PIA. Making it great to fly again. A thread.

PIA has negative equity of more than PKR 400b, and liabilities of more than half a trillion rupees. Loss for 2019 was PKR 56b. Taxpayer continues to burn cash, while also getting horrible service, and a poor safety record

1/n

PIA has more than 14k employees, while having one of the highest employee per plane ratio in the world. Its the 3rd worst in terms of customer experience & has one of the worst safety records in the last 12 years. PIA not only requires right-sizing, it requires structural fix
2/n

PIA is a behemoth which needs to be broken down into more palatable businesses, with each having a core function, and specialty. The airline needs to be split into Budget/Domestic Ops., International Ops., Handling & On-Ground Services, and finally Real Estate Management.

3/n

Domestic Ops. Almost 60% of passenger revenue is from domestic, shuttling 4.5m passengers, w/ share of 67%. PIA operates in a duopoly enabling it to charge higher prices compared to other jurisdictions. PIA has one of the highest price per seat mile in the world

4/n

Such extortionate price hampers growth of domestic travel. A budget airline would push towards a high volume, low margin b-model, w/ profitability extracted through volume, and scale, rather than a extortionate pricing. This will have multiplier effect on economy as well

5/n

Diaspora & Intl. Tourism. This is the second entity, with a focus on bringing diaspora and tourism back to PK. Pakistani diaspora in the MENA, EU & North America would prefer PIA as long as service quality matches with that of competition, and pricing is competitive.
6/n

This is latent demand, low hanging fruit that can be captured. Emirates transported more than 2.2 million passengers in 17-18 – with multiple flights to and from Dubai, from all major cities of Pakistan -- why can't PIA capture this and enable direct flights
7/n

Ground Handling & Operations. The 3rd entity can handle ground ops., not only for PIA, but also for other airlines operating flights to, and within Pakistan. It will compete in the market. PIA accrues ops revenue of >PKR8b, this is an amount that can increase significantly

8/n

Real Estate. Structure all real estate as a REIT, which manages all real estate of PIA. With prime holdings across the world, crown jewels being Roosevelt in NYC & La Scribe in Paris, and exposures across various cities in EU & NA. PIA also has prime real estate across PK.
9/n

e recognized anywhere. Ring-fencing real estate in a separate company, being managed by an independent team tasked to enhance real estate yields can unlock the latent value of a massive real estate portfolio. Roosevelt & La Scribe alone have mkt value of >USD728m
10/n

Reviving PIA means breaking it up, slicing & dicing to extract value. It requires professional management & political will. This isn't the 50s where someone w/ war medals can also run an airline. 2020 requires a disruptive approach,absence of which will only make things worse
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