ISLAMABAD, Nov 12: President Pervez Musharraf has summoned the top management of Pakistan International Airlines (PIA) for a presentation on its declining financial health and to see if a restructuring plan could pull the national flag carrier out of the red.
A senior finance ministry official told Dawn on Sunday that the chairman and chief executive of the airlines, Tariq Kirmani, and his top financial aides would make a presentation to the president on Tuesday and then listen to the views of the ministries of finance and defence.
He said the PIA management would obviously try to blame the rise in fuel costs for all its losses, "but other participants may have some different opinions and that would come in the open in the presence of the president.
The president and many others in the federal government are not happy with all that is going on in PIA, he added.
Beside the losses, the president would also like to be briefed on ban imposed by the European Union on some of PIA planes on account of safety concerns and Saturday’s unusual disruption in flight reservation system during a comprehensive briefing on Tuesday.
The official said details of the financial restructuring plan for the airline could not be discussed ahead of the president’s presentation. He, however, said it would comprise a set of measures including equity injection by the government, sale of some assets, raising long-term finances like term finance certificates (TFCs) and other similar instruments on government guarantees, besides some internal steps in the company.
He said there was no budgetary allocation for the current year to bail out the national flag carrier.
Internal auditors recently raised concern about the viability of the company owing to continuous increase in its losses. They said PIA’s total losses exceeded its assets by more than Rs22 billion as of Sept 30, 2006. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the corporation’s ability to continue as a going concern," said a report for the period ending June 30, 2006.
A government official said the internal auditors of the company had also drawn attention to another uncertainty about PIA’s Rs3.649 billion liability claimed by the Civil Aviation Authority (CAA), on account of rent, landing and housing charges and aviation charges, which the PIA management claimed to settle through negotiations, but had not made any provision in its accounts.
The airline is currently considering operational restructuring measures including disinvestment of its holding in PIA Investment Limited (PIAIL) or dispose of its property to improve cash flow.
Already, as part of the financial package an amount of Rs6.575 billion had been provided to the corporation up to June 30, 2006, against which 543 million A-class ordinary shares of Rs10 each were issued to the government. Another Rs114 million shares are expected to be issued during the current financial year.
The federal government had provided Rs8.8 billion ($150 million) as equity and guarantees to PIA for the purchase of eight new Boeing 777 aircraft out of which five had been acquired to date.
