praised PIA in his address to the nation
on Dec 30. Shaukat Aziz has said on TV that PIA had been
turned around. Both these leaders are claiming success
of PIA as their own political achievement. How can they
now refuse to bail us out,” the Chairman told colleagues
in high spirits at the wedding.
Saeed’s confession
was a confirmation of all the stories published by the
South Asia Tribune in recent months warning everyone that
the misleading and manipulated accounts being dished out
to the nation did not reflect the real situation which
was showing a devastating picture of the national airline
going down faster than anyone could imagine. Click to
View Charge Sheet against Chairman Saeed
Mr. Saeed also confirmed
that the Government of Shaukat Aziz had refused to fund
the purchase of the new Bombardier Dash-8 aircraft to
replace the Fokker Fleet, as reported earlier by South
Asia Tribune. Click to Read Report
“I took up the issue
of subsidy for Fokker replacement with the Government,
but we have neither been given an approval nor has our
request been turned down," he said, but then could
not restrain his anger at Shaukat Aziz: "It will
be unfair on the Government’s part if it asks PIA
to replace the Fokkers with its own resources as they
are operated on non-commercial routes,” he blurted
out.
This statement before the
journalists of Lahore published in the mainstream Pakistani
media finally ended Saeed’s quest to buy another
fleet of aircraft before he would quit the airline as
the Chairman, some time around April, leaving behind the
biggest financial scandal of the Musharraf regime.
His tenure has seen the
wildest ever buying spree by PIA accompanied by programs
which allowed him and his cronies to spend billions, and
in turn make millions, in the process.
Saeed’s claims in
the past few years that PIA would be earning billions
in profits went up in the air as he finally conceded that
PIA would not be able to achieve its financial targets
before 2006. But by that time, Saeed would have left the
airline and may already have consumed most of the money
he made in cooler climes abroad.
But the way Saeed once
again lied through his teeth and misled and confused everyone
by misrepresenting facts and figures on Friday did not
surprise aviation experts. His statement that PIA would
not achieve its targets set for 2004-05 was in itself
a big deception as PIA’s financial calendar starts
from January and ends in December. So talking about 2004-05
meant he was mixing and confusing the figures for two
years, so that readers may not be able to make out what
happened in one particular period.
Just 16 days before Saeed
confessed, the Board of Directors of PIA, which met for
its 283rd meeting in Karachi, was told that PIA would
make a pre-tax profit of Rs 1.7 billion in 2004. “The
Board was presented with the Budget Estimates for 2005
on which the Board deliberated upon in length and approved.
The Budget reflects the revenue earnings of Rupees 63.8
billion and the total cost of Rupees 61.38 billion. The
pretax profit has been estimated at Rupees 1.7 billion,”
a Press release of PIA said after the meeting. Click to
view Press Release
On October 26, 2004, the
same Board met and a Press release then said: "The
July-September 2004 accounts of PIAC presented to its
Board of Directors in its 282nd meeting held here today
declared an after-tax loss of Rs. 386 million." Click
to view Press Release
His 2004 accounts have
already been proved to be totally and creatively manipulated.
The balance sheet for the first 9 months of January-September
2004 reveals this fact. A quick look at the Page-9, Point
22 reveals a loss before tax of Rs 88.637 million but
how this loss has been manipulated into a Rs 1.1 billion
profit is amazing. See Chart on Top or Click
And for this jugglery of
figures, the following explanation has been given on Page-9:
“During the period (Jan-Sept, 2004), an exercise
was undertaken to organize the records relating to pending
income tax assessments of the Corporation and a detailed
tax position of the Corporation's open assessments was
prepared. This has resulted in revision to provision for
taxation made for the year ended December 2003 and adjustment
to deferred tax liability.”
Thus under this vague and
hard-to-understand explanation Rs 1.3 billion have been
added as “prior and deferred taxation” and
very conveniently a profit after tax of Rs 1.01 billion
has been arrived at.
With friends sitting in
the Presidency and Saeed claiming openly everywhere that
he had already lined up his support structure in the Pakistan
People’s Party which, he says, will shortly come
into power, Saeed is confident that no one will challenge
his figures and question his decisions or performance.
Aviation industry experts
also laugh at the excuses Saeed has been dishing out to
the Government for his lack of proper management of the
airline. The biggest excuse is the increase in fuel price
but when Saeed was making his statement in Lahore on Friday
about PIA not achieving its targets in even 2005, fuel
prices had already dropped by at least Rs 4 a liter and
were dropping further. Click to view Report
In comparison to PIA how
other major airlines of the region coped with the fuel
crisis is very interesting as not one major airline made
such a big fuss about the price increase as the managements
anticipated the rise and took steps to meet the challenge.
Some airlines, like PIA,
including Cathay Pacific, Singapore and Qantas, have added
a fuel surcharge on specific routes to counter higher
fuel costs. Asia's biggest carrier, Japan Airlines decided
against a fuel surcharge but it hedged about 50 percent
of its fuel costs.
"High oil prices will
not affect our purchases or monthly consumption. This
is the peak demand season," said Sophia Lin, General
Manager at Taiwan's China Airlines fuel department, whose
fuel costs make up about 26 percent of total expenditure.
The Taiwan carrier has hedged 70 percent of its fuel costs,
but it is also considering introducing fuel surcharges.
But PIA, despite the surcharge,
did not take any other innovative measure to counter the
fuel price rise. In fact, in a dirty trick, it included
the fuel surcharge as part of its revenue to boost its
profit-loss figures, an insider said.
The structure of PIA fares
is also highly manipulative, specially for the devoted
and emotional traffic to Islamic religious sites in Saudi
Arabia. For instance for a 7-hour return flight to Jeddah,
PIA is charging Rs 34,000 (US$ 567) but for a 16-hour
return flight to London the fare is also Rs 34,000. With
double the fuel cost, PIA subsidizes passengers going
to London and charges the lovers of Khana-e-Ka’aba,
the House of God.
How devout Muslims are
being taken for an expensive ride is obvious.
