ISLAMABAD: As Pakistan International Airlines (PIA) liabilities soar; the management has drafted a plan to settle them by selling some of its critical assets such as Roosevelt Hotel and make the entity financially viable.
This could help PIA reduce its liabilities pile which currently stands at Rs352b and drained the entity’s operations and services.
PIA Chief Executive Officer (CEO) is said to have forwarded a business plan for reviewal purposes to the federal government, highlighting two key aspects which could improve the state-owned entity’s fortunes, said a senior government official reported Express Tribune.
According to PIA CEO, the restructuring of the airlines balance sheet was necessary to convert the entity into a debt free one.
During a cabinet meeting held earlier this month, PIA CEO had suggested the settlement of Rs352b liabilities out of Rs406b by transferring assets which includes Roosevelt Hotel in New York and Scribe Hotel in Paris to the government.
He said the government could expect to recoup its investment by 2022, when it expected PIA’s capitalization to reach that level.
The second suggestion by PIA CEO was requesting the government to pick debt servicing costs of Rs59.334b and Rs49.98b for 2018 and 2018 respectively, which could provide breathing and fiscal space to it for two years.
And then from 2020 to 2022, it was expected PIA would be able to sustain the debt servicing cost, the CEO said.
He apprised the cabinet that PIA’s fleet of planes would rise from the current 36 to 44 by 2022 and five ATR 72 aircraft could be phased out of operation by 2022.
Aviation sector contributes 1.5pc to the country’s GDP and PIA provides employment to over 18,000 people directly and 50,000 indirectly which includes vendors, support activities and suppliers.
The cabinet was informed that if PIA closed, job opportunities would fizzle out and liabilities would remain intact and Pakistani passengers would be deprived of direct connectivity with the world and within Pakistan, where other domestic airlines didn’t offer their services.
According to cabinet members opinion; the data shared with them was difficult to scrutinize in absence of backup data. They highlighted despite being provided full autonomy by government, PIA failed to turnaround itself in these last four years.
The cabinet proposed the appointment of an independent regulator as Aviation Division couldn’t act as one due to conflict of interests. They added PIA required to undertake measures to improve its efficiency, which didn’t require financial resources and introduce strict accountability measures.
Also; they believed number of employees at PIA wasn’t the problem, but it was poor performance in customer services coupled with issues in procurement and lack of accountability which was leading to the collapse of the company.
Cabinet members recommended constituting a sub-committee to analyze the business plan thoroughly.