ISLAMABAD: In a significant development, the Economic Coordination Committee (ECC) of the Cabinet on Friday green-lighted a hefty sum of Rs8 billion for the purchase and repatriation of two Airbus A320 aircraft, which have been grounded in Jakarta since September 2021.

The ECC meeting chaired by Finance Minister Shamshad Akhtar approved bridge financing through the Civil Aviation Authority’s resources for Pakistan International Airlines (PIA) to meet emergent requirements of the airline related to overdue payments.

Back in 2015, Pakistan entered into a six-year lease agreement for two Airbus A320 aircraft. The monthly lease payment was close to $550,000. This comprehensive package covered not only the aircraft rent but also maintenance expenses and insurance costs.

The lease agreement for the Airbus aircraft concluded in 2021, following which the planes were dispatched to Jakarta for re-delivery.

PIA paying rental of $600,000 for planes stationed in Jakarta since Sept 2021

In a twist of events, Air Asia took over the leasing firm from which Pakistan had leased the aircraft. The new management stipulated that the leased planes be returned to their original state, necessitating the substitution of worn-out accessories with brand-new ones.

The company insisted on having the aircraft delivered to FL Technics in Jakarta for comprehensive maintenance, repair and overhaul. A PIA source revealed that Pakistan had no alternative but to comply with this demand in September 2021.

Pakistan and Air Asia engaged in multiple rounds of discussions, with disagreements primarily centred on the procedure for parts replacement. However, a consensus was eventually reached to replace the accessories, effectively restoring the aircraft to near-new condition.

According to the source, the government subsequently opted to buy the Airbus, a decision that the company concurred with. However, due to Pakistan’s inability to arrange the necessary funds promptly, the company retracted its agreement to sell the planes to Pakistan.

Recently, a high-level official delegation comprising representatives from CAA and PIA visited Jakarta. The delegation renegotiated the deal with the company, settling on a price range of US$21m to $26m, according to the source.

Upon receipt of payment, the first aircraft is slated for delivery to Pakistan within 10-15 days, according to the source. The source further added that the second plane is scheduled for delivery in the subsequent month.

PIA is currently paying a combined monthly rental of $600,000 for the two Airbus A320 aircraft that have been stationed in Jakarta since September 2021. This constitutes an extra expenditure for PIA, as it continues to pay the company despite not utilising the planes.

An official announcement said that the Aviation Division submitted a proposal for the provision of financial support to PIA through the CAA for certain emergent needs of the airline.

After detailed discussion and deliberation, ECC decided to approve the proposal of the division for bridge financing through CAA’s resources for PIA to meet emergent requirements related to overdue payments.

The ECC allowed the Aviation Division to proceed with the bilateral arrangement between the CAA and PIA.

The meeting was attended by Privatisation Minister Fawad Hassan Fawad, Planning and Development Minister Sami Saeed, Adviser to the Prime Minister on Aviation Air Marshal Farhat Hussain Khan and federal secretaries.

Published in Dawn, October 28th, 2023