The Economic Coordination Committee (ECC) of the Cabinet has directed Aviation Division to submit a detailed strategy for restructuring of PIA within two months, official sources told Business Recorder. The committee headed by Finance Minister, Asad Umar gave these instructions at a time the IMF Mission is in the federal capital to discuss a new programme. Umar has de-listed PIA from active list of entities which are being privatised.
However, he has directed that a plan should be tailored to reconstruct two hotels owned by PIA, one in Paris and the other in New York as high rise buildings on PPP mode. According to sources, Aviation Division informed the ECC that PIACL was passing through a difficult phase owing to accumulated losses resulting in severe cash flow crisis hampering operations. Erratic increase in fuel prices, rising Dollar to PKR parity and non availability of airworthy fleet are the key factors badly affecting operating cash flow causing delay/default like situation in discharging its obligation to the creditors, especially to aircraft lessors, fuel suppliers and other creditors.
Aviation Division, sources said, maintains that the continuing liquidity crisis has now reached an alarming level which may lead to grounding of its aircrafts. The debt profile of PIACL as on September 30, 2018 includes outstanding obligations to the tune of $ 125.84 million against GoP guarantees, wherein at the time of presenting the business plan to the Cabinet during the month of December 2017, the conversion rate was 1 & = 110.585 while present conversion rate is 1 $ = PKR 133.50.
Aviation Division further stated that owing to PKR devaluation/ depreciation, the allocated guarantee level has reduced by Rs 2.884 billion, and requested ECC to approve additional guarantees of Rs 2.884 billion to offset impact of Rupee devaluation/ depreciation on PIA guarantee limit. ECC its meeting held on May 11, 2018, had approved additional GoP guarantee limit of Rs 20 billion for engine overhauling. The rupee devaluation has also impacted to the tune of Rs 20 billion on GoP guarantees.
Aviation Division apprised that the situation clearly shows that the GoP guarantee level for engine overhauling program has been reduced by Rs 4.138 billion ($ 31 million x 133.5) due to rupee devaluation, resultantly engine overhaul requirements would not be created for as anticipated.
Keeping in view the facts, ECC was requested to consider issuance of new guarantees to the tune of Rs 4.138 billion for engine overhaul requirements.
The sources further stated that PIA is suffering from operating losses and facing difficulties to discharge its obligations towards creditors, requesting ECC to approve additional guarantees of Rs 10.0 billion to run operations smoothly for the next two months.
Aviation Division submitted following proposals for consideration and approval of the ECC: (i) additional guarantees of Rs 2.884 billion; (ii) additional guarantees of Rs 4.138 billion for engine overhaul and additional guarantees of Rs 10 billion for sustainable operations. After detailed discussion, the ECC approved the proposals of Aviation Division for GoP guarantees on three accounts.
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