Five 737-800s: PIA aircraft lease deal smells foul
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.
COMMENTS (37)
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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!
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.
PIA is in a dire need of fuel efficient aircraft like B-737-800. While kick backs cannot be stopped in Pakistan by crying foul, the right kind of aircraft must joint the fleet in time.
This smells so strongly of something that could only be called corruption that I am not accusing anybody. However, this could very well be the UK/US/ZION or several other countries as well as Pakistan. When this sort of thing happens in the UK the perpetrators usually get a knighthood. .
@gp65: Being an ex-army officer means nothing morality-wise in Pakistan, let me assure you of that.
@ET: At least put the correct picture of the aircraft that is being debated. The article incorrectly shows a picture of a PIA Boeing 777.
Reminds of the time Mi8 helicopters were purchased during one of Benazir's tenures. This was through a company called Crux (pronounced crooks) Haven, based in Denmark. The people are not only crooked but have gall to rub our faces in it. And we just do not understand it. Simply pathetic.
@Was A Pakistani:
well, unfortunately the commonality between PIA's -300 and the -800 is not as much as we are touting here. The -300 is the old analog cockpit; the -800 is very much "glass". Takes some getting used to. And of course they fly differently.
In the case of the Airbus, the cockpits are identical -- from the baby A318 all the way up to the super-jumbo, the A380.
@Aviator well said but may i ask which airline have u flown the 737-800 in :-)....
Well I'll not be surprised if it turns out to be true. If the guy can make couple of million dollars in the jf-17 deal these are commercial jets....at least nothing is at stake in this case ;)
@Zalim Singh: No one is cribbing about Hindustan making money .It is the kick backs to a fly-by-night company in Sharjah and Cayman Island Bank we are crying about .
People don't seem to be satisfied in any condition. Over the last few years every other person has complained how the standard of the national carrier has deteriorated, planes are old, the service isn't up to mark. Yet now when the airline is finally taking some adequate steps to improve its self some people just have to cause problems. Maybe what the author says is correct, maybe there is some corruption in this deal but whats important is that the airline is finally getting some newer planes. Its necessary considering how maintaining the current fleet has become a dilemma. The 737s that PIA currently owns are over 25 years old and need immediate replacement. The decision to opt for 737-800 is perfect because the crew, engineering staff would not require any significant training and if PIA saves a few million here its worth it. As for the "hurry PIA is in", its simply because the haj season begins next month and the airline dose not have enough planes to cater to it due to the ongoing issues thanks to the previous management and everyone is aware of the catastrophic season last year. Therefore, now is not the time for complaining and just let them go ahead with their plans. And my message is specially for mr.Gillani of Transparency International. The airline has already had enough hold backs in fleet expansion, please don't cause anymore.
good story..
@Rizwan:
So why do Ryanair operate over 300 of these aircraft? Why have United and American airlines recently each ordered over 100 of these aircraft?
The 737-800 actually has a lower per-seat operating cost than a320.
As an airline pilot myself I have flown this aircraft and it is a fantastic aircraft!
Kindly please do your research before posting such baseless comments.
@Dr. Meekal Ahmed......I agree with you,this is an aircraft of the century,but here we are discussing corruption & kick backs.
Another day, another corruption
All deals of this government done during past four years smell foul,in fact the entire administration smells foul! May God save Pakistan!! Ameen!
Six years ago, Indigo airlines, New Delhi created world record by booking 100, A320 aircraft with Airbus industries at rock bottom rates. While taking delivery (one every month) the planes are sold at a profit to finance companies and then taken back on lease. This is an excellent business model, as profits on sale of aircraft improves cash flows and bottom line, due to which, they were not bleeding, while all others were, when the petrol prices were sky high. About a year ago, Indigo has again booked 180 aircraft with Airbus. Other airlines in India are likely to follow this method. Airlines like GOAIR India return the aircraft during lean period and take them back when the season picks up. PIA can follow the above business model. Alternatively, they can lease planes directly from Gulf based airline companies or airlines of any other country who have surplus aircraft and not from any middlemen.
Frankly, I do not know anything about aircraft purchase, However, as a Pakistani who has been overseas for so many years, I have really seen the reputation of the airline really slide down. In the country where I am currently located in the Middle East, most travel agents refuse to book seats on PIA. On inquiring,one of them told me the aircraft is rarely on time and passengers take their wrath out on the travel agents as many of them miss their connecting flights.
Surely, it pains the heart. Someone must take the on job of putting the airline on its right track weather it is through purchase of additional aircraft or by putting the house in order.
@Rizwan:
You are completely mis-informed. The 737 is the best-selling aircraft in the world. Their newest version is the -900ER which I flew on to Islamabad recently operated by Turkish Airlines. The -800 that PIA is supposed to lease is a modern aircraft with sophisticated avionic systems. I am less excited about the -400 version since that is a bit old but still better (and more fuel efficient) than the -300 that PIA has operated for decades. They need to be phased out.
Where are the Public Procurement Rules ? They should apply to PIA.
Criticism for the sake of Criticism . . . . KAASH, we start to applause those who are endeavoring to put the things right in the PINDORAA BOX of PIA. Just a few weeks back, PIA was seemingly being bankrupted, every flight was getting late, banns were being imposed by IASA & other and PIA flights were almost stopped to operate in the America/Canada. And now when the things seems changing, something good must be going inside the PIA. Core management must be planning high to bring the Airline to surface initially and later develop into a regional giant Airlift (passenger & cargo) Carrier. I happen to know people who were in the technical as well as the financial bid opening that took place in the Headoffice PIA right infront of the Chairman PIA & all office representatives including the PPRA, PLPA, BIDDERS, PIA Management concerning the lease process etc were in attendance. AIRSPEED CHARTER being the lowest bidder was given a fair chance to prove its worth and bring in best aircraft available in the aviation market at the best price without any corruption. To my knowledge PLPA & PPRA offcials along with all others were satisfied with the fair conduct of the BID process. As a Qaum we have learnt just to do Criticism for the sake of Criticism.
@Rizwan: Its a Boeing 737NG we are talking. Maintenance cost of B737NG is far less than that of A320. It doesnt mean A320 is bad.. it is good it all depends on route mix. Boeing 737-800 are widely used. FlyDubai is using it for their operation. It makes sense for PIA to go for it because they have some feel even if it is for a B737 Classic. The aircraft are good and can easily to 14 hours utilization per day. I hope PIA will use them like that.
Just for information 737 are obsolet aircrafts very expensive to maintain .The word over Airlines are opting for Airbus 320 for lease .
If only one policy of 'merit' is adopted by PIA, all corruption roots will be eliminated.
If the aircraft pay for themselves through the business they are being leased for, then its all right. But most likely with PIA's track record this too will be borne by the tax payer in the end and by that time all involved will be in Houston, Dubai, London etc.
I don't see the problem, the lowest bidder got the contract, so whats wrong???
Every one in Pakistan knows too much about PIA, except PIA management.The mother of all ills in PIA is government interference???? As about corruption,it is a life style in Pakistan & has permeated the soul of the nation,hence,cannot be taken out of it.The new CO should have an in depth inquiry conducted against the last three MD's tenures to know astounding facts about what corruption means?
What is new in this deal,PIA was always managed in this way.Country will be abound with such deals as the new elections approach.Time is short and every body needs his cut before the new Govt sworns in.
Looks like ET is the one at fault here. Your investigation has turned up nothing. Obviously you are mistaken.
Most of the time PIA chief is from the armed forces. Even Air M. Noor Khan has been PIA chief. However, the organization always sliding down hill. Each and every act of corruption cannot be attributed to the elected govt.
No leasing company actually owns the aircraft they manage leases, owners can be different. It is standard. Who writes all this junk in newspapers in pakistan. Has the deal been signed? Lease amount doesnt seem bad at all based on country risk and if it is latest vintage. As for the money being paid.... it seems three months rental has been paid... sounds familiar. In my view other than commissions nothing looks too much of a fowl. Brother no one in the world will ever lease an aircraft to you from West due to country risk. I am involved in this business and i know what are the perils of getting aircraft into Pakistan as we are in same bracket as of Afghanistan so best way to get aircraft is only through ME companies. you can doubt the company and commissions but you cant doubt anything else. Jet will never tell you if their aircraft are on lease return and as far as the rental is concerned if the aircraft vintage is 2005 or better its not so bad either.
NAB inquire into this.There is sufficient information. If I re-collect correctly, ex- Chief of Air force is Chairman of PIA.I am sure he will not allow hanky panky in PIA
Since ppp came to power everything smells foul
I thought the new CEO of PIA is an ex- army person? Is he also indulging in corruption? Or could it be that this is no different from the past except that media discusses corruption of politicans but not army?