Fleet replacement: PIA seeks Rs3.3 billion for acquiring 10 aircraft
ECC to decide on flag carrier’s request in upcoming meeting.
The money will be utilised for initial dry lease, security deposits, training the crew and spare parts. PHOTO: FILE
ISLAMABAD:
Pakistan International Airlines has sought a fresh injection of Rs3.3 billion from the federal government to acquire 10 aircraft on lease, as the liabilities of the national flag carrier touch Rs185 billion.
The bailout has been requested for acquiring aircraft without crew, according to sources in the finance ministry. The Economic Coordination Committee of the cabinet, headed by Finance Minister Ishaq Dar, will consider PIA’s request in its upcoming meeting.
PIA is seeking short-haul narrow-body aircraft aimed at improving schedule reliability and cutting back on fuel costs. The management has issued tenders without specifying the make of airplanes.
The money will be utilised for initial dry lease, security deposits, training the crew and spare parts.
In its request documents, the PIA management has claimed that the induction of new aircraft will reduce fuel cost up to 56%, as narrow-body airplanes are more fuel-efficient than jumbo planes.
In February this year, the ECC, headed by then finance minister Saleem Mandviwalla, approved a special package of Rs100.5 billion and a provisional business plan for the cash-strapped national air carrier.
The bailout covered fresh guarantees of Rs49 billion in 2013 to meet critical liquidity needs of the corporation, $46 million (Rs4.5 billion) for acquiring narrow-body aircraft to replace the ageing fleet, loan guarantees of Rs33.5 billion until June this year and borrowing of Rs13.5 billion from National Bank against a letter of comfort to be subsequently replaced by guarantees.
However, despite floating tenders, the PIA management could not get planes on lease and no significant injection was made to bail out the airline.
PIA is facing another challenge of servicing its foreign currency debt due to rapid decline in the rupee against the US dollar, according to the officials.
The new government is also finding it tough to constitute a credible board of directors that could turn around the entity. It suffered an initial setback when the Supreme Court forced aviation adviser Captain (retd) Shujaat Azeem to resign on the issue of dual nationality. Board’s acting chairman Aslam Khaliq also had to leave the post.
Questions had also been raised over appointment of Arif Habib and Mian Mansha, a billionaire and close friend of Prime Minister Nawaz Sharif, as directors on the board.
Sources said in the absence of a credible management and board, there were no signs that PIA could be turned around in the near future. There have been unconfirmed reports that the government wanted to privatise the airline.
Since 2007, PIA has suffered operating losses to the tune of Rs115 billion, according to the airline’s financial statements. Its accumulative liabilities have touched Rs185 billion by June this year including Rs160 billion outstanding loans, according to the finance ministry officials.
By March this year, PIA’s short-term borrowings stood at Rs64.2 billion and trade and other payables were Rs65.5 billion, according to the financial statement for first quarter of 2013.
Published in The Express Tribune, August 31st, 2013.
Pakistan International Airlines has sought a fresh injection of Rs3.3 billion from the federal government to acquire 10 aircraft on lease, as the liabilities of the national flag carrier touch Rs185 billion.
The bailout has been requested for acquiring aircraft without crew, according to sources in the finance ministry. The Economic Coordination Committee of the cabinet, headed by Finance Minister Ishaq Dar, will consider PIA’s request in its upcoming meeting.
PIA is seeking short-haul narrow-body aircraft aimed at improving schedule reliability and cutting back on fuel costs. The management has issued tenders without specifying the make of airplanes.
The money will be utilised for initial dry lease, security deposits, training the crew and spare parts.
In its request documents, the PIA management has claimed that the induction of new aircraft will reduce fuel cost up to 56%, as narrow-body airplanes are more fuel-efficient than jumbo planes.
In February this year, the ECC, headed by then finance minister Saleem Mandviwalla, approved a special package of Rs100.5 billion and a provisional business plan for the cash-strapped national air carrier.
The bailout covered fresh guarantees of Rs49 billion in 2013 to meet critical liquidity needs of the corporation, $46 million (Rs4.5 billion) for acquiring narrow-body aircraft to replace the ageing fleet, loan guarantees of Rs33.5 billion until June this year and borrowing of Rs13.5 billion from National Bank against a letter of comfort to be subsequently replaced by guarantees.
However, despite floating tenders, the PIA management could not get planes on lease and no significant injection was made to bail out the airline.
PIA is facing another challenge of servicing its foreign currency debt due to rapid decline in the rupee against the US dollar, according to the officials.
The new government is also finding it tough to constitute a credible board of directors that could turn around the entity. It suffered an initial setback when the Supreme Court forced aviation adviser Captain (retd) Shujaat Azeem to resign on the issue of dual nationality. Board’s acting chairman Aslam Khaliq also had to leave the post.
Questions had also been raised over appointment of Arif Habib and Mian Mansha, a billionaire and close friend of Prime Minister Nawaz Sharif, as directors on the board.
Sources said in the absence of a credible management and board, there were no signs that PIA could be turned around in the near future. There have been unconfirmed reports that the government wanted to privatise the airline.
Since 2007, PIA has suffered operating losses to the tune of Rs115 billion, according to the airline’s financial statements. Its accumulative liabilities have touched Rs185 billion by June this year including Rs160 billion outstanding loans, according to the finance ministry officials.
By March this year, PIA’s short-term borrowings stood at Rs64.2 billion and trade and other payables were Rs65.5 billion, according to the financial statement for first quarter of 2013.
Published in The Express Tribune, August 31st, 2013.