Pakistan International Airlines (PIA) to be split in to two entities - The 'Good PIA' and the 'Bad PIA' !

Pakistan International Airlines restructuring plan  !

Even without the proper business plan ,on wednesday , the federal government  approved  Rs457 billion of restructuring plan for Pakistan International Airlines (PIA) to see it financially viable.

The government has decided to lay off about 25% of the existing workforce or 3,500 employees of the national flag carrier, shut its non-profitable routes and share the international routes with other airlines.

It may be the “last lifeline” to the bleeding airline,as the Economic Coordination Committee (ECC) sent the PIA restructuring plan to the federal cabinet for its final endorsement.

The IATA Consulting firm has also started working on PIA business plan, which is expected to be finalized by September this year, the ECC was informed.

Chaired by Finance Minister Hammad  Azhar, the ECC approved to split the PIA into two companies –

• the Good PIA  that will have only Rs137 billion liabilities along with core assets, and
• the Bad PIA that will pick Rs457 billion liabilities and will retain the ownership of its non-core assets.

“After detailed consultation, the ECC recommended the restructuring plan of PIACL for onward submission before the Cabinet, after reconciliation of tax liability figures, with a direction to place a cap on future debt which PIACL could take against its improved balance sheet, once restructuring plan is implemented”, stated the Ministry of Finance.

“With a negative equity of Rs460 billion comprising bank loans of Rs326 billion and other payables of Rs118 billion at its balance sheet, the company neither remained a self-sustained entity commercially nor operationally efficient and sustainable,” the ECC was informed.

The company has over 14,000 employees and is operating on non- profitable routes. The options before the government were to close down PIA, privatize or restructure it.

The two PIA companies are -  the government-owned bad company that takes away the financial liabilities off the balance sheet of PIA along with some non-core assets and a new company carrying out the core business with rightsizing, rationalizing profitable routes and on remaining routes code-sharing with other airlines, capitalizing on ethnic diaspora and religious tourism and modernizing of the fleet.

Government has a plan, if there are legal obstacles in setting up the company, the government would directly assume the liabilities and convert into equity.