OPERATING PIA OR STATE OWNED ENTERPRISES ON PUBLIC PRIVATE PARTNERSHIP

By:
MAHMOOD ABDUL GHANI
Advocate Supreme Court of Pakistan

Pakistan International Airlines, with only 35 serviceable Aircrafts but on permanent strength of more than 19000 employees and 600 Pilots is undergoing huge financial loss of Rs. 3.3 Billion a month. For the year ended 31-12-2012, PIA incurred a loss of Rs. 22 Billion. Expected net loss for the year ending 31-12-2013 in all probability will be about Rs. 40 Billion. Same is the financial results for the year 31.12.2014 and 31.12.2015.

Prime Minister of Pakistan announced that PIA will be privatized to the extent of 26 percent. He also announced annual loss of Rs. 500 Billion in existing State Owned Enterprises subsidized by the Federal Government. This led to almost all Trade Unions apart from certain political parties joining in the hue and cry against privatization. Federal Minister for Information and Broadcasting and Minister of Finance after meetings with the representatives of Joint Adhoc Committee of PIA Employees have now announced that PIA will not be privatized but for improving its performance it will be run on Public Private Partnership basis and no action will be taken which is detrimental to the interests of the employees. Concerned Ministers have also given assurance that no employee will be sacked and interest of all employees will be safeguarded and that before any action is taken, representatives of all the Unions would be invited for consultation.

The basis of Industrial Relations is that one should be honest and truthful and not mislead and misguide the employees or keep them under false hopes. The assurance presupposes that both Management and Employees will be partners and would jointly benefit from the profits likely to be earned by PIA or other SOE in due course. This means they will equally share losses suffered by PIA or SOE, be that for any reason whatsoever. Are the employees of SOE who would be entering into this Public Private Partnership prepared to contribute to the loss suffered by PIA in future. Mr. Kaiser Bengali, a known Economist suggested that Government sell portion of enterprise to private sector and that Management of PIA and Pakistan Railway be privatized so that the Company’s affairs are made more efficient. Suggestions have also come that to start with there should be reorganization at the top of the Management. Existing strength of large Deputy Managing Directors and General Managers in PIA should be reduced substantially. All senior executives employed by present Government be removed forthwith. Further suggestion made is that new Aircrafts be inducted and that operations of number of international and domestic routes terminated earlier be reintroduced. Mismanagement, lack of proper homework, and leadership, check and balance of employees, timely maintenance of Aircrafts have been made as reasons and grounds for the present state of affairs in PIA. Induction of light weight Aircrafts and avoiding extra burning of fuels be given priority so that billion of rupees per year are saved. It has been suggested that PIA purchase eight narrow bodied Aircrafts for domestic sector having seating capacity of 150 seats each. This suggestion has been made by the President PIA Pilots Association and that each of these Aircrafts fly on minimum of 10 hours a day and touch six sectors. It has also been suggested that there are many ways to cut down PIA expenses though these suggestions have not been detailed. It has been reported that there are number of Directors and General Managers in PIA who are drawing salary and other benefits without doing any work and that they do not come to the office but avail all the privileges. The basic issue for consideration is the strength of the existing employees’ ratio to the number of serviceable Aircrafts in operation reasonable, fair and just. Number of employees are in the ratio of about 555 employees to one serviceable Aircraft in Pakistan, as compared to international average of about 110-120 employees for one Aircraft. So far no proposal has been made either by the Trade Union or the Pilots Association as to how they justify existence of 19400 permanent employees and almost 600 Pilots keeping in view present number of Aircrafts in operation. Partnership presupposes that both Government who owns PIA and the employees who would now be partners will not only share profit but also share losses. Throughout past five years when the previous Government was in office, there was permanent unrest between Management and PIA and the Airline Pilots Association who repeatedly warned that they will go by “Work to Rule” policy. In the past, basic fundamental mistake committed by all previous Governments, elected or otherwise, was to employ surplus staff on contract basis. No attempt whatsoever was made to ensure that this concept of either employing workers on contract and or even outsourcing certain operations have long been disapproved off by the superior judiciary in this country. This was not only evident in the case of PIA but also in KESC. KESC met this problem by offering Golden Handshake payments to such contract employees. Thereafter the understanding was reached with the Union whereby contract employees agreed to forego all past claim as far as their length of service and benefits were concerned and instead were confirmed as employees from the date of conclusion of settlements with the Union. This was done as KESC required employees. Unfortunately in the case of PIA, far from negotiating the terms for confirmation of contract employees, on political grounds, not only in PIA but in all the State Owned Enterprises, contract employees were announced to be confirmed, opening up avenues for claims for financial benefits with retrospective effect which apparently has been effected leading to additional financial constraints on the economy of the State.

Before any Public Private Partnership arrangement is undertaken, the terms and the manner in which such partnership is to be worked out be made known to all the stakeholders. Even people of this country should be asked to make positive contribution to ensure that scheme would be workable and Government will not be called upon any more to carry out bailout packages. It need without saying that there is difference between stoppage of operations in Pakistan Steel Mills and PIA. If Pakistan Steel Mills ceases to function for lack of funds only the employees involved are not made payments of salary, yet it does not disrupt the entire economy and mode of travel in this country. The bailout package announced by the Government include payment of immediate salary to the employee for two months with more offer to grant further bail out amounts for payment of salary for the next few months. Some amount has been allocated to purchase coal in order to enable furnace to operate. This will only resulted in Pakistan Steel to operate on 25 percent capacity. This capacity in itself does not permit retaining strength of 18000 employees in Pakistan Steel Mills. It is all to very obvious that Government should get out of way and in the ultimate analysis nor subside any loss making enterprise. Let private sector do what it does best. Innovate, create jobs and grow economy. Giving annually Rs. 500 Billion to about 200 SOEs as “bailout package” and or meeting losses suffered is no answer to this problem. During the past five years SOEs have drained off $ Five Billion from our economy each year or almost $ 25 Billion altogether. Since 1991 Pakistan sold off about 165 SOEs at a price of Rs. 476.212 Billion. Even if Public Private Partnership proposal as has been floated by the present Government as an alternative to immediate privatization, there are certain conditions which have to be met by the employees of PIA. Some of the conditions, if not all, apply to all SOE. Suggested conditions are:

a) Employees will have to accept reasonable Golden Handshake scheme to be floated by PIA or other SOE, as an inevitable alternative to sustain PIA or SOE without any further bail out or subsidy. Reduction of the present strength of PIA and other SOE headcount is inevitable.

b) To make it abundantly clear to the employees in the lower salary strata, there will also be revamping of executives and officers, General Managers etc. This will avoid possible plea that reorganization should commence from the senior executives, down below, to avoid immediate labour unrest.

c) Government should review and revisit ‘Open Sky’ policy and find out an alternative solution, and or revisit terms with foreign airlines to also operate on some domestic routes.

d) Effort should be made to find out number of senior executives including Managing Directors, Directors, General Managers etc in other Airlines presently in operation in this country keeping in view the strength of Airlines and the same strength be fixed in relation to PIA, in proportion to the number of Aircrafts and Pilots.

e) Sacked Employees (Reinstatement) Act 2010 should be repealed with immediate effect;

f) To reduce expenses of domestic flight expenses, PIA be operated on domestic route on “No Frill Basis” with no breakfast, lunch, dinner and tea/coffee served. Fly Dubai does it All American Airlines on domestic routes do it. All domestic routes of PIA being less than 90 Minutes, this will result in huge saving on meals, food, beverages and in turn reduce strength of Stewards and Airhostesses in the Aircrafts, and thus reduce pilferage and waste of foods and lead to deduction in losses.

g) Postings in foreign countries of Pakistani Nationals from Pakistan be discontinued. At all outstation locations of PIA local employees be recruited and paid accordingly. This will also result in increased reserve in foreign exchange on excess baggage charged.

h) Fare by way of discounted tickets to PIA employees be discontinued with immediate effect. All employees from the Chairman, Managing Directors, Directors, Board Member and General Managers etc to the ordinary employees, all should pay for travel in PIA in full for themselves or members of the family if they desire to travel by PIA either on foreign or domestic routes.

i) All reduced or subsidized airfare on domestic or foreign routes be discontinued. Discount given to students, senior citizens, journalists etc and other category be that for any nature or reason be discontinued. All should pay full fare both on domestic and foreign travel by PIA.

j) Retirement age of PIA and other SOE employees be reduced to 55 years with no extension be that for any reason or grounds whatsoever;

k) Application of Benazir Employees Stock Option Scheme whereby 12 percent shares in SOE have been announced to be given free by the previous Government be recalled and this free gift of shares to PIA or other State Owned Enterprises be not effected.

l) There should be a moratorium on grant of any increase in the existing financial benefits and terms and conditions of service for the next five years till such time as PIA or SOE does not recover past financial losses All non core functions be outsourced strictly within the ambit of law and the decision of Apex Court in the case of Fauji Fertilizer. Public Sector Strategy aimed at turnaround and or privatization be formulated by the Government and implemented forthwith.

m) PIA Pilots Association should announced that they will not go or threaten any Work to Rule policy, and all office bearers of the Union in all SOE will perform their normal work and no office bearer or activists of the Union shall consider himself absolved from work. No Trade Union be affiliated to any political party in the country. If need arises the law appropriately be amended.

n) All employees in all cadre drawing more than Rs. 20,000/= per month as take home salary should announce with immediate effect twenty percent reduction in their salary on voluntary basis as their contribution to save these “National Assets”. Such voluntary reduction in salary and other benefits were made effected in other Airlines around the world in case of Airlines in loss so as to avoid immediate redundancy.

o) Board of Directors of PIA and other SOE should be appointed with immediate effect comprising of professionals and experienced personnel in Aviation Industry even if need be, foreigners, Finance, Human Resources and Labour Executives with no political affiliation and or attachment whatsoever be on the Board. There should be no conflict of interest in such appointments. All members of the Board should be free, independent and highly qualified.

p) Every effort be made to find out as to how other Airlines in other countries of the world succeeded in bringing about turnaround of their loss making Airlines and those policies be implemented in our country in suitable cases.

q) All bogus and fake degree holders in SOE be removed from service forthwith. All Pilots and Cabin Crew be subjected to medical test and preflight check before they enter the cockpit to avoid the recent incident in Leeds Bradford, United Kingdom and ensure safety of passengers. Pilots and Cabin Crew should no longer consider themselves above law. This is essential for aviation safety including those of passengers Chief Medical Officer in PIA should check in to ensure fool proof monitoring with zero tolerance on this issue. Shaheen Airliines incident should be eye opener.

If some of these conditions are accepted by the Trade Unions and Pilots Association, then in the first instance for the next six months privatization be not effected, and be deferred. If however, there is no financial result to the satisfaction of all the stake holders achieved, then there should not be mere 26 percent but a complete privatization of PIA and other SOE. It should be made clear that this privatization should be transparent and within the limit of law and Constitution. At the same time written undertaking should be obtained from all the employees of PIA as also Pilots and other SOE employees to the effect that if Public Private Partnership is undertaken, the employees will pledge their provident funds amount, gratuity, pension benefits on the eve of retirement with PIA or other SOE in case the enterprise suffer loss hereinafter, it will be shared equally by SOE employees. Public Private Partnership does not mean that employees will only gain if PIA or SOE earns profit but will not share if PIA or SOE suffer loss.

If the suggested proposals fail to reduce loss in SOE, then instead of continuing to suffer loss of Rs. 500 Billion annually, this entire sum of Rs. 500 Billion be allocated as “Golden Handshake” payment on one time basis amongst all the 200 existing SOEs employees. The distribution be Rs. 350 Billion for the workers and Rs. 150 Billion for officers. Amongst the workers this Golden Handshake payment be effected keeping in view length of service of the employee, senior workmen in length of service receiving more than those recently confirmed or employed on political grounds. This nation can afford, a onetime further loss of Rs. 500 Billion to be given to the 200 SOEs employees who will be retrenched following privatization. It be made clear that if this offer is not acceptable to the employees the scheme will lapse, and thereafter only legal dues permissible in Labour Laws will be anted on the eve of retirement, downsizing, reorganization etc.