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The Pakistan Aviation industry is facing a loss of at least US$2 billion per annum due to the ban on national carriers imposed by European Aviation Safety Agency (EASA). What's hurting Pakistan more is the clipped wings of Pakistan International Airlines , which is due to flight restrictions to major economies , hence a dried up Revenue generation.
And the result is here, the flag bearer is bleeding — Pakistan International Airlines (PIA) has requested another Rs45 billion bailout package from the government to pay for interest costs and finance its operations , an untimely demand which many see the loss making carrier as a burden on the country's Economy , hence ticks all the boxes to sell the entity.
Pakistan's Ministry of Civil Aviation has also asked the continuation of the five-year government facility to pick the interest cost, ending on June 30, until the airline’s balance sheet is restructured.
The PIA has asked for a Rs22 billion federal injection to pay off interest on its loans, Rs15.6 billion in the shape of additional sovereign guarantees to take more loans, and another Rs7 billion to buy an aircraft, according to the sources.
The battered state of Aviation in Pakistan was evident , when in Last year, Shell Pakistan said , Aviation business “No longer commercially Viable” to run , hence will discontinue its aviation operations across Pakistan. Different Airports affected were Jinnah International Airport (IATA: KHI, ICAO: OPKC), Quetta International Airport (IATA: UET, ICAO: OPQT), Sukkur International Airport (IATA: SKZ, ICAO: OPSK) and Nawabshah Airport (IATA: WNS, ICAO: OPNH).
Pakistani Government , through its high level meetings, is seeking the restructuring of PIACL in order to enhance its performance and make it compatible with international standards, The finance minister is willing to support the timely execution of the Civil Aviation, PIA, and other projects.
In April 2021, in a plan that never materialized, Pakistani government had approved the splitting of the national carrier into two companies; good PIA with only Rs137 billion in liabilities along with core assets, and the bad PIA which has liabilities worth Rs457 billion and will retain the ownership of its non-core assets. But this plan was never implemented.
They have been working on it , Since 2017, at least three PIA restructuring exercises have been carried out , but in absence of a viable business plan , and yet PIA has been bleeding .
Meanwhile , Federal Minister for Aviation Khawaja Saad Rafiq has made it clear that there is no plan to sell the national airline to PIA, the organization is being reorganized, he also said that billions of rupees have been wasted on the construction of airports in wrong places in the past.
The sources said that in December 2017 the then government had picked PIA’s interest cost for five years on the condition that the airline would become financially viable.
The PIA management, however, has requested the finance minister to extend the interest-payment facility until the financial restructuring is complete – a goal that may never be achieved given it poor performance in the past.
For the current fiscal year, the government allocated Rs15 billion in the budget for interest payments. PIA wants more, as it has demanded Rs22 billion more. It claimed, in the meeting, that the finance ministry had allocated Rs15 billion in the budget against the annual requirement of nearly Rs32 billion. The airline added that due to an increase in interest rates, the total debt servicing cost for this fiscal year would jump to Rs37 billion.
The Payment sheet of PIA is also not exemplary, it owes to the Pakistan State Oil company, the Federal Board of Revenue, K-Electric, fleet insurance, aircraft and engine lessors.
The carrier has also asked an increase in the limit of the sovereign guarantee by Rs15.6 billion to over Rs263 billion that will help it taking more loans to remain afloat. PIA’s current guarantees limit was Rs248 billion, which has already been exhausted.
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