ISLAMABAD: Aviation Secretary Mohammad Irfan Ellahi on Tuesday told the Public Accounts Committee (PAC) that the Privatisation Commission (PC) was considering a proposal to divide Pakistan International Airlines Corporation (PIAC) into two companies — PIA-I and PIA-II — with the objective to hand over liabilities, including interest payment on Rs180 billion loans, to the government.

The PIA-II would be an operational side of the national flag carrier with a clean balance sheet, while outstanding liabilities of the PIA would be parked in PIA-I and the government would be responsible for their payment, he told the committee.

He said that the corporation has devised a strategy for core and non-core business. Some important departments of the organisation, like flight kitchen, medical, training centre and marketing, would be outsourced, while flight operation, cabin and cockpit crew, finance, information technology and administration departments would remain under the PIAC’s control, he said. Similarly, some departments of the engineering section would be under the PIAC’s control, while overhauling, maintenance and repairing would be privatised, the official said.

The PAC asked the government to park the Rs180bn legacy loan for at least five years so that the loss-making entity could be turned into a profitable organisation.

Auditor General Rana Assad Amin endorsed the PAC’s recommendation and said the government had also parked Rs260bn liabilities of power distribution companies and made the payment.

Chinese airline

The secretary also said that a private Chinese airline would begin its operation in Pakistan as the licence had been granted.

It would begin its domestic operation by January, he said.

The official said it was a misconception that PIA sold routes to other airliners. He said the air route agreements were inked between the countries on a reciprocal basis and the companies could not sell any route.

“The airline can sell only slots allocated at various designations like Bangkok and Heathrow Airport,” he explained.

The committee expressed dissatisfaction over the explanation of the PIA management for decreasing profit despite a marginal decline in fuel prices. It asked the auditor general to conduct a detailed audit of PIA to determine reasons behind its financial losses.

It also recommended that the government utilise proceeds from the sale of the Roosevelt Hotel in New York and Hotel Scribe in Paris, owned by PIA, for retirement of the airline’s swelling debt.

PAC Chairman Syed Khurshid Ahmed Shah said the profit of these hotels against book value were less than 0.5 per cent, against the international standard. Globally, 6pc profit on investment was considered a valuable gain and PIA was earning only $1.5 million annually from these hotels. “The management can even earn 3pc profit on bank deposits,” he argued.

The committee’s member Mian Abdul Manan said the management could retire all the loans by selling these hotels.

The committee asked the PIA management to buy aircraft directly from manufacturers to save public money, as leasing companies charged more than them.

Mr Shah suggested that the PAC should play a supervisory role in the bailout of PIA from the financial crunch and recommended monthly briefings on its performance.

He said the Aviation Policy had failed to address the grievances of the sector and the public, and it should be revisited.

Published in Dawn, October 26th, 2016