The Economic Co-ordination Committee (ECC) of the Cabinet is likely to allow the financially sick Pakistan International Airlines (PIA) to float Sukuk (bonds) worth Rs 16 billion to clear the huge claims of Civil Aviation Authority (CAA) and the oil bills, sources in Defence Ministry told Business Recorder.
They said that the proposal has been submitted to the Cabinet Division to make it part of the next ECC meeting agenda. PIA had projected a 6 percent growth in economy, fuel prices around $80 per barrel, and the rupee to be weakened to Rs 62 per dollar. But all these estimates proved wrong.
Key concerns for the national flag carrier for 2008 remain uncertainty in the fuel prices, rupee exchange rate, political scenario, and huge Civil Aviation Authority's (CAA) claims, sources said. The PIA board has projected 15 percent growth in passengers, followed by overall revenue growth of 13 percent and increase in limited fixed expense to 1.6 percent, they added.
PIA has also projected Rs 13.2 percent growth in revenue to Rs 79.8 billion in 2008 against Rs 70.5 in 2007 whereas operating expenses/fuel cost would increase by 7 percent to Rs 33 billion in 2008 compared to Rs 30. 2 billion of last year. Financial cost would increase by 15.6 percent to Rs 8.4 billion in 2008 as compared to Rs 7.3 billion in 2007 and Rs 4.8 billion in 2006.
Sources said that the Cabinet Division had returned the summary of Defence Ministry on PIA's sukuk proposal, as the entity had not submitted detailed action plan to the government, as was directed by the Cabinet.
Recently, the government, while reviewing PIA's financial and operational performance including the ongoing financial stringencies, had expressed concern on accumulated financial losses. Sources said that PIA management had also been directed to take quicker steps on financial turnaround, but nothing has been done so far.
Key initiatives for 2008, submitted by the PIA management to the government, were said to be included by new marketing leadership team, stepping up interaction with travel agents, greater accountability of sales management, launch of new routes/increase frequency on others, opening up of ticket sales on all GDS's, attaining 100 percent e-ticketing, revamping of cargo strategy and securing of Haj fare that recovers cost which has already been rationalised. It is pertinent to note here that the caretaker government had also extended a guarantee to PIA for raising Rs 1 billion from banks to meet its immediate financial needs.