Govt support eases PIA fiscal crisis

Airliner hints at restructuring also coming back “on track”

ISLAMABAD:

Pakistan International Airlines (PIA), the state-owned carrier, has received a much-needed lifeline from the government of Pakistan, signalling a positive turn in the airline’s troubled financial situation.

In a recent announcement on its official social media account on X (previously Twitter), PIA revealed that its financial challenges have started to recede, thanks to the support provided by the government.

#PIA's financial challenges ease out as @GovtofPakistan supports with release of some critical funds through Banks. The funds shall be used to clear long standing dues of Aircraft & Engine leases, Spares Support & Handling payments at foreign stations. Restructuring also on track

— PIA (@Official_PIA) September 9, 2023

While the airline did not specify the exact amount of funds received nor did it mention the nature of these funds, it did express gratitude for the release of critical funds through banks. These funds are earmarked to settle long-standing dues related to aircraft and engine leases, spares support, and payments at foreign stations, said the tweet. Additionally, PIA hinted at a long-anticipated restructuring, which has been on the horizon as the airline grapples with severe economic difficulties.

The airline’s financial woes have been a subject of concern, as it reported substantial losses of approximately Rs64 billion in the first six months of 2023. This marked increase in losses compared to the same period in the previous year, where PIA reported Rs43.5 billion in losses, emphasised the urgent need for financial intervention.

Read No decision on PIA restructuring

To address its financial challenges, PIA had previously requested Rs23 billion in debt relief for the current fiscal year and sought deferral of Rs16 billion in financial obligations for eight months during a meeting of the Economic Coordination Committee (ECC). However, the outcome of the meeting did not result in a clear decision regarding further financial injections into the ailing national carrier.

Earlier this week, the ECC, in its deliberations, also discussed the possibility of restructuring PIA to steer it towards financial recovery. However, no concrete decision was reached on this matter, as the cumulative losses of PIA had already reached a staggering Rs743 billion by December of the previous year.

As part of the ongoing discussions, the ECC also examined the timelines and costs associated with the restructuring plan. Following extensive deliberation, the ECC decided to form a separate committee tasked with assessing the restructuring plan for PIA.

Despite the government’s support, the ECC rejected PIA’s request for deferment of payments, amounting to Rs1.3 billion per month, which the airline pays to the Federal Board of Revenue (FBR) as federal excise duty (FED). Additionally, the request for deferring Rs0.7 billion per month, paid to the Civil Aviation Authority (CAA) for embarking charges, was also turned down.

While PIA’s financial challenges remain significant, the recent government support offers a glimmer of hope for the beleaguered airline as it strives to navigate through turbulent economic waters and regain its footing in the aviation industry.

Published in The Express Tribune, September 10^th, 2023.

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