Pakistan International Airlines’ $78 Million Bailout Appeal Rejected By State

September 4, 2023 1:46 pm

Islambad: Pakistan’s flag carrier, Pakistan International Airlines (PIA)’s appeal for a PKR 23 billion ($76 million) bailout has been refused by the standing government. Yet another urgent appeal from the airline resulted in the government’s direction to secure commercial bank loans instead. The government also suggested that the airline should develop a viable privatization plan that has been lingering for a long time.

The airline officials recently met with Shamshad Akhtar, the interim finance minister of Pakistan, to inform them about the financial need the airline is facing. The airline showed a need for PKR 23 billion to rescue itself from growing losses. The finance minister instructed the airline that the government was prepared to provide a limited amount of PKR 13 billion ($43 million) should the airline request commercial loans.

In order to arrange bank loans, the airline must set up a restructuring plan for the airline. The operational areas that lead to financial losses must be reformed as part of the plan. Moreover, a viable privatization plan must be in place to guarantee commercial loans.

The airline has received bailouts on multiple occasions in the previous fiscal year. In 2022, the airline was granted PKR 15 billion ($49 million) to pay the interest cost on its existing loans. The finance ministry also granted an additional PKR 4 billion ($13 million) to aid in the settlement of the nation’s Civil Aviation Authority (CIA) dues. Pakistan’s aviation ministry has requested that the government bodies continue to facilitate the interest cost coverage for the airline when needed.

A dire need for bailout money

The national carrier of Pakistan is the largest money-losing public sector entity in the nation. The airline’s financial troubles have recently worsened due to many factors, including safety issues, bans from key markets, and compromised pilot training and fleet maintenance activities. The airline incurred losses of PKR 36.8 billion ($121 million) during the first quarter of 2023, up by 170% over the same period last year.

The airline is projected to incur a loss of PKR 112 billion ($389 million) in 2023, significantly more than in 2022. The cumulative losses stand at nearly PKR 700 billion ($2.2 billion), with current liabilities of over PKR 350 billion ($1.1 million). The viability of the airline to function in its current form is bleak. The nation’s government and the finance ministry strongly suggest a solid privatization plan that can rescue the airline from the current turmoil.

The restructuring and privatization plan was first blocked by the parliament in 2016, which restricted the transfer of management to a maximum of 49%. The parliamentary regulations effectively put a halt to the privatization plan. The government later amended the decision and permitted the sale of the majority of its shares to private investors.