Caretaker Prime Minister Anwaar-ul-Haq Kakar has directed to complete the privatisation process of Pakistan International Airlines (PIA) on fast track basis to provide reliable services to passengers, state-run Radio Pakistan reported on Thursday.
Chairing a meeting to review the process of PIA privatisation in Islamabad, the interim prime minister urged the stakeholders concerned to expedite the process keeping in view raising standards of the national flag carrier as per international standards.
Anwaar-ul-Haq Kakar directed all relevant stakeholders to find an immediate solution to the matters related to this privatisation.
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The Economic Coordination Committee (ECC) of the Cabinet recently directed that emphasis should be given to the Pakistan International Airlines Corporation Limited’s (PIACL) privatisation instead of restructuring, as the national flag-carrier is on active list of privatisation, well-informed sources told Business Recorder.
The Ministry of Aviation briefed the ECC on September 6, 2023 that PIACL, the national flag carrier was owned by the government of Pakistan to the extent of 92 percent shares.
PIA had a glorious past and a series of achievements, but from the late nineteen nineties it has incurred losses as it could not compete well with the other emerging regional airlines.
PIA’s problems were exacerbated due to absence of entrepreneurship, rising extraneous influences, internal mismanagement as well as its inability to finance the cost of fleet expansion.
As of December 31, 2022, PIA’s debt and liabilities stood at Rs743 billion which was five times more than the total value of its assets.
PIA’s total losses for the last financial year stood at Rs86.5 billion, out of which Rs11 billion were operational losses.
lf the situation continues as such, PIA’S debt and liabilities would rise to Rs1977 billion and its annual losses would increase to Rs259 billion per annum by 2030.
Several attempts were made in the last decade or so to make PIA sustainable. These attempts followed two basic approaches. The first approach mainly focused on turning around PIA by cutting costs, improving internal management and increasing fleet size with capital investment from Government of Pakistan.
The second approach focused on financial, legal, operational, commercial and human resource restructuring of PIA to clean its balance sheet with the ultimate aim of attracting private investment through divestment of Government of Pakistan shares.
This approach was identified first in the Dubai Islamic Bank Consortium Report of 2017 who were engaged for this purpose by the Privatization Commission and later in Dr Ishrat Hussain’s Report on PIA Restructuring Plan in 2020.
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ln addition, PIA also carried out a study for formulating a sound business plan to make it profitable by engaging the International Air Transport Association (IATA) which also recommended a similar approach while indicating a capital injection of $3.5 billion over a period of five years to enhance fleet size from 29 aircraft in 2021 to 49 in 2026.
However, none of these reports could be implemented for various reasons.
The Ministry of Aviation apprised that in order to proceed further, it was important to seek the government’s approval of the restructuring plan. The restructuring of PIA was likely to take around eight months or so. It was also obvious that at the time of divestment, fair value of shares can only be obtained if PIA remains operating till the completion of all stages of restructuring.
However, currently PIA is facing a serious cash flow problem as a result of which it has been unable to pay to its creditors, aircraft lessors, fuel suppliers, insurer, international and domestic airport operators and even the IATA on time.
Resultantly, it has been forced to ground five out of its thirteen leased aircraft while four additional aircraft are likely to be grounded during this week.
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