PIA privatisation

The caretaker government is expediting efforts to privatise PIA and free the country of the economic drain of the struggling airline. The government’s hand was forced by the Privatisation Commission, which refused to offer the airline any additional funding, even to cover the restructuring plan of 8 to 10 months. The airline has since taken out expensive commercial loans to cover day-to-day operational costs, and if there was any doubt, the taxpayer will almost certainly have to foot the bill when the airline’s next cash crunch comes around. The loans are reportedly valued at over $50 million, while the Aviation Division was apparently asking the government for even more — about $75 million. A large chunk of this was only to cover pending dues, rather than the future costs related to preparing the airline for privatisation.

The airline has also grounded some aeroplanes in the hope of making the loan money last longer, but even on the ground, the planes, which are mostly leased, are costing the exchequer a mountain of cash. Some reports actually suggest the groundings were not a cost-cutting move but a legal requirement, because the airline is already behind on lease payments and can’t legally fly planes that are not paid up. While it appears some payments have been made, with several cancelled or suspended flights being brought back online, a massive outlay of about $100 million will be needed in the near future to cover the planes, and there are few scenarios where PIA will be able to make those payments without additional borrowing.

Meanwhile, PIA was also close to a disastrous situation where it would have lost access to spare parts from Boeing and Airbus over unpaid dues. This would have forced the grounding of almost all of the airline’s planes. The only ‘silver lining’ is that, given that the government already has to figure itself of the airline and its nearly $2.5 billion in debt — about five times the value of its assets — a further decline of a few million would hardly have made a difference.

Published in The Express Tribune, September 21^st, 2023.

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