03-16-2010, 12:00 PM
ISLAMABAD: The Pakistan International Airlines (PIA) is in desperate need of financial injection to make the national flag carrier a viable entity, a brief forwarded to the Senate standing committee on Defence and Defence Production said.
The committee was informed that PIA was planning to start Quetta – Zahidan – Quetta flights from October, whereas it wanted to capture the large pilgrims passengers share to Iran, Iraq and Syria.
It said that financial support was needed to increase the number of aircraft in the fleet.
The PIA management said that there were three options for improving its liquidity which include financial injection by the government, dollar-based fleet loans conversion into rupee loans and conversion into equity the non-fleet loans. The airline has sought conversion of non-fleet loans worth Rs45 billion and foreign exchange loans worth $250 million.
It suggested that the mark-up rates be fixed as high as 3 month KIBOR for rupee dominated loans and 3 month LIBOR plus 3.75 per cent for the dollar loans and 5.28 per cent for fixed dollar loans.
The PIA management has said that if the said package was approved the national flag carrier would benefit from saving the interest cost, positive net equity and improved ratios, increase in market capitalisation and better future financial flexibility.
It also said that the respective governments in the region had approved bailout packages for Air India and Japan Airlines as the year 2009 has been the worst year in the aviation history.
It also said that the respective governments have approved bailout package for Air India and Japan Airlines as the year 2009 has been the worst year in the aviation history.
For the year 2010 the management has projected a loss of Rs11.10 billion, but the brief had also said that PIA capability to improve its operational performance.
However, it will demand full commitment not only from its employees, management but also from its stakeholders to achieve self-sustenance.
“Due to low margins in airline industry, PIA operations on its own cannot support the huge burden of financial cost especially on account of non-fleet loans,” the brief presented to the senate body said.