WASHINGTON, Dec 4: The Pakistan International Airlines will sign an agreement on Dec 15 to purchase eight E777 aircraft from Boeing at the cost of $1.2 billion, Pakistani and US officials said here on Thursday.

The signing-in ceremony will be held at the US Export-Import Bank in Washington. PIA chairman Ahmed Saeed will represent the national airlines at the ceremony.

Last year, the Ex-Imp Bank agreed to provide $125 million to Pakistan to help it buy passenger aircraft from the Boeing Co. This is the first time that the bank is underwriting a deal between Pakistan and a private US firm.

Also last year, the Pakistan government agreed to contribute $150 million over three years to help PIA finance the purchase of 10 new planes.

Announcing the government contribution, finance minister Shaukat Aziz had said the money would help the airlines embark on an ambitious $2 billion fleet-overhaul programme that includes the scheduled purchase of 10 planes by 2011.

PIA has launched an ambitious plan to improve the airline’s aging fleet with new aircraft.

The average age of PIA’s current fleet is 23 years. It has 40 planes and 22,000 employees.

The airlines had earlier made an arrangement to take delivery of three Boeing 777s and seven turboprop aircraft by 2003.

The federal government had said that its decision to contribute 15 per cent of the total money needed to complete the purchase was largely due to the airline’s improved financial performance.

The Economic Coordination Committee of the cabinet had originally allowed PIA to buy four 777 Boeing and three A-340 Airbus but the airlines later changed its plan and decided to buy four more E777 aircraft from Being.

E777 aircraft have an extended range and PIA hopes that the purchase will enable it to reduce the flight duration by operating direct flights between Pakistan and the United States.

Sources in Washington say that PIA’s decision to buy E777s instead of the A-340 airbus was also influenced by the Ex-Imp Bank’s agreement to enhance its loan facilities. According to the sources, the bank has agreed to provide up to 60 per cent financing to help purchase Boeing aircraft that are manufactured in the US.

But while announcing the original purchase plan, officials in Islamabad had said that the manufacturers of A-340 Airbus had offered to provide 75 per cent financing.