Breaking News - PIA Privatisation Causes Chaos; New COO Linked to Qatar Airways

Pakistan International Airlines (PIA), the financially-troubled national carrier of Pakistan, has entered the final stages of a privatization process, which was initiated by the government of Prime Minister Nawaz Sharif in December last year, when it announced to sell a 26% stake in the airline, along with the management control, to a foreign carrier by the end of July 2016.

Bernd Hildenbrand, newly appointed COO of PIA.
Bernd Hildenbrand, newly appointed COO of PIA.

´Sources in Pakistan as well as the PIA union, are suggesting that Middle East carrier Qatar Airways is interested in buying the ailing airline and is using a newly appointed Chief Operating Officer and former Lufthansa executive to obtain details of the financial position and liabilities of PIA. The Pakistani government has strongly denied the rumours about a link between Bernd Hildenbrand's appointment and the interest from Qatar.
The privatization, which formed part of a commitment from the Shariff government to the International Monetary Fund (IMF) to privatize several public sector entities (PSEs) in exchange for a US$6.8 billion bailout package, was scheduled for completion next month. However, the government has meanwhile informed IMF officials that the PIA privatization will face a delay of at least six months.
When the Shariff government announced its plans in December last year, they caused widespread unrest among PIA employees and unions who feared large-scale layoffs by the new owner.

 

Al Baker ante portas
Last week the plans resulted in a countrywide strike disrupting flight operations throughout the nation, while during demonstrations at PIA's headquarters in Karachi two employees were killed by security forces.

´The killings prompted COO, Naseer Jabbar to hand in his resignation with PM Shariff, who within days exacerbated the situation by appointing a German national and former Lufthansa executive, Bernd Hildenbrand, as his successor.

Pakistan Prime Minister Muhammad Nawaz Sharif (left) meets Qatar Airways Chief Executive (CEO) Akbar Al-Baker  to discuss "aero-political issues".
Pakistan Prime Minister Muhammad Nawaz Sharif (left) meets Qatar Airways Chief Executive (CEO) Akbar Al-Baker to discuss "aero-political issues".

According to claims by the PIA union, the appointment of Hildenbrand is linked to a due diligence process of PIA and the new COO is working on behalf of Qatar Airways to evaluate the financial health and pending liabilities of PIA. During an event in the Sri Lankan capital Colombo in January, Shariff reportedly had a lengthy meeting with Qatar Airways CEO, Akbar Al Baker during which "aero-political issues" were discussed.

 

Transforming PIA is a gargantuan task
Prior to his appointment as COO, Hildenbrand was managing director of Lufthansa Services in Bangkok, Thailand. Before that, he worked in senior management positions at Inflight Management Solutions and Globeground in Germany.
For a brief period, he also was based in Malaysia, managing Lufthansa's cargo operations. He left Lufthansa on January 31, 2016 under an early retirement scheme.
The Pakistani government meanwhile has called the union accusations regarding Hildenbrand and Qatar Airways "baseless and unfounded.” It insists that Hildenbrand has been tasked with transforming PIA into a profitable business.

Debts exceed assets
However, rumours that the new COO is reportedly receiving a monthly salary of around US$25,000, while the airline, according to an half yearly report by PIA's external auditors (Ernst & Young Ford Rhodes Sidat Hyder/KPMG Taseer Hadi & Co) for the period January to June 2015, is basically bankrupt, has created further opposition to the privatization plans.

In the report, the external auditors stated that PIA’s liabilities exceed its total assets by Rs 169.443 billion (US$162.3 million), which along with other factors disclosed in the report indicate the “existence of a material uncertainty which may cast significant doubt on the Corporation’s ability to continue as a going concern.”
PIA’s total accumulated loss as of June 30, 2015 was Rs 240.863 billion and by September 30, 2015 it had increased to Rs 247.414 billion.
Meanwhile, the Pakistan Air Lines Pilots Association (PALPA) last week announced its withdrawal from the strike against the privatization plans. According to a statement by PALPA president Amir Hashmi, the pilots had been part of the protest from the beginning, but never supported the idea of a complete strike "which can have serious consequences on an airline which is already sinking.”
"Pilots are part of a professional body, we are not a political party," Hashmi said, adding that the PIA strike had turned into a political arena.

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