Aircraft lease: Fearing litigation, govt bars PIA from easing conditions

ECC approves release of $29.9m for acquiring eight airplanes.

ISLAMABAD:

The government has barred the board of directors of Pakistan International Airlines (PIA) from easing the terms and conditions for eight aircraft being acquired on lease from Qatar Aviation Lease Company, fearing any relaxation may lead to initiation of court cases.

“PIA should ensure that no relaxation in the terms and conditions for the acquisition of aircraft on lease, as advertised, is allowed even with the approval of its board of directors as it may lead to court cases,” the Economic Coordination Committee (ECC) said in a meeting held on March 27.

The ECC approved release of $29.9 million to PIA for the acquisition of the eight aircraft on dry lease.

Officials present in the meeting said the government had allocated Rs16 billion in cash support for PIA, which had to be released after the ECC’s approval.

On July 12, 2013, the ECC gave the go-ahead for release of Rs12.7 billion while Rs3.3 billion was yet to be released for dry lease of aircraft as the acquisition of airplanes was under process.

The ECC, in its December 2013 meeting, approved acquisition of five aircraft (A320-200) on dry lease out of 10 shortlisted planes, but did not give clearance for five A-319s.

PIA, after due process, signed a Letter of Intent with GE Capital Aviation Services for three aircraft, however, the offer of two aircraft was withdrawn.

The ECC directed during the December deliberations and later in a progress review meeting in February 2014 that PIA should float tenders for acquiring an additional 10 new generation narrow-body aircraft.

The tenders were floated in line with the Public Procurement Regulatory Authority (PPRA) rules and opened on March 7 this year. Two companies – Qatar Aviation Lease Company and KL Aero Parts of Bulgaria – submitted offers for the lease of aircraft.

Qatar Aviation’s offer of eight aircraft was considered and bid results were uploaded on the website. The airplanes were selected after due diligence offered by the company.

These aircraft would arrive between April and July 2014. PIA was in the process of signing a Letter of Intent with Qatar Aviation and required funds for initial deposit, training and acquisition of tools, equipment, manuals and spares.

ECC members proposed that the committee should allow release of $29.9 million, as already approved by it for the lease of aircraft. The remaining amount may be released on the arrival of two more aircraft.

Published in The Express Tribune, April 13^th, 2014.

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