News Analysis |
Prime Minister Shahid Khaqan Abbasi has announced that PIA’s crown jewel, the Roosevelt Hotel in Manhattan, New York, will not be sold. This announcement came amidst heavy rumor clouds stating otherwise.
The Aviation Division secretary Sardar Mahtab had submitted a proposal to put the hotel on sale to pull PIA out of the debt trench that the national flag carrier has been beckoning under since the mid-2000s. The prime minister had also been informed that the hotel was also going into loss and therefore it should be sold. However, the Prime Minister, who chaired a meeting regarding affairs related to the Roosevelt Hotel at the PM Office, turned down the proposal, asking the secretary to come up with a plan to turn it into a profitable entity, a publication quoted.
The Prime Minister has also directed the Aviation Division secretary to submit a business plan for improving the income stream of the hotel by either alternate or mixed-use development.
Earlier, PIA had come up with a plan of transferring assets, including Roosevelt Hotel, to pay off Rs. 352 billion to clear the balance sheet of the national carrier in an attempt to make the organization financially viable.
Last month, a parliamentary panel was informed that the Pakistan International Airlines had no plans to sell the Roosevelt Hotel in New York. A meeting of the National Assembly Standing Committee on Parliamentary Affairs presided over by its chairperson Dr. Shezra Mansab Ali Khan Kharal discussed the abrupt discontinuation of PIA flights to and from New York and other issues related to the national flag carrier.
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Mian Tariq Mahmood asked Irfan Elahi, the aviation secretary who is also acting as chairman of PIA, to tell the committee why the New York operation was suspended.
The aviation secretary had informed the meeting that PIA incurred Rs. 1.5bn losses from New York operations last fiscal year and it had been facing losses for the past 10 years or so. When Mr. Mahmood enquired about the reports that said that the PIA was going to sell its Roosevelt Hotel in New York, the acting PIA chairman said that there was no such plan.
Those present at the meeting expressed their frustration over the abysmal performance of the national flag carrier and directed its management to take steps to revert the situation. After the meeting, Mr. Mahmood spoke to the press and informed them that the committee had directed the PIA management to furnish complete details of the Roosevelt Hotel.
Mian Tariq Mahmood asked Irfan Elahi, the aviation secretary who is also acting as chairman of PIA, to tell the committee why the New York operation was suspended.
The PIA chief executive officer had submitted a business plan to the federal government based on two options to make PIA financially viable. The total liabilities of PIA stood at Rs. 406 billion; to clear the balance sheet, the CEO wanted the national carrier to pay off liabilities worth Rs. 352 billion out of Rs. 406 billion. One of the proposals was to either transfer the hotel to the government or sell it to pay off PIA’s debt.
In a meeting, the proposal was submitted to the Prime Minister to sell Roosevelt Hotel to clear the debt. However, the proposal was turned down. The Aviation Division secretary briefed the meeting in detail about the financial condition of the hotel and reducing the scale of return on investment.
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The Prime Minister said that the government considers Roosevelt Hotel as an important historical building owned by the state and that its divestment is not an option. “Apart from being a valuable property, the hotel also carries cultural significance for Pakistan.”
Mr. Mahmood spoke to the press and informed them that the committee had directed the PIA management to furnish complete details of the Roosevelt Hotel.
Beginning in 1979, the hotel was leased by the Pakistan International Airlines through its investment arm PIA Investments Ltd. (“PIA”), with an option to purchase the building after 20 years. Prince Faisal bin Khalid bin Abdulaziz Al Saud of Saudi Arabia was one of the investors in the 1979 deal. In 1999, PIA exercised their option and bought the hotel for $36.5 million, after a legal battle with owner Paul Milstein, who claimed it was worth much more.
In 2005, PIA bought out its Saudi partner in a deal that included the prince’s share in Hôtel Scribe in Paris in exchange for $40 million and PIA’s share of the Riyadh Minhal Hotel (a Holiday Inn located on property owned by the prince). PIA has since controlled 99 percent interest in the hotel, while the Saudis have only 1 percent.
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In July 2007, after a major $65 million (equivalent to $75,077,000 in 2016) renovation, PIA announced that it was putting the hotel up for sale. The increasing profitability of the hotel, at the same time as the airline itself started to incur massive losses, resulted in the sale being abandoned. On January 1, 2011 The Roosevelt Hotel’s General Manager stated the hotel is once again undergoing extensive renovations but will remain open during the process.
The Prime Minister has also directed the Aviation Division secretary to submit a business plan for improving the income stream of the hotel by either alternate or mixed-use development. The meeting was attended by Advisor on Aviation Sardar Mehtab Ahmed Khan and other senior officials.