PIA negotiating $2b deals amid declining orders

LAHORE - In mid June, PIA entered into negotiations with Boeing and Airbus for procurement of 27 new aircrafts of worth more than $2 billion at list prices.
The deals could be one of the major narrow-body sales campaigns of 2009, and was revealed to Flight Daily News at the Paris Air Show by PIA Managing Director Capt Mohammed Aijaz Haroon.
It is worth mentioning here that the deal is being struck when there is recession worldwide, due to which, Boeing and Airbus have secured a grand total of just four new aircraft orders between them in the first three months of 2009.
The worlds airlines have ordered a total of just 50 aircrafts in the first quarter (28 for Boeing, 22 for Airbus), but they have cancelled 46 (32 for Boeing, 14 for Airbus), for a net order gain of just four aircraft. This is a massive turnaround from the 709 aircraft ordered in the first three months of 2008 (289 for Boeing and 420 for Airbus).
Speaking after signing a deal at the show with Thales for a RealitySeven Boeing 777-300ER full-flight simulator, Aijaz said the airline has completed the evaluation for the expansion of its fleet. Were looking at the Airbus A320 and Boeing 737. Weve had meetings with Airbus and Boeing and are waiting for their final numbers. We expect to finalise a deal within the next few weeks.
This PIA deal, if it goes through, will be the biggest purchase order by an airline in 2009, while the worlds aviation industry is facing its worst crisis since the great recession. Losses for 2009 are estimated to be in the range of $9 billion and this estimate is based on Brent Fuel prices of $56 per barrel. The Asia Pacific airlines are expected to account for one third of industry losses in 2009. The crisis has been further aggravated by the worldwide threat of terrorism, which coupled with economic recession, has dealt a severe blow to aviation industry. In such times, airlines have embarked on tightening belts, freeze on recruitments and aircraft induction, and adopted new marketing strategies, utilizing their best talents to retain their share of revenue, both passenger and cargo.
The frequency of flights to USA which once were over 9 flights a week, five to Newyork, two each to Chicago and Houston, have been slashed down to two flights a week. Similar drastic reductions in frequency of flights to UK, Europe, Far East, Gulf and regional sectors have seen a sharp decline in fleet utilization.
Investigations conducted by this scribe reveal that PIA has seen a sharp decline in the utilization of its Boeing 777 fleet from the industry average of 16 hours/day to under 10.4 hours/day in Feb 2009.
The PIA business plan submitted to EXIM Bank at the time of induction of B777s was based on average fleet utilization of 16 hours/day and an annual increase in revenue generation of over Rs2 billion per annum from 2003 onwards. The A310 fleet utilization has dropped from 8.9 hours/day in 2008 to under 8.4 hours/day in Feb and March 2009. The utilization of ageing fleet of Boeing 747 was 3.1 hours in 2008 and has drastically reduced to 1-2 hours/day in March 2009.
Ageing fleet of Boeing 747 and B737 are due for grounding along with at least 5 A310s whose block hours are above 59,000 HRs with landing cycles in the range of 17,000 to 20,000. PIA has in spite of huge losses increased its surplus employees by another approximately 8,500 in the last 12 months.
It has hired another 80 pilots, when there are almost 66 pilots hired in 2006 awaiting their turn for being operational. It has 520 fully trained pilots flying Boeing 777s, A310s, B737, ATRs and the Boeing 747s. While the requirement of pilots is based on retirement age of 60 years, the fact is that the age of utilization of pilots has been raised by CAA to 65 years.