Cabinet ponders over splitting PIA into two firms

A plan to split Pakistan International Airlines into two companies was discussed by the federal cabinet on Tuesday and was then sent over to the Economic Coordination Committee (ECC) for amendments.

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In an attempt to address the finance woes faced by the national carrier, the federal cabinet on Tuesday discussed dividing the organization into two companies — new and the old PIA.

This plan was first approved by former prime minister Nawaz Sharif during his last tenure. Pakistan Interna­tional Airlines Corporation was then managed into a company through legislation in 2015. However, the plan could not be executed then due to the hue and cry of PIA employees as well as opposition parties, who opposed the move that could probably lead to the privatization of the company.

Information Minister Fawad Chaudhry has now disclosed that the federal cabinet has approved the plan to divide the national carrier into two companies, but sent the summary to ECC again for a few revisions.

The minister had earlier praised the national carrier’s management for bringing down the operational losses of PIA from Rs57bn to Rs1bn. However, he said that the real problem was the loan which caused an overall loss of Rs460bn.

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PIA’s aircraft-to-employee ratio was 450, which was highest in the world, he added.

A report released by PIA said that the booked a net loss of Rs34.64 billion in the year ended December 2020 compared to a loss of Rs52.6 billion in 2019.

The ECC has also approved a restructuring plan worth Rs457 billion for PIA to curb its losses over the next three years by paying off some of the pervious debt and writing off some of the loans.

PIA’s Annual Report 2020 revealed that the national carrier is now ready to return back to the skies. PIA has expressed hope that a boost to its flight operations would help turn around its financial performance.

“Passenger numbers are expected to grow to 2.8 billion in 2021,” PIA Chief Executive Officer Air Marshal Arshad Malik said in the Annual Report 2020 dispatched to the Pakistan Stock Exchange (PSX) on Monday. The expected number of passengers in 2021 would be one billion more than in 2020, but still 1.7 billion travellers short of the 2019 figure, he added.

PIA has also negotiated with financial institutions for rescheduling its loans, given back a couple of leased aircraft to foreign firms and cut down its workforce by 1,900-2,000 employees (or 14%) by offering them voluntary separation scheme (VSS).

However, the airline like the majority of State-Owned Enterprises (SoE’s) has been losing billions each year. The pandemic also had a devastating impact on the global aviation industry and this worsened the conditions for PIA.

With the vaccination drive gaining pace and airplanes flying again, PIA’s return to previous flight operations is also being celebrated. But, this in no way guarantees that it’s negative equity of Rs460 billion which comprises loans worth Rs326 billion and other payables of Rs118 billion would be recovered.