ISLAMABAD, Nov 10: A Senate body was informed on Monday that the national flag carrier had been facing accumulated losses of Rs75 billion which would swell to Rs85 billion by the end of the year.

Captain Ijaz Haroon, PIA’s Managing Director, told the Senate Standing Committee on Defence that the airline suffered a loss of Rs38 billion over a nine-month period ending on Sept 30, caused by devaluation of rupee against foreign currencies and soaring oil prices in the international market.

He said that the airline had been facing a debt of Rs143 billion, including Rs123 billion guarantees, by the government.

He claimed that a number of steps had been taken to reduce operational costs, like reduction in posts at general manager level, manpower rationalisation, and redefining of job description.

He said a Rs55 billion bailout plan had been prepared to overcome the financial crunch. The plan would be submitted to the Economic Coordination Committee of the Cabinet (ECC) in the third week of the current month.

“We have proposed a number of steps to overcome the problems confronting the airline and if the plan is approved, the airline can become a profit-earning organisation by 2010,” Captain Ijaz Haroon asserted.

He said that services of 4,800 contract employees had been regularised with a “minimal impact” on the monthly payroll of the organisation.

He said the airline had offered re-employment to 131 contract employees while services of 59 sacked employees had also been restored. He said the process of re-employment or reinstatement had been done through a committee in a ‘fair, free and transparent’ manner.

The PIA MD said the airline had extended the time for getting tickets in case of on-line booking from three hours to six hours. He said the airline had abolished the Economy Plus class on all international flights due to a poor response. However, he said, the Economy Plus class would continue on domestic flights.

The committee asked the ministry of defence to undertake a special audit of the airline to focus on the purchase of Boeing 777 and leasing of Airbus aircraft.

The two deals had set off accusations of kickbacks. Official documents revealed that no feasibility was carried out for the purchase of eight new Boeing 777 family aircraft for Rs105.95 billion.

An official told Dawn that no bids were invited and the option of the Airbus was foreclosed in the initial stage, leaving only two options -- old versus new Boeing aircraft. Four A340 Airbus could have been purchased for the price of three Boeing 777.

The PIA’s multi-million dollar deal with Air Jamaica, for leasing six old A-310 jet craft was also seriously questioned by industry experts.

The airline had signed the dry lease deal for 10 years at a rate of $200,000 per aircraft, but these planes could not fly on long routes without refuelling.

The planes were acquired under a dry lease agreement, which gives the leasing airline an option to purchase the aircraft at the end of the lease period.

Thus, PIA will be forced to ply these aircraft on domestic and regional routes only. The second problem is in the Pratt and Whitney engines. The airline does not have the facility to maintain and overhaul these engines, forcing the organisation to spend more money for maintenance of these engines.

Committee Chairman Senator Nisar A Memon directed the PIA management to look into the matter of Haj and Umra fares as these were on the higher side considering that international oil prices had considerably decreased.

The committee set a deadline for a reply from the airline on the subject by the first week of next month.

The Chairman of Standing Committee said that the PIA management should come up with a clear vision whether it wants to be a national or regional or international airline, in the next meeting to be held in the first week of December.