The cash-strapped Pakistani government has approved a Rs1,700 crore bailout package for its ailing national flag carrier PIA which has been running into losses for years.
The government on Monday approved the bailout package for the Pakistan International Airlines (PIA) to keep it afloat for the next two months, the Express Tribune reported.
It is the first bailout package approved by the government of Prime Minister Imran Khan, who is also the minister in charge of the Aviation Division.
Pakistan government is itself facing financial crisis and is seeking its largest loan package of up to USD 8 billion from the IMF to bail itself out from the severe balance-of-payments crisis that threatens to cripple the country's economy.
The Economic Coordination Committee (ECC) of the Cabinet, chaired by Finance Minister Asad Umar, on Monday approved the Rs 1,720 crores 'dose of oxygen' – the second in last six months.
The Pakistan Tehreek-e-Insaf (PTI) government followed in the footsteps of the last Pakistan Muslim League-Nawaz (PML-N) government that had kept PIA afloat for five years by providing such bailouts.
The money will be borrowed from commercial banks on the back of sovereign guarantees of the finance ministry. In order to facilitate the borrowing, the ECC extended the guarantee limit to Rs 21.2 crore, said the Ministry of Finance officials.
The ECC was told that continuing liquidity crisis in the PIA had now reached alarming levels, which may lead to grounding of the fleet. The fresh injection will keep the airline in the skies for the next two months, according to Aviation Division officials.
The PIA's accumulated losses surged to Rs 36,000 crore by the end of June, which, according to the finance ministry, speaks volumes about the persistently deteriorating performance of the carrier.
The ministry urged that unless an integrated business plan, including a comprehensive debt retirement strategy, was implemented, such "intermittent doses of oxygen will hardly bring about any meaningful recovery to the ailing entity."
Seeking more loans to pay off existing ones was not only unsustainable but may even affect PIA as a going concern, stated the ministry.
Finance Secretary Arif Ahmad Khan suggested the appointment of a duly qualified chief executive officer having relevant industry experience, reconstitution of PIA's board of directors and development of a debt management strategy for the long run.
Prime Minister Khan has appointed Air Marshal Arshad Malik as the CEO amid apprehensions among his cabinet ministers over Malik's experience in handling a commercial airline, revealed sources who attended the cabinet meeting a few weeks ago.
In addition to the already provided Rs 19.5 crore worth of sovereign guarantees, the finance ministry has also injected Rs 4.08 crore in cash into the airline. After the fresh injection, the total cost of bailout will jump to Rs 25.3 crore.
After coming to power, the PTI government struck PIA off the privatisation list without first framing a plan to revive the ailing airline.
The PIA has been in losses for years but successive governments have failed to improve its financial situation.