LAHORE, Dec 23: Pakistan International Airline Corporation (PIAC) chairman Hamid Nawaz Khan has said the corporation would float Rs15 billion Term Finance Certificates (TFCs) during this week to further strengthen the financial position of the airline.

Talking to reporters after the stone-laying ceremony of PIA complex at the New Terminal Complex on Monday, he said the mark- up on the TFCs amounting to around Rs12.5 billion would be paid by the government for the next five years. He said the PIAC had already received bids from banks at home and abroad to the tune of around Rs10 billion.

Answering a question, Mr. Hamid said the PIAC had requested the government to provide it Rs20 billion to bring out the airline from severe financial crisis. However, he said, the government gave only Rs4.7 billion as a bridge finance. Instead of the remaining amount, he said, the government would be giving Rs36.5 billion in the shape of Rs15 billion TFCs, Rs12.5 billion mark-up and Rs9 billion to purchase aircraft in three phases. “Out of this Rs36.5 billion support, the PIA would only be required to pay back Rs15 billion after five years from TFCs’ launching onwards. “Now there will be no financial problems for the PIA,” he said.

He said the airline had already received Rs150 million as the first instalment to acquire aircraft in three phases. He said that PIA had made an agreement with a best aircraft company in the world and purchase seven aircraft — three next year and two each in 2006 and 2008.

Though the average life of an aircraft is about 24 years, he said, the existing Fokker fleet is 39 years to 42 years old. He said the last induction of six aircraft in the PIA fleet was way back in 1991. He said the maintenance cost of old fleet is very high.

With the availability of new aircraft, Mr. Hamid said the PIA would be in a position by the year 2006 to pick passengers from Lahore for non-stop travel to any destination in the world. Currently, he said, the corporation is struggling to maintain the existing fleet which was deteriorating in the absence of proper maintenance. “The PIA had accepted in routine that if 40 per cent lights and call bells were out of order, even then it was OK to allow an aircraft to take off,” he cited an example.

Mr. Hamid said the PIA was at the verge of collapse as its liabilities had surpassed its assets. During two and half years from 1999 to Dec 2000, he said the PIA suffered losses of around Rs12.6 billion. He also said that there was Rs750m loss every month.

During this period, he said, the PIA had gone bankrupt and no bank was ready to give money to pay staff salaries. He said the Pakistan State Oil (PSO) also served a notice that it would provide fuel to the PIA only on cash payments and same was the case with all international suppliers. At this critical point, he said, the PIA pledged its only profitable route to Jeddah with the City Bank and paid salaries to its staff. “This was the time when people had started suggesting to disband the PIA and develop new national airline under the name of ‘Air Pakistan’ and retain only competent staff,” he said.

However, he said, the PIAC management worked hard and without throwing out its staff started turning around. Initially the airline stopped losing money and then went on to earn profit. By December 1 this year, he said, the PIA had earned a record profit of Rs2.5 billion. He also claimed that the PIA would earn a profit of Rs3.5 billion during the next calendar year.

Answering a question, he said, the socio-economic routes were still running in loss. “But we will continue to bear this loss and fill the gap while earning more and more profits from other areas for the benefit of our people.” he said.

Answering another question, Mr Hamid said the PIA did not give anything to the Civil Aviation Authority during 1999 and 2000. But afterwards, he said the PIA had refunded Rs3 billion to the CAA out of its Rs6 billion liabilities. The PIA is now paying around Rs180 million to the CAA every month, he added.

He also said that the PIA had increased salaries of its directors to compete with the open market. Saying that PIA had out sourced its different services including finances, he added that the case of contractual employees’ revised salaries would be determined by the new finance wing.