Five-year revival plan: PIA seeks billions of rupees to overcome losses

Air carrier needs money for debt restructuring and aircraft purchase.

ISLAMABAD:

The Pakistan International Airlines is seeking injection of billions of rupees in taxpayer money mainly to buy 16 new aircraft and overcome losses under a five-year revival plan, as the carrier’s losses have crossed Rs96 billion.

In a meeting of the Public Accounts Committee (PAC) on Monday, the office of the Auditor General of Pakistan disclosed that there was no truth in the claim that the PIA was running into operating profit in 2010 as the state-owned entity suffered Rs16 billion losses and further Rs4.3 billion losses in just three months (January-March) of this year. PIA’s financial year runs from January to December.

The director general commercial audit said that in just three years PIA’s losses have increased by Rs23.6 billion. In 2008, the airline’s accumulated losses stood at Rs73 billion, which by March 2011 soared to Rs96.6 billion, he added.

According to the PIA presentation, in 2010 the national flag carrier earned Rs107.5 billion revenue, which was Rs12 billion less than the target. Its expenses on fuel and oil increased to Rs44.7 billion from Rs31.5 billion in 2009. Other than fuel, expenses stood at Rs54.5 billion from Rs50.8 billion a year ago.

“PIA has Rs140 billion in debt, half of which was obtained for purchasing aircraft and its servicing is a constant burden on the entity,” said Defence Secretary Syed Athar Ali.

Last year, PIA paid Rs9.3 billion in debt servicing, Rs1.8 billion on account of fleet debt and Rs7.5 billion in non-fleet debt, shows the latest balance-sheet of the airline.

The DG commercial audit disclosed that the PIA’s short-term loans are increasing alarmingly, which will cause very serious financial problems in the years to come.

“Money is not a substitute for the efficiency as even Rs100 billion subsidy to PIA cannot yield results,” said Yasmeen Rehman, acting chairperson of PAC.

PIA Managing Director Captain Nadeem Yousufzai said that the airline’s five-year revival plan for 2010-14 is pending with the finance ministry, as the entity needs significant financial support for debt restructuring and buying new aircraft. He said under the plan PIA would increase its revenue from Rs94 billion in 2009 to Rs217 billion by December 2014.

He, however, said this would not be possible without adding 16 new aircraft in a fleet of just 40 and restructuring of the debt stock of Rs140 billion. He said this would also depend on 21 per cent depreciation of the rupee against the US dollar in the next four years.

For rationalisation of the workforce, PIA intends to send 4,339 employees on deputation to other allied departments, which would ensure Rs3.8 billion savings in five years, said Yousufzai.

Illegal appointments

In a case of illegal appointment of 618 employees in the airline, including eight re-hired after retirement, the defence ministry has fixed responsibility on some high-profile officials. The defence secretary said out of 618 employees, eight were hired in violation of rules. He said according to the findings, former PIA chairman Tariq Kirmani was mainly responsible.

$11m contract for  kitchen services

In February 2006, PIA awarded a kitchen management contract to Singapore Airport Terminal Services Limited (SATS) at a price of $11 million, which the defence secretary termed “an ill-conceived contract”. He said interestingly Singapore Airlines was availing kitchen services from a Pakistani company. During the years, SATS failed to meet the targets, he added.

The DG commercial audit said the defence ministry was creating hurdles in the way of an inquiry report to determine responsibility. Giving July 6 deadline for completing the inquiry report, PAC said “this is an eye-opener audit objection that reflects criminal negligence, favouritism and inefficiency in running a state entity.”

Published in The Express Tribune, June 14^th, 2011.