PIA seeks Rs7b loans to keep itself afloat

Concerns have arisen about partial or complete suspension of flight operations

ISLAMABAD:

Pakistan International Airlines (PIA) has urgently requested an additional loan of over Rs7 billion from banks to sustain its ongoing operations. The national flag carrier is grappling with severe financial issues, leading to concerns about potential disruptions or even a complete suspension of flight operations.

In response to these concerns, PIA's administration has reached out to the Aviation Division, urging them to arrange an immediate loan of more than Rs7 billion from banks.

A letter dispatched to the division by the PIA mentions that the government of Pakistan's guarantee includes an option for the airline to secure a loan of Rs7.5 billion.

Interestingly, no bank has shown any interest in providing a loan of Rs5 billion to the airline due to the severe financial problems faced by the PIA.

Read more: Pending PIA sale

The letter further states that due to financial issues, fuel supply in Jeddah and Dubai was halted, and the Pakistan State Oil (PSO)—the state-owned oil marketing company— also refused to supply fuel to the airline.

It says the International Air Transport Association (IATA) membership can also be suspended at any time. The Federal Board of Revenue (FBR) has also issued notices to the airline.

The letter urges the Ministry of Finance to intervene immediately and instruct banks to provide a loan of Rs7.5 billion under the government's guarantee. The letter has been sent by the General Manager Funds Management to the Deputy Director Division for necessary action.

Last month, on September 22, the caretaker privatization minister had announced that the government would not ground the PIA — its highest loss-making enterprise — and that no employee of any entity would be sacked even after its privatisation.

Also read: PSO suspends fuel supply to PIA on shorter routes

The statement had come hours after interim Finance Minister Dr Shamshad Akhtar said the government would give any support needed to keep the PIA in the skies.

According to a report published in The Express Tribune, the two separate statements were apparently aimed at pacifying lobbies working to save the airline despite a severe financial crisis.

“The prime minister has instructed me that the PIA would not be grounded. We have already worked out a way to keep the PIA flying,” said Minister for Privatization Fawad Hassan Fawad while responding to a question at a news conference.

Earlier the PIA had requested a moratorium on its domestic debt repayments to bridge an annual deficit of Rs153 billion between its sales and essential expenditures.

The PIA management and the Ministry of Finance were in discussions for about Rs260 billion domestic debts restructuring that the airline owed to nine commercial banks. Fawad had told the media that he was reviewing a plan shared by the PIA and had yet to reach a decision.

The PIA’s plan revolves around debt restructuring, blocking tax payments of the FBR and not paying fees and charges of the Civil Aviation Authority (CAA) but doing nothing to improve its administrative affairs.

“We will have to give support to the PIA, as the government has 92% stakes in the airline,” Dr Shamshad Akhtar had said on the same day while addressing a separate news conference.

“If needed, the government would also restructure the PIA debt but the final decision would be taken by the privatisation minister,” she had added.