PIA struggles amidst 70% revenue decline, seeks Rs8bn loan guarantees

Pakistan International Airlines (PIA) is facing an unprecedented financial crisis with a staggering 70 percent decline in revenue, primarily attributed to the cancellation of over 600 flights. To counter this perilous situation, the Ministry of Finance is diligently working to secure Rs8 billion in loan guarantees, in a bid to adhere to the agreed-upon limits set by the International Monetary Fund (IMF).

According to top official sources, PIA has witnessed a daily revenue drop of 60 to 70 percent, plummeting from its previous earnings of Rs700 to Rs800 million to a mere Rs300 million. The situation has become increasingly dire as two aircraft within the PIA fleet are grounded due to various issues. Consequently, the airline now needs help to meet its fuel requirements and is compelled to announce only those flights for which fuel has been secured.

Last week, the Economic Coordination Committee (ECC) approved a bridge financing package of Rs8 billion, utilizing Civil Aviation Authority (CAA) resources, to settle a $25 million debt owed to Malaysia to procure two aircraft. Although there was an outstanding amount of $30 million, PIA successfully negotiated the repayment to $25 million.

PIA had requested Rs24.6 billion from the government of Pakistan to cover its operational expenses. The Ministry of Finance initially rejected this request, citing past instances where financial injections were provided with a commitment to implement restructuring plans, which were subsequently left unfulfilled.

Meanwhile, the Privatization Commission is vigorously pursuing the necessary procedures to privatize PIA by December or January. The commission faces the daunting challenge of not only accomplishing the privatization process but also maintaining the airline's operations. Failing to keep the airline operational in its current state could undermine the desired results of privatization.

In light of these developments, the Ministry of Finance is actively working to create a fiscal space and has expressed willingness to provide guarantees for loans amounting to Rs8 billion. There is even the possibility of increasing financial injections to as much as Rs15 billion, though exact figures are yet to be confirmed, with outcomes expected to emerge this week.

It is worth noting that PIA's total guarantees limit stands at Rs262 billion, which had been previously exhausted but later repaid by the airline, leaving a margin of Rs8 billion available at this time.