PIA proposes to pay off debt by selling New York, Paris hotels

ISLAMABAD: 

Pakistan International Airlines (PIA) has drawn up a plan to hand over some of its key assets such as Roosevelt Hotel to creditors in an effort to pay off liabilities of Rs352 billion and make the carrier financially viable.

“PIA chief executive officer has sent a business plan for review of the federal government highlighting two options for changing fortunes of the national flag carrier,” said a senior government official while talking to The Express Tribune.

The PIA CEO emphasised that restructuring of the air carrier’s balance sheet was required to turn PIA into a debt-free organisation.

 In a cabinet meeting held in the first week of November, he proposed that in the first option PIA’s liabilities worth Rs352 billion out of Rs406 billion could be cleared by transferring assets including Roosevelt Hotel in New York and Scribe Hotel in Paris to the government.

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After an expected turnaround by 2022, he said, PIA’s capitalisation would reach the level where the government would be able to recover its investment.

In the second option, he suggested that the government may pick debt servicing costs of Rs59.334 billion and Rs49.98 billion for 2018 and 2019 respectively in order to provide fiscal space in the two years. In the following years from 2020 to 2022, PIA would be able to bear the debt servicing cost.

The cabinet was told that the airline’s fleet would expand from the present 36 aircraft to 44 planes by 2022. The current strength of five ATR 72 aircraft will be phased out of operation by 2018.

The aviation sector contributes around 1.5% to Pakistan’s gross domestic product (GDP) – the overall size of the economy. PIA provides 18,000 direct jobs and 50,000 indirect employment opportunities including for suppliers, vendors and support activities.

If PIA was closed, the cabinet was told, the job opportunities would disappear, liabilities would stay in place and most of the Pakistani passengers would lose direct connectivity with the world and within the country where other domestic airlines did not go.

Cabinet members were of the view that it was difficult to analyse the figures put before it without backup data. They noted that despite given full autonomy by the government, PIA could not achieve desired results in the past four years.

Direct connectivity should not be the sole criterion to keep running PIA but closing down the airline may also not be the option, they said.

It was suggested that an independent regulator may be appointed as the Aviation Division could not act as a regulator because of conflict of interests.

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PIA should take measures to enhance its efficiency, which did not require money, as well as undertake strict accountability. Expert consultants having experience in aviation policy may be hired.

The cabinet members were of the view that the number of employees was not the problem rather poor performance in customer service coupled with leakages in procurement and lack of accountability led the organisation to the verge of collapse.

In order to analyse the business plan, they said, a sub-committee may be constituted as the plan needed to be thoroughly scrutinised. After comprehensive discussions, the committee was formed to look into the plan and come up with recommendations.

COURTESY BY: https://tribune.com

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