PIA to seek sovereign guarantee for Rs 55 billion loan from government: Senate panel on defence informed

Pakistan International Airline (PIA) will be seeking a sovereign guarantee for the loan of Rs 55 billion from the government within a week as the national flag carrier faces accumulated losses of Rs 75.1 billion till September 2008.
The Senate Standing Committee on Defence Production that met with Senator Nisar Ahmed Memon in the chair on Monday asked the Managing Director PIA, Aijaz Haroon that how much money the government should inject to bring the PIA out of financial crisis.
"We required Rs 55 billion and a business plan to improve the performance of national flag carrier will be submitted to the Economic Co-ordination Committee (ECC) on November 18 with a request for Rs 55 billion guarantee to implement the plan, the MD told the meeting.
The meeting was convened to have a briefing by the PIA MD on the financial position of the airline that was curious to know as to how the new management has to turn the profit ridden organisation without curtailing operation losses into the profit generating entity. The chair also wondered whether there was any plan being considered by the management of the PIA to privatise the national airline.
Aijaz Haroon told the committee that that accumulated losses of the airline have gone beyond Rs 75.1 billion till September 2008 owing to a number of reasons but the fuel and exchange rate have been the major ones. PIA had taken a loan of $1.4 billion to purchase new aircraft that is continuously accumulating due to depreciation of exchange rate. The depreciation of Rs 1 against the dollar was adding Rs 1.4 billion to the PIA loan of $1.4 billion, he added.
The MD said that PIA has been struggling to react to the changes in the market because of rising fuel price, rupee depreciation, ageing aircraft, unfavourable aviation policy, interest on short term borrowing, geo political situation and inconsistent policies. "We are taking necessary measures to reduce losses and the required financial assistance, if the government could help us to bring the entity out of losses by 2010," he informed the committee.
Answering questions, he dismissed the notion that the airline had any plan to reduce Haj fares. He said that the Haj fare was calculated on oil prices hedged for this particular purpose at $120 per barrel. The MD was directed by the committee to submit details on hedging in the next meeting so that it could be known whether the issue was handled rightly or caused any negative impact.
The committee on defence also asked Secretary Defence Kamran Rasool to conduct audit into all the purchases made by the airline, including those made by previous management, to find out transparency in it and submit the report to the committee.
Moreover, the PIA MD was asked to submit a thorough report about the employees reinstated in PIA with financial implications when the committee was told that services of 4800 contractual employees have been regularised while 180 persons have been re-appointed who were earlier fired. The MD said that not a single person was given backdate benefits as all of them have committed in writing not to demand backdate benefits except seniority to those who were fired on political grounds.