Breakthrough
in Pakistan's PIA A320 lease dispute
Economic
Coordination Committee (ECC) in Pakistan has reportedly given the green light
for a bridging finance package totaling PKR 8 billion (approximately USD 28.9
million) to Pakistan International Airlines (PIA) to settle a prolonged dispute
involving two A320-200 aircraft grounded at Jakarta Soekarno-Hatta Airport
since September 2021.
The move
aims to conclude the matter with Asia Aviation Capital Limited (AACL).
An official
statement from the Ministry of Finance, issued after a meeting on October 27,
2023, revealed that "the ECC decided to approve the proposal of the
aviation division for bridge financing through the Civil Aviation Authority's
resources amounting to PKR 8 billion for PIA to meet emergent requirements
related to overdue payments."
PIA
send delegation to Jakarta to resolve Airbus A320 aircraft dispute
AACL was
seeking over USD 31 million from PIA, covering unpaid basic rent, redelivery
rent, maintenance reserves, and contractual interest for the aircraft with
registration codes AP-BLY (msn 2926) and AP-BLZ (msn 2944). AACL is a
wholly-owned subsidiary of Capital A, the entity behind the AirAsia Aviation
Group. The dispute has escalated to the UK courts, and a delegation of PIA and
Pakistani government officials, led by CEO Muhammad Amir Hayat, traveled to
Malaysia to negotiate a settlement with AACL.
Under the
agreement, PIA will take ownership of both aircraft. Upon receipt of payment,
AACL will deliver the first aircraft within 10-15 days and the second in the
subsequent month.
Indonesian
aircraft grounded at Karachi Airport for weeks
Separately,
outstanding fuel invoices have prompted Pakistan State Oil (PSO) to use social
media to urge PIA to clear a debt of PKR 26.8 billion (USD 96.8 million) owed.
Failure to settle this debt could lead to further disruptions in fuel supply,
which has already resulted in approximately 500 canceled flights in the past
two weeks.
PSO
expressed its concern in an October 26 post, stating, "The nonpayment of
dues has put a considerable strain on PSO's finances, and the situation has now
reached a critical point where the supply of fuel by PSO has to be curtailed
and eventually halted." The post emphasized the hope that PIA would clear
its dues, allowing uninterrupted fuel supplies to resume.
PSO
stops supplying aircraft fuel to PIA once again
In the
preceding week, discussions between PIA and PSO yielded an agreement to
temporarily increase PIA's credit limit by PKR 500 million (USD 1.8 million),
permitting uninterrupted operation of scheduled flights. PIA's monthly fuel
expenses are approximately PKR 8.5 billion (USD 30.7 million).
Pakistan's
Caretaker Prime Minister, Anwaarul Haq Kakar, affirmed the government's
commitment to supporting PIA during its partial privatization process. He
established a four-member committee to facilitate the airline's transition to
partial privatization.
Notably,
PIA is Pakistan's largest loss-making enterprise, with debts amounting to PKR
713 billion (USD 2.56 billion), of which PKR 285 billion (USD 1.03 billion) is
government-guaranteed debt. Without substantial restructuring, it is anticipated
that the airline's losses and liabilities could reach PKR 2 trillion (USD 7.2
billion) by 2030.
In
September, PIA secured PKR 18 billion (USD 65 million) in bank loans with
partial government guarantees, and it is currently seeking an additional PKR 15
billion (USD 54.2 million) to maintain its operations. Although the government
is unlikely to cover daily operational expenses, it is expected to provide
guarantees to enable PIA to secure bank financing, ensuring its continuity
until the partial privatization process is finalized, with a new minority
shareholder injecting capital and taking over the airline's operations.
Source: https://www.ch-aviation.com/