PIA Could Seek Freeze On Foreign Debt Payment

[Abbas Ali]

From Saad Hasan

KARACHI: The Pakistan International Airlines (PIA) is likely to seek a freeze on its foreign debt repayment at current rupee-dollar exchange rate to help control accumulated losses, PIA Managing Director Aijaz Haroon told ‘The News’ on Saturday.

Depreciation of rupee in past two years has swelled the US dollar denominated cost of $ 1 billion the national flag carrier had borrowed to buy Boeing 777 aircraft, he said. This will be part of a financial restructuring proposal, which PIA submits to government by mid of next month for adjusting over Rs 70 billion of accumulated losses, which have wiped off airline’s equity. He said it is very unlikely that the government faced with a large fiscal deficit can afford direct equity injection at this point of time.


“But PIA has to be compensated somehow for all the losses which have piled up between 2003 and 2007.” The proposal, which will be based on future earning projections might also include request for a waver from Civil Aviation Authority (CAA) charges, he said. PIA has a fleet of 42 aircraft but most of them like Airbus A310-300s and Boeing 747s need immediate replacement with fuel-efficient airplanes. Reduction in fuel price and stable exchange rate helped PIA bring down loss to Rs 10.77bn in nine months to September 2009 compared with Rs 38.4bn it incurred in same period of previous year. It also posted a gross profit after four years. About the possibility of selling PIA-owned Roosevelt Hotel in New York to pay for past losses, he said it is not the appropriate time to see a billion-dollar property when real estate market is still recovering in US. “Besides, what is the point in selling a business which earns PIA $ 7-8 million annually?”

PIA has long been criticized as inefficient organization where financial pilferages are rampant. Management is often questioned by National Assembly for unnecessary expenditures. But Haroon, a B777 pilot who took office in 2008 says focus has remained on little things like catering service on domestic flights while measures to protect the interest of airline have been ignored. Over the years, Gulf-based carriers have been allowed to increase flights to Pakistan. Their better service and aircraft have snatched around 80 percent international traffic from PIA. The national flag carrier has lobbied successfully in past few years to stop Gulf carriers from expanding operations. But government out rightly rejected a PIA proposal to take some of the frequency back from them, Haroon said.

Source: The News (March 7, 2010 print edition)

[Abbas Ali]

PIA Urgently Needs Cash Injection

By Sajid Chaudhry

ISLAMABAD: Pakistan International Airlines (PIA) is desperately seeking equity injection to make national flag carrier a viable entity.

According to a briefing that was submitted to the Senate Standing Committee on Defence and Defence production on Thursday, in this regard, the PIA management has three options i.e. equity injection by the government, forex dominated fleet loans conversion into Pak Rupee loans and also conversion into equity i.e. the non-fleet loans.

PIA is seeking conversion of non-fleet loans worth Rs 45 billion and forex dominated loans worth $250 millions. It is also seeking to fix markup rates as high as 3M KIBOR for Rupee dominated loans and 3M Libor Plus 3.75 percent for Dollar dominated loans and 5.28 percent for fixed Dollar loans. PIA management feels that if the said package is approved for national flag carrier, it would benefit in saving interest cost, positive net equity and improved ratios, increase in market capitalisation and better financial flexibility in future.

The briefing further stated that PIA has shown it has the capability to improve its operational performance. However, it will demand full commitment not only from its employees, management but also from all the stakeholders to achieve self-sustenance. Due to low margins in the airline industry, PIA operations alone on its own cannot support the huge burden of financial cost, especially on account of non-fleet loans.

Source: Daily Times

ISLAMABAD: The Pakistan International Airlines (PIA) is in desperate need of financial injection to make the national flag carrier a viable entity, a brief forwarded to the Senate standing committee on Defence and Defence Production said.

It said that financial support was needed to increase the number of aircraft in the fleet.

The PIA management said that there were three options for improving its liquidity which include financial injection by the government, dollar-based fleet loans conversion into rupee loans and conversion into equity the non-fleet loans. The airline has sought conversion of non-fleet loans worth Rs45 billion and foreign exchange loans worth $250 million.

It suggested that the mark-up rates be fixed as high as 3 month KIBOR for rupee dominated loans and 3 month LIBOR plus 3.75 per cent for the dollar loans and 5.28 per cent for fixed dollar loans.

The PIA management has said that if the said package was approved the national flag carrier would benefit from saving the interest cost, positive net equity and improved ratios, increase in market capitalisation and better future financial flexibility.

It also said that the respective governments in the region had approved bailout packages for Air India and Japan Airlines as the year 2009 has been the worst year in the aviation history.

It also said that the respective governments have approved bailout package for Air India and Japan Airlines as the year 2009 has been the worst year in the aviation history.

For the year 2010 the management has projected a loss of Rs11.10 billion, but the brief had also said that PIA capability to improve its operational performance.

However, it will demand full commitment not only from its employees, management but also from its stakeholders to achieve self-sustenance.

“Due to low margins in airline industry, PIA operations on its own cannot support the huge burden of financial cost especially on account of non-fleet loans,” the brief presented to the senate body said.

Source: DAWN

[Amaad Lone]

PIA management is asking for a bailout from a government that itself got a bailout from the IMF.

Plus organizations like PEPCO have already killed the budget, creating a huge circular debt.

The government has no will power to do anything thing drastic.

Like I said before, they will rather shut down PIA then privatize it.