Pakistan International Airlines (PIA) to halt operations of
several aircraft
Pakistan International Airlines (PIA) has been forced to ground
multiple aircraft due to financial difficulties, leading to concerns about its
ability to maintain operations in the coming months. This crisis has resulted
in overdue payments to creditors, aircraft lessors, fuel suppliers, insurers,
and airport operators, including the International Air Transport Association
(IATA).
As a consequence, PIA has had to ground five of its 13 leased
aircraft, with the possibility of an additional four facing a similar fate.
Furthermore, the Ministry of Aviation revealed that Boeing and Airbus are on
the verge of discontinuing the supply of spare parts by mid-September. In
response to these challenges, the ministry has urgently requested an infusion
of Rs23 billion in cash and the suspension of duties, taxes, and service
charges to domestic agencies. However, this request lacks a concrete and viable
business plan.
Committee
established to expedite privatization of Pakistan International Airlines (PIA)
The ministry emphasized that the restructuring of PIA is a complex
process expected to span approximately eight months. It also stressed that for
the divestment of PIA's shares to yield a fair value, the airline must remain
operational throughout all stages of the restructuring.
Unfortunately, PIA serves only a small fraction of the country's
population, accounting for less than 3% of citizens using air travel, while
consuming significant public funds. This contrasts with the highly criticized
and loss-making power companies that provide electricity to nearly 80% of the
population.
FBR
freezes PIA bank accounts over unpaid FED
The government of Pakistan holds a 92% share in PIA, which was
once renowned for its slogan "Great People to Fly With." However,
since the late 1990s, the airline has faced mounting losses due to competition
from emerging regional airlines, a lack of entrepreneurial spirit, external
factors, internal mismanagement, and insufficient funding for fleet expansion,
as highlighted by the Aviation Division.
To address its financial losses, PIA accumulated substantial debt,
which has now reached unsustainable levels. As of December 31, 2022, PIA's debt
and liabilities amounted to Rs743 billion—five times more than the total value
of its assets. Additionally, its total losses for the last financial year
(2022-23) reached Rs86.5 billion, with Rs11 billion attributed to operational
losses.
If the current situation persists, PIA's debt and liabilities are
projected to reach Rs1,977 billion, with annual losses of Rs259 billion by
2030, according to the Aviation Ministry. It's important to note that Rs383
billion of the current debt liability of PIA is underwritten by the government
of Pakistan, and as the 92% owner, the responsibility for the remaining
payables ultimately rests with the government.
Numerous attempts have been made over the past decade to make PIA
financially sustainable, but these efforts have largely been unsuccessful.
These attempts focused on cost reduction, improved internal management, and
fleet expansion with government capital investment. The second approach
involved restructuring PIA's financial, legal, operational, commercial, and
human resources aspects to attract private investment through divesting
government shares. However, none of these approaches have been implemented for
various reasons.
Recognizing the ongoing deterioration of PIA's financial
condition, a decision was made in June 2023 to restructure the airline based on
recommendations from the Dubai Islamic Bank Consortium Report. A committee was
formed to guide this restructuring effort, leading to the approval of a plan in
July to create a new holding company that retains legacy loans, non-aviation
assets, and existing PIACL subsidiaries, with PIACL as its wholly owned
subsidiary retaining aviation assets and related liabilities.
Source: https://www.paktribune.com/