Sept 24, 2021: According to a local TV news media report, the government has approved restructuring plan for Pakistan’s flag carrier PIA.
In a live news program with TV anchor Nasim Zehra, former Adviser to the Prime Minister on Reforms and Austerity Dr. Ishrat Hussain said that the final program for restructuring of the airline has been approved by the federal cabinet.
As per plan, on the Human Resource front, PIA employees workforce will be reduced from 14,000 to 7,000.
Out of these, 4,000 employees will be offered Voluntary Separation Scheme (VSS)/Golden Handshake while 3,000 employees will be asked to leave the airline by outsourcing non-core business.
As for the capital assets, all ageing aircraft in PIA fleet will be replaced by newer aircraft.
It is intended that PIA will be made a regional airline serving Pakistanis traveling to/from the Middle East and also Umrah and Hajj pilgrims.
The corporate restructure involves PIA assets to be moved to a company managed by the airline while PIA liabilities/legacy loans will be parked in a “bad company”. Meanwhile, the primary stakeholder in the airline, the Pakistan Government will absorb these loans in 10 years.
State owned enterprises like PIA are bleeding cash and the situation has been worsening thanks to the pandemic, and certain routes being banned for PIA. In addition to this, several govt bail out packages that have been given to the airline before failed to make a difference to profitability because they weren’t supported by clear plans.
Completion of PIA reforms/restructuring cannot happen overnight. Over the years, the airline decayed with declining human resources quality, outdated processes and procedures, non-accountability of resources, according to Ishrat Hussain.
Latest bail out package
Earlier this month the government approved a Rs44 billion bailout package for Pakistan International Airlines (PIA) in the shape of cash and sovereign guarantees.
The airline has experienced a significant dip in revenues and cash flows due to the pandemic and unprecedented travel bans/lockdowns imposed by various countries, according to the airline management.
“The ECC also approved the enhancement of existing approved guarantee, enabling PIAC to overcome its financial challenges,” stated the finance ministry.
The ECC approved $130.3 million in cash support and another Rs22 billion in the shape of bank borrowing, backed by sovereign guarantees, according to an official of the Ministry of Finance.
The amount of Rs44 billion has been provided amid mounting losses of PIA that reached Rs542 billion by June this year, the company’s first half-year (January-June) report of 2021 revealed.
In order to facilitate the borrowing, the ECC extended the guarantee limit from Rs226 billion to Rs247.6 billion, said the official of the Ministry of Finance. The money will be borrowed from commercial banks on the back of sovereign guarantees of the finance ministry.
The PIA management informed the ECC that its daily revenue had come down to Rs50 million to Rs70 million from the Rs400 million before the airline was struck by Covid-related restrictions and a ban imposed by the European Union.
The restructuring plan of PIA was presently stuck due to delay in finalisation of a business plan by IATA Consulting, it added.
CAA calling in its debts
Meanwhile, today The Pakistan Civil Aviation Authority (PCAA) has issued a notice to the flag carrier PIA indicating that it will cut airport services to the airline, including airbridges, ground power supply and airport IT services, if it does not settle its debts with the regulator by November 1, 2021.
The PCAA, which also operates most of Pakistan’s airports, said the flag carrier owes it PKR127.7 billion rupees.
The PCAA said that during a meeting in May, the airline agreed to pay PKR250 million per month to cover the charges.
However, a PIA spokesman Abdullah Hafeez Khan told Dawn daily newspaper that the flag carrier would seek recourse from the government. He underlined that the flag carrier was currently undergoing wide-ranging, government approved restructuring and, according to earlier agreements, should be protected from creditors’ claims until PIA’s reforms and balance sheet restructuring had been completed.
He added that PIA was unable to repay all of its debts at once due to its legacy losses and the impact of the COVID-19 crisis.
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