Pakistan injects Rs. 17bn to keep crashing airlines afloat

Special Pakistan injects Rs. 17bn to keep crashing airlines afloat
In this file photo, Pakistan International Airlines (PIA) plane taxies before take-off from Karachi International Airport in Karachi on April 21, 2010. (AFP)
Updated 15 November 2018

Pakistan injects Rs. 17bn to keep crashing airlines afloat

Pakistan injects Rs. 17bn to keep crashing airlines afloat
  • Continuing liquidity crisis in Pakistan International Airlines (PIA) may lead to grounding of the fleet
  • Rs 17 billion bailout package will keep PIA afloat only for another two months

ISLAMABAD: The semi-state-owned Pakistan International Airlines (PIA) was approved Rs. 17.02 billion by the government in the form of “sovereign guarantees” and other financial aid — a second bailout in the space of six months, the PIA spokesperson confirmed to Arab News on Tuesday.
PIA, a profitable airline which became a burden on the country’s already stressed exchequer, has been dying a slow death for years.
“The government did agree to park the interest till we get some respite,” but since the approved document has not been shared with the airline management, Mashood Tajwar, the struggling carrier’s general manager and official spokesman, was unable to provide further details.
PIA had amassed a colossal debt of $3.33 billion (Rs. 406 billion) up from last year’s $2.92 billion in July, and the fresh bailout from the economic coordination committee headed by Finance Minister Asad Umar is part of Prime Minister Imran Khan’s plan to attempt nursing the airline back to health before considering privatization. Khan also holds the ministerial portfolio for aviation division.
The outgoing government tried to privatize the airline but met legal hitches and criticism over its attempt to sell what once was a national asset and pride of the country.
The national flag carrier has a new chief executive and president appointed by the premier. Umar is optimistic that under the “energetic and enthusiastic” air marshal Arshad Malik, PIA will “experience a turnaround.”
Tajwar clarified that the latest injection or “support” is not necessarily all bailout. He told Arab News that the approval empowers the airline to “borrow from banks” against guarantees from the Ministry of finance. Of the Rs.17.02 billion, Rs.10 billion is sovereign guarantee and a further Rs. 40.8 billion has been allocated in the form of cash for PIA by the ministry.
However, continuous foreign loans taken by the airline have added to its woes and made its situation worse. PIA immediately owes $125.84 million to foreign lenders.The sharp decline of Pakistan’s currency has made debt servicing harder and devaluation further affected the previous financial support package by the government.
In May, the apex court objected and barred the airline from changing livery on its planes to the country’s national animal, the Markhor (the screw horn goat), part of its rebranding and repositioning strategy. The decision resulted in further loss to PIA.
The airline has suffered through operating financially unsustainable routes, grounding of aircraft because of technical problems, overstaffing, incompetent employees, union strikes, inadequate fleet, and wrong strategies. The open sky policy of the government allowed foreign airlines to take a large chunk of PIA’s business, further driving the struggling carrier into the ground.
The airline competition is so fierce that it would take several years before signs of a break even surface, said the spokesperson. PIA is in dire need of strategic planning and quick revenue generation if its management hopes to ward off privatization in the future by the government which is currently optimistic it can help to resurrect it.
But aviation Industry expert Tahir Imran told Arab News that when the airline witnessed a decline in its losses some years ago, it made the fatal decision to increase its passenger capacity by inducting larger aircrafts instead of enhancing its flight frequency by purchasing smaller more efficient and economical aircrafts. This, he said was the final nail in PIA’s coffin.