Aircraft on wet lease: PIA cuts a better deal

Pakistan International Airlines (PIA) after incurring a colossal operating loss of over Rs 3 billion in its Premier Service to London during last six months is finally moving towards Turkish Airlines (THY) to acquire A-330 aircraft on wet lease but now at industry average rental fee; it was learnt. According to sources, three international airlines, Turkish Airlines, Sri Lankan Airlines and Portuguese charter airline Hi Fly, submitted bids for the tender of A-330 aircraft on wet lease and the tender was reportedly awarded to THY.
They said the PIA officials were going to meet the top management of THY at its headquarter in Istanbul in a week or two to sign a formal agreement for acquiring A-330 aircraft on wet lease at 25 per cent less rental fee. Sources said that national flag carrier had earlier acquired A-330 aircraft from Sri Lankan Airlines (SLA) on wet lease at US $8100 per hour rent for guaranteed hours for its Premier Service to London.
The airline had engaged the said aircraft from SLA for six months under a formal agreement of acquiring three similar type aircraft on wet lease at a rental fee, which was 25 per cent higher than the market rate. The decision to acquire aircraft from SLA by paying an additional US $2100 per hour rent has depicted poor planning of the management to launch such an expensive and luxurious service, which the sources described as one of the major reasons for incurring a colossal operating loss of over Rs 3 billion during six months of Premier Service operations.
On the other hand, Sri Lankan newspapers claimed that CEO SLA Captain Ratwatte said the wet lease contract with PIA was the most profitable commercial agreement undertaken by SLA in the recent past. The newspapers said that it had helped uplift the bottom line of the company at a time when they were facing significant challenges in efforts to transform the financial fortunes of the airline and return it to profitability. Sources however said that the PIA management after facing refusal by the SLA to cut its rental fee at the market average level had forcibly gone for a fresh tender instead of extending said agreement, which the sources termed a cost effective measure to make Premier Service feasible for an already cash-starved national flag carrier.
They further said that PIA management was now attaining similar type of aircraft from Turkish Airlines at US $6000 per hour for guaranteed hours, which was 25 percent less than the rental fee collected by SLA. Meanwhile, PIA spokesman confirmed that airline management was in discussions with Turkish Airlines. He said that THY offered better rates than SLA did for same aircraft type during retender on January 17, 2017. Replying to a question, he sought to dispel the impression that PIA acquired A-330 aircraft on wet lease from SLA at high rate, saying that rates change with market seasonality besides Turkish Lira also dropped by 20 percent.