Economic Coordination Committee (ECC) of the Cabinet has approved ‘rescue package’ for the financially strapped national flag carrier, Pakistan International Airlines (PIA), with the help of Secretary Cabinet, Nargis Sethi who is also holding additional charge of Secretary Defence.
Official documents revealed that the ECC was briefed about the recurring liquidity crisis being faced by the PIA for the last several years. The main reasons behind this crisis are high fuel prices in the international market and deteriorating dollar to rupee parity. The cash flow generated from operations is insufficient to pay the fleet loan instalments resulting in a shift of borrowing from fleet to non fleet loans.
PIA had submitted a business plan proposing different measures to make the airline self-sustaining. The plan is under consideration with the special committee constituted by the Prime Minister to examine the viability of the plan.
The meeting was further informed that the ECC in its meeting held on March 8, 2011 approved extension of eight GoP guaranteed loans with aggregate value of Rs. 11.5 billion with different maturity periods starting from August 26, 2011 to October 29, 2012.
Besides, PIA has a debt of Rs. 33.50 billion as GoP guaranteed short-term loans. PIA has not been able to repay these loans. In addition, Finance Division had approved fresh borrowings to the tune of Rs. 6.60 billion.
Consequently, Ministry of Defence suggested the following: (i) guarantee in respect of existing GoP guaranteed loans of Rs. 11.50 billion and fresh loans of Rs. 6.60 billion may be extended/ issued by the Finance Division until December 31, 2012; (ii) the present PIA debt of Rs. 33.50 billion may be allowed to be converted into a long-term debt for a period of 5-7 years on the terms and conditions to be approved by the Finance Division; and (iii) Finance Division may be allowed to issue fresh guarantees against the guarantee vacated due to the repayment by PIA on terms and conditions to be approved by the Finance Division.
During discussions, it was stated that PIA has already submitted a business plan which is being scrutinized by the Cabinet Committee on Restructuring (CCoR) and will be later submitted to the Prime Minister for approval. Finance Division supported the proposals made by the Defence Ministry.
The ECC, however, observed that though it would be a daunting task to revive PIA, yet with the induction of new management, it is expected that PIA would become more profitable organisation and its services would be improved, benefiting travelling public. Mushtaq Ghuman - Copyrights Business Recorder -