PIA grounds more aircraft as financial crunch bites

ISLAMABAD - The national carrier of Pakistan has confirmed that some aircraft have been grounded but they would be back in operation soon.

Pakistan International Airlines (PIA) has said the grounding is 'temporary' and the aircraft would be back in the air once payments are made. The number of grounded aircraft has not been revealed.

The carrier has been facing severe financial challenges for quite a long period of time and has been seeking bailout packages from the government to stay afloat.

The Ministry of Aviation also informed the government that PIA was currently facing a severe cash flow crisis, leading to arrears with creditors, aircraft lessors, fuel suppliers, insurers, and international and domestic airport operators; it was also informed that payments were pending even to the International Air Transport Association (IATA).

The ministry had confirmed that due to these challenges, the national flag carrier had been forced to ground five of its 13 leased aircraft, with the possibility of four more facing a similar situation.

PIA's spokesperson Abdullah Khan also confirmed media that the airline had to cancel a number of domestic and international flights after grounding at least five of its Airbus A320 jets.

“PIA’s liabilities have increased to Rs743 billion or $2.5bn, which exceeds its total assets by five times, according to data compiled by Bloomberg,” a Bloomberg report had said.

PIA's challenges worsened after it was reported last week that the supply of spare parts to the carrier could be suspended over cash flow problems.

The Economic Coordination Committee (ECC) also discussed issues pertaining to PIA which has been sustaining losses for quite a long period of time now.

After detailed deliberation, the participants decided to constitute a separate committee for the assessment of the restructuring plan of PIA but rejected the PIA's demand for the provision of Rs22.9 billion and deferment of Rs1.3 billion per month to the Federal Bureau of Revenue (FBR) as well as loans and markup amount till the finalization of the restructuring plan.

During the meeting, the secretary Aviation gave a detailed briefing to the chair about the financial burdens, liabilities of PIA, and the need for restructuring the state-owned enterprise.

The participants of the high-profile meeting discussed and reviewed the timelines and costs of the restructuring plan and after detailed discussion, it was decided to constitute a separate committee for the assessment of PIA's restructuring plan.

The participants also came to the conclusion that the Finance Division and State Bank of Pakistan would support PIA in dealing with its financial challenges after a concrete plan for restructuring the airlines was finalized and submitted to the satisfaction of the committee.

There have been demands for privatizing the national carrier due to its economic nonviability. Former Aviation Minister Khawaja Saad Rafique also stressed the importance of privatizing the carrier or else it would have to shut operations.

In the final days of the PDM regime, it was also decided to privatize loss-making Pakistan International Airlines during a meeting of the Cabinet Committee on Privatization chaired by then Finance Minister Ishaq Dar.

The committee “after deliberation decided to include Pakistan International Airlines Co. Ltd. in the list of active privatization projects of the ongoing privatization program, following an amendment in the law by the Parliament,” a finance ministry statement had said.