The Pakistan International Airlines (PIA) has sought yet another bailout package worth Rs23 billion from the government to remain afloat – a demand that the interim set-up has not accepted yet and instead asked the national carrier’s management to prepare a viable restructuring plan.
The PIA management met with caretaker Finance Minister Dr Shamshad Akhtar this week and sought financing of Rs23 billion, according to people familiar with the discussions.
However, they added that the airline could not immediately win the bailout package.
The PIA is the country’s highest public sector loss-making entity and successive governments have been doling out money from the budget to keep it afloat.
Yet, there is no plan to install a professional management and the affairs of the PIA are handed over to air force officers, who do not have experience in running commercial airlines.
The PIA management informed the caretaker finance minister in the meeting that there was a financing gap of Rs23 billion.
However, the finance ministry asked it to arrange Rs13 billion funds from the banks against the available space of annual sovereign guarantees limit.
In the last fiscal year, the government had increased the limit of the sovereign guarantees to over Rs263 billion for taking more loans to maintain a steady position.
In case, the PIA fails to service its debt, the banks have the option of cashing these sovereign guarantees.
Read also: The PIA riddle
The ministry further told the national carrier that the rest of the Rs10 billion should also be arranged from the banks.
The PIA sought the finance minister’s intervention to acquire loans from the banks, as its balance sheet did not support more borrowings.
During the first three months of this year, there was a phenomenal increase of 170% in the PIA’s quarterly losses that jumped to Rs36.8 billion, according to its balance sheet.
The airlines’ cumulative losses have increased to Rs686.7 billion. Its current liabilities are Rs369 billion higher than its assets.
The finance minister instructed the airline to present a restructuring and privatisation plan to the federal cabinet.
The previous government had amended the PIA Act towards its fag end aimed at allowing the sale of its majority shares and transfer of management control to private buyers.
In 2016, parliament placed restrictions on the sale of more than 49% shares and management transfer -- a move that blocked the PIA’s privatisation process.
Sources said the finance minister asked the airline to prepare a viable business plan, which should also reflect the management’s own efforts instead of just relying on the federal government’s handouts.
Read: PIA may suffer Rs112b loss this year: CEO
According to the PIA’s board of directors, the future operations of the airline are dependent on the support of the government because of its worsening financial conditions.
In the last fiscal year, the PIA demanded Rs22 billion and received Rs15 billion for the payment of the interest cost on the legacy portfolio.
Last month, the finance ministry also facilitated Rs4 billion to bridge financing for the settlement of the Civil Aviation Authority (CAA) dues. The ministry will pay this sum in the fourth quarter of this fiscal year.
The aviation ministry also demanded the earlier continuation of the five-year government facility to pick the interest cost that ended on June 30.
The 2013-18 PML-N government made the mistake of amending the PIA law to stop the sale of its majority shares that would transfer management control – a political decision that cost the taxpayers Rs100 billion alone between 2018-23.
The PIA’s losses multiplied during this period and reached Rs633 billion in September 2022.
In April 2021, the PTI government approved splitting the national carrier into two companies: The first was the “good” PIA with only Rs137 billion in liabilities along with its core assets. The other one was the “bad” PIA, which had liabilities worth Rs457 billion and retained the ownership of its non-core assets.
However, this plan was never implemented.
Since 2017, at least three PIA restructuring exercises have been carried out but in the absence of a viable business plan, the national carrier has been incurring heavy losses.
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