PIA Seeks Rs 20bn from Govt. to Avoid Operations Suspension

[Abbas Ali]

PIA Seeks Rs20bn to Overcome Cash Flow Deficit

Zaheer Abbasi

ISLAMABAD: Pakistan International Airlines (PIA) has reportedly sought Rs 20 billion from the government to overcome cash flow deficit during the fourth quarter of 2014 to avoid suspension of operations.

Sources said PIA has informed Finance Minister Ishaq Dar that the organisation is in need of urgent cash support from the government to cover the cash flow deficit of Rs 20 billion of fourth quarter 2014, otherwise, capital of the corporation would further erode.

The Aviation Division further argued that such a situation would result in suspension of operations as critical suppliers have already started holding supplies as they are not ready to lend further credit. Sources added that Rs 20 billion cash deficit includes finance cost payment of Rs 7.139 billion, long term deposits and repayment of Rs 2.4 billion and Rs 3.261 billion on account of working capital charges.

National flag carrier required Rs 6.738 billion for repayment of long-term loan and Rs 1.048 billion repayment of short-term loans. Source said that Finance Division maintained that PIA is being privatised and this may be the last support before privatisation.

The Aviation Division further stated that if cash support was not provided by the government, PIA will not be able to induct the capacity as projected in Business Development Plan for 2015 and onward. The list of critical suppliers with minimum amounts of Rs 12.054 billion to be paid was also provided to the Finance Division. Sources in the Finance Ministry said that the Economic Co-ordination Committee (ECC) of the cabinet meeting presided over by the Finance Minister was submitted three proposals and two of them were approved during the meeting.

They added that the ECC approved issuance of government guarantee of Rs 2 billion for Burj Bank for the loan, which was arranged by PIA for five years with two years grace period and the Finance Ministry was also allowed to issue replacement guarantees of over Rs 10 billion in place of the vacated guarantees.

Source: Business Recorder (November 30, 2014, edition)