Pakistan International Airlines (PIA) has requested the government to put an embargo on domestic debt repayments as it faces an annual deficit of Rs153 billion.
This request comes as the government is trying to find a solution for the airline’s financial sustainability without resorting to additional bailout packages.
As per reports, PIA management and the Ministry of Finance have had extensive discussions for the restructuring of Rs260 billion domestic debt, which the airline owes to nine commercial banks.
Financial challenges loom large, with PIA requiring Rs13 billion per month to meet debt obligations and cover operational costs. Official figures indicate monthly sales of just over Rs22 billion, paling in comparison to expenditures nearly reaching Rs35 billion, resulting in a monthly deficit of approximately Rs13 billion, with a significant portion allocated to debt servicing.
While the government is committed to PIA’s privatization, the airline’s management seeks a transitional period of six to eight months to implement comprehensive administrative and corporate restructuring.
PIA’s debt extends to nine domestic commercial banks, with a total of Rs260 billion. It also owes $370 million or Rs113 billion to two consortiums—the National Bank of Pakistan-Habib Bank Limited consortium and the Standard Chartered Bank consortium.
Among these banks, the Bank of Punjab holds the largest exposure at over Rs56 billion, followed by Askari Bank Limited at Rs43 billion, JS Bank at Rs34 billion, NBP at Rs33 billion, Faysal Bank at Rs32 billion, Habib Bank Limited at Rs29 billion, and Bank Islami at Rs22 billion, according to insider sources. Albaraka Bank has extended a loan of Rs9 billion, and Soneri Bank’s exposure to PIA stands at Rs5 billion.
To service its external debt of Rs109 billion, PIA requires Rs3.1 billion per month, in addition to Rs7.5 billion for servicing its domestic debt.
The resolution of this financial challenge appears to rely primarily on a cash injection from the Ministry of Finance or potential measures such as withholding tax payments to the Federal Board of Revenue (FBR) and various fees and charges to the Civil Aviation Authority.
But, the finance ministry has expressed reluctance to provide further bailouts and commercial banks have also reservations about debt restructuring.
However, PIA’s management argues that the airline’s financial viability hinges on debt restructuring, advocating for a moratorium covering both principal and interest payments.