ISLAMABAD: The Pakistan International Airlines (PIA) is asking the government, saddled with its own mounting debt, to write off losses of $ 1.7 billion to save it from looming threat of bankruptcy.
In a five-year survival plan submitted to the government, PIA has promised to make cutbacks and boost its fleet in a bid to improve its fortunes, if the treasury agrees to cancel its debt and pay off other creditors.
Blaming “bad policies of the past” for accumulated losses of Rs 80 billion ($ 936 million) and liabilities of Rs 144 billion, said PIA spokesman Sultan Hassan, insisting the airline is capable of future success. Defending the company against long-standing allegations of graft and staffing problems, he stated that operational profits show PIA can become self reliant.
“We want to reform the airline. If the government helps us by taking on our previous losses and loans so that we can invest capital, we will be able to revamp the company for the future,” said Hassan. But the burden would be a massive undertaking for a government dependent on US aid to survive. The country is mired in a recession worsened by falling foreign direct investment and is plagued by security and social problems.
“I don’t think it is viable,” said an international finance official in Islamabad on condition of anonymity. “The Pakistani economy is already weak, the government is under heavy debt; if PIA’s request is accepted and be an additional burden.” A former financial adviser to the government, Ashfaq Hassan, said privatisation was the only long term solution for the airline, which has failed to turn a net profit since 2004 according to its last annual report.
“This is a plan that the Ministry of Finance should never accept. It would leave a huge impact on the national budget,” said Hassan. “If the government injects any money into PIA, it would only help it to survive for another year and nothing more. The only solution for this corporation is privatisation. Anything else is a waste of time and money.” PIA was created out of private airline Orient Airways in 1955, just eight years after Pakistan came into existence, and today has a fleet of 40 planes, a combination of Boeing 747s, 777s, 737s, Airbuses and ATR aircraft.
Performing well until the 1970s when corruption and overstaffing hit the fortunes of the corporation, PIA’s reputation was further battered in the 1980s as it failed to maintain its fleet, said economic expert Shahidur Rehman. He said the 1990s signalled further decline for PIA, when legislation was liberalised to allow more competition in the flight market. The state carrier remains the largest operator on Pakistan’s international and domestic routes.
But union officials say years of corruption, nepotism, bad management and poor planning have pushed the corporation to its lowest ebb. “Every PIA contract is awarded against kick-backs and commission to the relevant authorities. This is employees’ money being looted by corrupt officials,” said Ashraf Bilo, a PIA union leader.
PIA desperately seeks bailout to survive
