Economic Co-ordination Committee (ECC) of the Cabinet has reportedly directed Pakistan International Airlines (PIA) to refrain from giving any relaxation in terms and conditions in acquisition of aircraft on dry lease even with the approval of its Board of Directors (BoD), as it may lead to litigation, official sources told Business Recorder.
The ECC which met on March 27, 2014 was informed that the government allocated an amount of Rs 16 billion as a cash support for PIAC which was to be released after approval of ECC. The apportionment of this amount is as follows: (i) payment to overdue vendors- Rs 7 billion; (ii) EXIM Bank guaranteed loan instalments- Rs 5.7 billion; and (iii) acquisition of aircraft on dry lease- Rs 3.3 billion.
It was pointed out that ECC on July 12, 2013 approved the release of Rs 12.7 billion while an amount of Rs 3.3 billion, against dry lease of aircraft was yet to be released as the acquisition of aircraft were under process. It was stated that ECC in its meeting held on December 3, 2013 approved acquisition of five (A320-200) aircraft on dry lease out of 10 shortlisted and did not approve five A-319 aircraft.
PIAC after due process signed an LoI with the GECAS for three aircraft however, 5MBC withdrew their offer for two aircraft. The ECC further directed in its meeting held on December 3, 2013 and during a progress review meeting dated February 13, 2014 to float tenders for additional ten new generation narrow body aircraft.
They said tenders were accordingly floated as per PPRA Rules. The tenders were opened on March 7, 2014 in presence of the media in which two companies participated ie Qatar Aviation Lease Company (QALC) and KL Aero parts of Bulgaria. The offer of 08 aircrafts of QALC was considered by the committee. The results of the bids were uploaded on the website for 10 days as required under PPRA Rules.
However, the aircraft have been selected after due diligence offered by Qatar Aviation Lease Company. These aircraft would be available from April 2014 to July 2014. PIAC was at present in the process of signing LoI with the said company. PIAC now urgently requires requisite funds for initial deposits, training, acquisition of tools, equipment, manuals and spares.
It was proposed that ECC may release an amount of rupees equivalent to $29.9 million to PIAC as already approved by the ECC for acquisition of aircraft on dry lease. The balance amount may be released on arrival of the remaining two aircraft. The meeting observed that PIA should ensure that no relaxation in terms and conditions of acquisition of aircraft on lease as advertised should be allowed even with the approval of its Board of Director, as it may lead to court cases.
The summary of eight A 320s with V2500 engines offered by QALC is as follows: (i) MSNs, 4804, vintage 2011, hours, 9,840, cycles 3,911, rent, $294,000 and security, $588,000; (ii) MSNs 4812, vintage, 2011, hours, 9,439, cycles, 3,666, rent $295,000 and security deposit; (iii) MSNs, 4874, vintage, 2011, hours 8,928, cycles, 3,569, rent $296,000 and security deposit $592,000; (iv) MSNs 4918, vintage 2011, hours, 5393, cycles, 3,091, rent $297,000 and security deposit $594,000; (v) MSNs 4973, vintage, 2012, hours, 5,115, cycles, 2,957, rent $299,000 and security deposit $598,000; (vi) MSNs 5073, vintage 2012, hours 4,816, cycles, 2,557, rent $302,000 and security deposit $604,000; (vii) MSNs 5335, vintage, 2012, hours 4,001, cycles, 2,286, rent $308,000 and security deposit $16,000; and (viii) MSNs 5375, vintage 2012, hours, 3,662, cycles, 2057, rent $309,000 and security deposit $618,000.
The sources said, ECC has been assured that four to five aircraft will be delivered by end of current month. The estimated cost of A 320-200 type of 11 aircraft is as follows: (i) security deposits $13.1 million, training and manuals $5.8 million, engineering spares and tools $10.5 million and contingency $0.5 million.