No Free Lunch Anymore, PSO tells PIA

[Abbas Ali]

ISLAMABAD: The ongoing wrangling over non-payment of Rs15.454 billion dues between the two state-owned companies -- Pakistan State Oil (PSO) and Pakistan International Airlines (PIA) has touched new high as the former has made it clear to the latter that there will be no free lunch anymore.

In a latest letter directly addressed on October 17, 2016 to Bernd Hildenbrand, Chief Executive Officer of PIA, of which a copy is available with The News, PSO has asked for the payment of dues from PIA that have alarmingly swelled to Rs15.454 billion as it is being financially constrained to stop paying to refineries for the jet fuel being supplied to PIA and in case of any stoppage of jet fuel to PSO by refineries, the national flag carrier will solely be responsible for such breakdown in supply chain.

In the earlier correspondence of September 9, 2016, PSO had declared PIA as perpetual defaulter of PSO on account of failure to pay mammoth amount that runs into billions of rupees. The top official of PSO says the state-owned entity is borrowing loans from the commercial banks to cater to the fuel needs of PIA and other power sector entities and to this effect it has paid to the banks the hefty amount of Rs7.15 billion as financial charges in financial year 2016.

The PIA spokesman, when contacted, said that PIA is very sensitive towards the clearance of dues and it has paid the Rs47 billion loan with interest, but since it is facing deficit and is in financial constraint which is why it is unable to clear the dues of PSO in one go. He, however, said that PSO is a regular supplier of jet fuel to PIA and customer relations are spread over decades. He said due to poor financial health of PIA, timely payments are not always possible. “PIA is paying PSO delayed payment charges. As PIA is a major customer of PSO there is no move to stop its fuel supply,” he insisted.

However, the latest letter written on October 17, 2016 and signed by Kashif Siddiqui, General Manager PSO, to top man of PIA also says, “ The outstanding amount against jet fuel supplies has now accrued alarming level of Rs15.454 billion (principle amount of Rs14.485 billion plus late payment surcharge of Rs969 billion) as of October 16, 2016.”

It further mentions that the situation has aggravated further because no payment has been received from September 24, 2016. The letter mentions that this is the violation of terms and conditions and also contrary to commitments made by PIA time and again.

Since June 2016, an amount of around Rs2.1 billion has been made short by PIA against daily upliftments. During a recent meeting held on September 30, 2016 between chief financial officer of PIA and deputy general manager of PSO, it was committed that lump sum amount will be paid to PSO to clear the deficit by October 15, 2015. However, no payment has been disbursed so far despite the commitment.

The letter further goes on to mention PSO’s economic miseries, saying that due to non-payment by PIA, the state-owned oil marketing company is facing difficulty in making payment to refineries for supplies of jet fuel. It said the non-payment has worsened the cash flow situation of PSO owing to which the OMC is becoming more vulnerable in terms of its increasing inability to make payments to refineries for the jet fuel supplies being supplied to PIA by PSO. It said in case of any stoppage of jet fuel to PSO by refineries, the national flag carrier will solely be responsible for such breakdown in supply chain.

It is pertinent to mention that PSO, the victim of circular debt of Rs248 billion, has been exposed to more financial miseries with a growing fear that it may not be able to continue to provide petroleum product to PIA in the days to come.

The official said that PSO is a state-owned company and is taken for granted by all government entities. “Likewise PIA is also taking PSO for granted for many years and the dues that PIA owe to pay have swelled up to staggering Rs14 billion,” he said.

The PSO official argued that when it comes to Shell International Company, PIA always pays the amount in advance, then gets the fuel, but in the case of PSO, PIA comes up with step motherly treatment. He said the PSO has also taken up the payment issue with secretary aviation, but all went in vain.

Source: geo.tv

[Abbas Ali]

According to news report on following link, today PSO suspended jet fuel supply to PIA for one hour at Karachi Airport.

The suspension caused delay in departure of airline's flights to Islamabad, Sukkur and Jeddah.

http://ummat.net/latest/20161102/305498.html

Abbas

[uzairali]

^ Not a good way to force PIA to pay up.

This will only make PIA loses higher and more people choosing to fly other airlines than PIAs.

[shamxa]

^ Not a good way to force PIA to pay up.

This will only make PIA loses higher and more people choosing to fly other airlines than PIAs.

But if they won't pay either way, it can be argued that they just want to minimise their losses

[Amaad Lone]

With fuel cost down by 70 percent how is PIA not able to pay PSO??

PIA needs to increase load factor, stop flying empty seats to generate the revenue and cover its losses.

[Abbas Ali]

PSO says it did not suspend jet fuel supply to PIA at Karachi Airport on November 2. The delay in departure of a number of PIA flights from Karachi on November 2 was due to some problem with airline's own fuel management/supply system/equipment.

PIA spokesperson had said that delay was caused by suspension of jet fuel supply by PSO.

PSO says that PIA has not made payments for jet fuel supply since past six weeks.

Info source: http://tribune.com.pk/story/1218919/bla ... h-airport/

Abbas

[Abbas Ali]

PSO suspended jet fuel supply to PIA at Karachi Airport today, according to news sources.

Abbas

[Abbas Ali]

According to Dunya News channel, PSO has complained against incomplete payment made by PIA. The airline paid PKR four hundred thirty million instead of PKR eight hundred thirty million.

The incomplete payment can affect supply of jet fuel to PIA by PSO.

Abbas

[Vaqar Khan]

I have relatives flying today's PK304 from Karachi to Lahore. Were due to depart at 1500 hours. Found out after check-in that PSO was refusing to supply fuel hence departure was delayed. Seems situation has been resolved now as boarding has started for expected departure at 1700 hours.

[Abbas Ali]

Since November 26, PSO has provided jet fuel worth Rs830 million to PIA but so far oil company has only managed to collect Rs430 million in payment.

‘PIA is called upon to pay the outstanding amount, failing which PSO would be constrained to immediately suspend oil supplies,’ PSO said in statement.

Total receivables of PSO from national carrier stand at Rs4.42 billion.

Source: http://dunyanews.tv/en/Business/367185- ... dues-pile-

Abbas

[Abbas Ali]

According to Geo New, today jet fuel supply to PIA was suspended by PSO at Karachi Airport due to delay in payments by the airline. After payments assurances made by PIA the jet fuel supply was restored by PSO.

The suspension of jet fuel supply delayed departure of PIA flight PK-787 from Karachi to London.

PIA Boeing 777-340ER registration AP-BID as flight PK-787 departed from Karachi at 6:39 PM with a delay of more than seven hours. Flight's scheduled departure time was 11:15 AM.

https://www.flightradar24.com/data/flights/pk787

Abbas

[Abbas Ali]

Departure of PIA Karachi to Islamabad flight PK-308 was also delayed due to suspended jet fuel supply, according to DAWN News channel.

PIA Boeing 777-240ER registration AP-BGJ departed from Karachi at 7:31 PM as flight PK-308 to Islamabad with a delay of more than three hours. Flight's scheduled departure time was 4:00 PM.

https://www.flightradar24.com/data/flights/pk308

Abbas

[yyzflyer]

how will they buy new aircraft if can't even pay for fuel ?

[Abbas Ali]

^ I think in recent times they acquired leased aircraft with government assistance, bank loans with government guarantees etc. They can acquire more aircraft using similar methods with the help of government depending on how long government wants to continue helping the ailing airline.

Abbas

[Abdulrafeysiddiqui]

Current Prime minister from his discussions and speeches regarding PIA shows that he has some interest in PIA as he always says that we are trying to bring back the glory. Hope PIA gets better before current PM's tenure ends.