ISLAMABAD: The government on Wednesday, September 15, approved Rs44 billion bailout package for Pakistan International Airlines (PIA) in the shape of cash and sovereign guarantees after its failure to bring any improvement to the financial condition of the national flag carrier in three years.
The Economic Coordination Committee (ECC) of the cabinet approved the bailout package, the fourth by the Pakistan Tehreek-e-Insaf (PTI) government.
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, it added.
The ECC approved $130.3 million (roughly Rs22 billion) 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 the finalization of a business plan by IATA Consulting, it added.
Due to reckless statements by the aviation minister about fake licenses of PIA pilots, the airline was banned from flying to many international cities, which aggravated its financial problems.
The PIA management had sought $100 million for operational requirements and $30.3 million for Roosevelt Hotel, New York, taking total cash support to $130.3 million or Rs22 billion.
Out of the $100 million, $40 million will be used to pay the lease cost of 10 aircraft, $17 million for induction of six narrow-body aircraft, and $23 million for clearing dues of lessors.
Former finance minister Dr. Abdul Hafeez Shaikh had been against giving big bailout packages to PIA in the absence of a viable business plan.
