PIA’s collapse

Published October 24, 2023

IT is difficult to recall the last time when passengers flying PIA experienced a hassle-free, comfortable journey, free from last-minute flight cancellations, delays or a cranky cabin crew. But Sunday’s events stood out: the national flag carrier cancelled almost 80 international and local flights because it did not have the fuel to fly its shrunken fleet. Apparently, PSO, PIA’s fuel supplier, cut off supplies over mounting unpaid dues. With the airline suffering massive financial losses, PIA has been locked in a tense face-off with PSO, and its flight operations have had to endure increasing delays and cancellations for the past one week at least. PIA owes the oil supplier Rs26.7bn — including almost Rs25bn in previous arrears and Rs2bn in new unpaid dues against recent oil supplies — but has not been able to clear that amount in spite of commitments made over the last several months. A report suggests that the carrier had agreed to make advance payments to PSO on a daily basis for procuring fuel for its flight operations. The mechanism worked for a few days before PIA reportedly ran out of cash and PSO stopped fuelling its operations. PSO, which is also facing a financial crunch due to the non-payment of dues to the tune of Rs760bn by power companies, cannot be expected to bail out a collapsing airline when no other state entity is prepared to help it.

With the airline incurring monthly losses of almost Rs13bn, its accumulated liabilities have already reached Rs713bn, far exceeding its assets of Rs110bn. There is no life left in the airline. It is virtually dead as both a business and a brand, and it is clear that financial bailouts cannot resurrect it. Its flight operations are shrinking and the fleet has been reduced to 19 operational but aging aircrafts; it cannot fly to many international routes due to safety concerns; and is facing stiff competition on domestic routes from the new, more efficient private airlines that offer better services at cheaper prices. PIA’s new record of flight cancellations in one day underscores the urgency of winding up its operations to avoid further losses to taxpayers at a time of deep economic crisis. Plans to retain or retrench its employees, settle its liabilities and sell its assets can be finalised and executed later.

Published in Dawn, October 24th, 2023

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