Five 737-800s: PIA aircraft lease deal smells foul

Against tender rules, PIA is leasing five aircraft from a company that does not own them.


Saad Hasan August 11, 2012

KARACHI:


Something is rotten in the national flag-carrier’s cabin.


Pakistan International Airlines (PIA) is leasing five aircraft through a company which does not have any ownership stake in the planes, raising concerns about the deal’s transparency.

The contract for five Boeing 737-800 aircraft has been awarded to Air Speed Charter, a Sharjah-based firm that claims to be in the freight-forwarding business. Attempts to contact the company through numbers posted on the website were in vain. But that is not the most pressing cause of concern.

The narrow-body aircraft being leased are currently under the use of an Indian airline that says all information pertaining to the deal is “incorrect.”

Leasing process

According to tender rules, a leasing company must have some stake in the aircraft which have been offered to PIA. That does not appear to be the case in the latest lease agreement.

“The entire process of this lease is a joke,” said a PIA official close to the deal. “It’s like a middleman is being paid millions of dollars to lease the aircraft from another firm, something that PIA could have done for itself,” the official said. PIA will pay $780,000 as deposit for every aircraft – a total of $3.9 million. The leasing cost is $20,700 per aircraft, per-month. Another million dollars will be paid as ‘good-faith deposit.’

Despite waiting for two days, PIA did not give its official response. However, senior airline executives and officials at Civil Aviation Authority (CAA) maintain that all is not well with the deal.

Aircraft owners

Manufacturer serial numbers (MSN) of the five aircraft – 30403, 30407, 30408, 30409 and 30410 – all appear on website of India’s Director-General of Civil Aviation (DGCA). MSNs are unique digits assigned to an aircraft by the manufacturer and are presently registered by Jet Airways.

In the DGCA records, the aircraft are owned by North American Hire Company and Caledonian Bank, which operates out of the Caymen Islands.

When Jet Airways was asked if it knew anything about the aircraft being leased to PIA, a spokesperson replied: “Your information is incorrect.” India’s Director General Civil Aviation Arun Mishra did not respond either.

Commissions and cuts

While Pakistan’s CAA officers refused to comment on the matter, one source told The Express Tribune: “This is how commissions are paid. It is a clear case of cuts being made by influential people.”

PIA invited bids from aircraft dealers to lease 10 aircraft including four Boeing 737-400, two Boeing 777 and four Boeing 737-800.

Air Speed Charter was purportedly selected because it submitted the lowest bid. “The entire process of opening technical and financial bids and then getting the board of directors’ approval was done in a matter of three days. What is the hurry?” the source questioned.  The airline has yet to carry out technical inspection of the aircraft before asking the CAA to issue airworthiness certificate. This is not the first time that PIA will deal with companies registered in Sharjah’s Saif Zone and those that operate out of the Cayman Islands.

Of the seven PIA Boeing 777s, five are owned by a company based in the Cayman Islands.

PIA said it needs the aircraft in September 2012. It remains unclear when PIA gets the delivery since the aircraft are still registered in India.

Published in The Express Tribune, August 11th, 2012.

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COMMENTS (37)

Truth Bites | 8 years ago | Reply

The only solution to PIA i guess it to privatise this elephant to make it viable national carrier. Dont sell 100% shares, but a good percentage with management would be far better option for airline to run nicely. Government should not run any businesses, it only regulates! Sri Lankan airline is good example nearby!

A. Khan | 8 years ago | Reply

I think a lot of people are missing the point here. Were the rules bent to accommodate Airspeed Charters for leasing the aircraft ? Of course they were, as it is a pre-requisite that companies should own the aircraft they are leasing. Clearly AC does not do that. That's the first thing that is setting off alarms. I could go on but why bother ? The public is equally uneducated about these matters.

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