The ECC approved guarantees for borrowing $150 million from Exim Bank of US and Islamic Corporation of Insurance and Export Credit (ICIEC) for servicing and repair of nine Boeing 777 aircraft. PHOTO: FILE
ISLAMABAD:
The government has approved a Pakistan International Airlines’ request for acquiring five European-made aircraft on lease aimed at cutting financial losses of the state-run carrier whose accumulative losses have shot up to Rs267.8 billion.
The decision was taken here on Tuesday by the Economic Coordination Committee (ECC) of the cabinet, headed by Finance Minister Ishaq Dar.
However, the ECC turned down PIA’s request for another five aircraft that the national flag carrier also wanted to acquire on lease.
It approved sovereign guarantees for obtaining a loan of $150 million for repairing Boeing 777 aircraft and extended existing guarantees of Rs33.5 billion until the end of current financial year in June 2014.
The PIA management had shortlisted 10 A-319 and A-320 aircraft based on their combined score according to their financial and technical parameters. According to a handout issued by the Ministry of Finance, the lease of the remaining five aircraft was rejected because of their low combined score.
PIA emphasises that it needs at least 10 airplanes to prop up revenues and cut financial losses. Its board of directors has approved acquisition of six Airbus 320 and four A-319 aircraft on dry lease.
According to the third quarter results, the air carrier’s liabilities have increased to Rs267.8 billion by the end of September this year. Minister of State for Privatisation Khurram Dastgir Khan has said the corporation is causing the government a loss of around Rs36 billion per annum.
Aviation Secretary Imran Ali Gardezi claimed in the ECC meeting that the PIA management had reduced losses last month from Rs3.3 billion per month to Rs1.5 billion.
Gardezi, who is also acting chairman of PIA, is facing criticism for allegedly promoting his relatives in the airline. Nepotism remains one of the major reasons behind the troubles faced by the airline coupled with corruption and political appointments.
The ECC directed that the lease period of the four aircraft earlier acquired on wet lease may be extended so that a pool of at least 10 aircraft could be maintained. It also authorised PIA to initiate the bidding for five additional aircraft which may be inducted by June 15, 2014.
The finance minister observed that the lease of aircraft would not only restore PIA’s international credibility, but would also improve its image.
The aviation secretary said after approval of a Rs16 billion bailout package in July this year PIA had been able to add six aircraft to its fleet, which increased the number of operational airplanes to 26. This, he said, improved flight schedule and no complaints of delay were reported during Hajj operations, which ran smoothly after many years.
The ECC approved guarantees for borrowing $150 million from Exim Bank of US and Islamic Corporation of Insurance and Export Credit (ICIEC) for servicing and repair of nine Boeing 777 aircraft. However, the guarantees depend on clearance of financing terms by the Finance Division.
The ECC also extended the validity of existing guarantees for PIA’s term loans of Rs33.5 billion until June 30, 2014. It directed that these term loans should be converted into term finance certificates in order to retire the guarantees.
Essential commodities
The ECC expressed concern over media reports about increase in prices of essential commodities. The Consumer Price Index rose 10.9% in November over the comparative period of last year as inflation returned to double digits after a gap of 16 months.
The ECC told the provincial governments to strengthen monitoring of prices and check hoarding and profiteering. It expressed the hope that the provinces would share information and follow best practices to provide relief to the common man in maintaining fair prices of essential commodities.
Published in The Express Tribune, December 4th, 2013.
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COMMENTS (8)
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All this money will go to waste, if the same incompetent and corrupt management is to head PIA, which has been responsible for its massive losses. Under this Chairman and MD PIA posted its biggest corded loss in a quarter, with Rs 13.58 billion losses declared from July to Sept 2013 pf this year, with Sec Aviation Mr Gardezi appointing his relative Hamid Gardezi an inter pass as a Director and another inter pass Junior pilot Chakkar Shah as GM Fuel and Brand Management. It seems either Fed Gov is least bothered about tax payer money or it is deliberately driving PIA to an irreversible state of insolvency?.
From being among the top 10 airline of the world in the sixties and seventies, PIA has been reduced to a non entity in the world of aviation. Gone are the days when PIA help create airlines like Emirates,Air Malta, Singapore Airlines.It was Nur Khan who had this vision, all that followed after him did nothing but employe their relatives and friends. The result, from being a great airline PIA has gone down the tubes. After 60 years it still has 26 aircraft, and a dismal record, the airlines it help create are the biggest players in the world of aviation today. Like everything in Pakistan its a sad story.
It is sad to see rulers waste the money just for there own sake. PIA is currently failing and these corrupt politicians keep filling there pockets at awam expense.
@SHB Wet lease is when an aircraft is leased from another airline and comes with flight and cabin crew. These are generally to fill in short term requirements.
Dry Lease is when the aircraft only is leased (on operating or finance lease) from a leasing company / banks. The dry lease does not come with flight and cabin crew. The aircraft is normally painted in its own livery.
PIA has gone into bankruptcy because they treated their customers as cattle. The problem will not be solved by adding more planes or pumping money, make them more efficient and client oriented. They will start making profits and expand their operations. Stop pumping taxpayers money into loss making enterprises.
What is the difference between dry and wet lease? Any body to explain.
Why govt is not getting rid of this white elephant? They are throwing good money after the bad money.