Government Guarantees for Five Billion Rupees Approved for PIA

[Abbas Ali]

According to PTV News, Economic Coordination Committee (ECC) meeting chaired by finance minister today approved Government of Pakistan guarantees for five billions rupees for PIA.

Probably five billion rupees bank loans to be obtained by PIA.

Abbas

[H Khan]

For this amount, GoP could buy PIA's liabilities (pension and other benefits) and let this dead horse die of its natural death

[uzairali]

Why can't they just sell off the hotels and pay off a huge amount of debt?

It is not the excessive employees or fuel prices that hurt PIA, it's the interest payments. Anyone thinks PIA with its current state gets 1-2% interest rate on loans? The riskier it is, the higher the interest rate. And if it defaults, probably the hotels are set as collateral.

Let's just assume its 1% on 3 billion dollars, that's $3 million if interests are paid annually. Times that by 5% (Pak gov't sold eurobonds for 7% I believe, so 5% is still generous), that's $15 million. Do the hotels really net PIA $15 million in profits? Maybe. But if PIA going to continue to give away its profit as interest payments for foreseeable future?

Or it can sell the hotel for billions, pay some debt and induct more planes so it doesn't have to ask gov't always. We missed kenyan 777 deal because gov't didn't release funds.


And the hotels are not piece of food, PIA can one day purchase them back when it itself is in a good position.

[Abbas Ali]

Bailout packages and selling assets like hotels are not going to solve problems of PIA. The money will go down the drain like it has been since year 2005.

PIA needs to be restructured according to international aviation industry standards like appropriate aircraft-to-employee ratio and good independent management preferably controlled by a strong strategic investor taking concrete steps to make it a profit-making airline.

Government should not be managing or financially supporting the airline.

Abbas

[uzairali]

Bailout packages and selling assets like hotels are not going to solve problems of PIA. The money will go down the drain like it has been since year 2005.

PIA needs to be restructured according to international aviation industry standards like appropriate aircraft-to-employee ratio and good independent management preferably controlled by a strong strategic investor taking concrete steps to make it a profit-making airline.

Government should not be managing or financially supporting the airline.

Abbas

I don't think i said bailout package or gov't managing PIA as being part of solution.

What the gov't is doing, every few time they give some millions of dollars in order for PIA to pay its debt or lease new planes. But they need one big sum all together, not peanuts every now and then.

Regarding aircraft-to-employee ratio, it's now down to around 14500~ from 19000 few years ago. With Pakistan airways being made and employees being transferred, this ratio will further go down.

PIA cannot have the same employee ratio as western counterparts since a lot of its work is manual labor, since manual labor is cheaper than automatic machines in west, where employees are paid handsomely otherwise. Right now employee ratio is 390, it'll be down to under 300 by the end of the year once we get 8 planes. But PIA will need to continue paying interest on its debt.

[Abbas Ali]

Cartoon in today's ''The Express Tribune" (March 22) newspaper:



Related news report:

ECC approves Rs22b bailout for PIA

By Shahbaz Rana

Published: March 19, 2016

ISLAMABAD: The federal government on Friday approved a Rs22 billion bailout package for Pakistan International Airlines (PIA).

The move comes just two days before a joint sitting of parliament which, among other legislation, is expected to take up a controversial bill to pave the way for the national flag carrier’s privatisation.

The Economic Coordination Committee (ECC) of the Cabinet approved the package that includes Rs5 billion in fresh guarantees for more borrowings and a roll-over of Rs17 billion debt that PIA incurred in the past, finance ministry officials said. The net increase in liabilities of PIA will be Rs5 billion.

The ECC allowed an increase in the limit of the federal government guarantees for PIA from Rs146 billion to Rs151 billion to help the national flag-carrier pay its liabilities, a finance ministry handout said. It is the second time in the last four months that the government increased the limit of guarantees. Earlier, in December, the ECC had jacked up the limit from Rs141 billion to Rs146 billion.

The finance ministry will also assist the Aviation Division negotiate a Rs12 billion loan roll-over with banks, said the officials. In addition, it will also help roll over Rs5 billion loans that PIA borrowed on its balance sheet without support from the finance ministry.

The government did not mention the Rs17 billion roll-over in the official handout.

Over Rs8 billion in loans are maturing in the next three months that have to be serviced to avoid default. The PIA also needs money to pay to Pakistan State Oil. The airline needs Rs3.8 billion per month just to pay back its past debt and interest against them.

Source: http://tribune.com.pk

Abbas

[Abbas Ali]

According to Geo News, Finance Minister Ishaq Dar informed news media today that PIA has sought financial assistance of twenty-two billion rupees.

Government has provided guarantees for five billion rupees for the airline, he said.

Abbas

[Abbas Ali]

The Bank of Punjab (BOP) advertisement in today's (April 8) newspaper:

BOP Taking PIA to New Heights

BOP is proud to announce its collaboration with PIA, acting as Structuring Advisor for medium term facility of PKR 5 billion. BOP is one of Pakistan's fastest growing banks, with a network of 405+ branches in 194 cities nationwide. Our Corporate Banking teams are committed to the growth of large and small businesses as well as national corporations, contributing to the growth and stability of the economy.



Abbas