Huge losses lead to closure of PIA’s Premier Service
ISLAMABAD – Pakistan International Airlines (PIA) has closed its Premier Service after bearing huge losses in around six months.
According to the official data, total earnings for the service between August 14 2016 and February 8 2017 remained around Rs0.96 billion.
The loss incurred on direct operations was Rs1.14 billion while the total loss was calculated at Rs2.88 billion.
Premier Service had started on August 14, 2016, on the country’s 69th Independence Day with A330 aircraft on Islamabad/ Lahore-London-Lahore/ Islamabad sectors.
Tall claims had been made at the time of its launch that PIA would be transformed into a profit making modern airline.
The national flag carrier also announced better in-flight entertainment and many other features, including a complimentary limousine service for its Premier Business Class customers on their arrival at London’s Heathrow Airport.
It was told that in order to provide better quality services as per international standards- an aircraft had been acquired from Srilankan Airlines on wet lease.
Since, as per National Aviation Policy an aircraft cannot be wet-leased for more than six months, PIA’s agreement with Sri Lankan Airlines for wet lease of one Airbus A330 expired on February 09, 2017 and the aircraft was returned.
Explaining the huge losses, the management argued that the PIA fares were worked out to be increased in anticipation. However, owing to capacity glut the overall fare levels did not increase and PIA had to settle for the min fare range (all inclusive) of GBP 532-682 against competitor fare range (all inclusive) of GBS 520-670.
It was therefore decided that till the time PIA’s own fleet (B-777s) was upgraded with value-added services (Wi-Fi and flatbed seats, IFE) the Premier Service be suspended.
It is also worth mentioning that after suspension of Premier Service, the flight operation to London has not suffered. The premier service was on six frequencies out of total ten. PIA still operates same number of flights to London by its own fleet of Boeing 777s.
Officials claim that the airline was selected after a transparent bidding process. Tender for Wet Lease of up to (04) Wide Body aircraft was floated on May 19, 2016 and bids were opened on June 30, 2016.
Three bidders, namely Sri Lankan Airlines, HiFly and TAG Linhas Aereas De Angola participated in the bidding and after technical evaluation the evaluated bidder with the lowest cost per seat per Block Hour as per the tender floated was selected.