More justification for selling the company is provided by Pakistan International Airlines’ (PIA) request for another Rs45 billion bailout package from the government to cover interest expenses and support its operations.
According to sources in the finance and aviation ministries, the ministry of aviation has also requested extension of the five-year government facility to choose the interest rate, which expires on June 30, till the airline’s financial sheet is reformed.
Ishaq Dar, the finance minister, was presented with the demands on Thursday, but he did not immediately promise to provide any more financial support, according to the sources. According to accounts, Dar demanded that the management create a workable business plan.
According to the sources, the PIA has requested a Rs 22 billion federal injection to pay off interest on its loans, Rs 15.6 billion in extra sovereign guarantees to take out new loans, and a further Rs 7 billion to purchase an aircraft.
According to a document from the finance ministry, Khawaja Saad Rafique, the federal minister for railroads and aviation, as well as Dar, presided over a meeting on railroad and aviation issues.
A political move made by the 2013–18 Pakistan Muslim League-Nawaz (PML-N) administration to modify the PIA law to prevent the sale of majority shares that would transfer management control has so far cost taxpayers Rs100 billion between 2018 and 23. The losses for PIA increased over this time and peaked in September 2022 at Rs633 billion.
The Pakistan Tehreek-i-Insaaf (PTI) administration approved the division of PIA into two firms in April 2021: the good PIA, which has core assets and liabilities totaling just Rs137 billion, and the bad PIA, which has liabilities totaling Rs457 billion and would keep ownership of its non-core assets. But this strategy was never put into action.
At least three PIA restructuring exercises have been carried out since 2017, but without a workable business model, the national flag carrier has continued to suffer significant losses.
According to the sources, on the premise that PIA would achieve financial viability, the then government agreed to pay PIA’s interest costs for a period of five years in December 2017. However, given its past poor performance, the PIA management on Thursday asked the finance minister to prolong the interest-payment facility till the financial reorganisation is finished.
The government set aside Rs 15 billion in the budget for interest payments for the current fiscal year. However, PIA has requested an additional Rs22 billion. In the meeting, it was asserted that the finance ministry had allotted Rs. 15 billion in the budget, which was less than the nearly Rs. 32 billion yearly requirement. The airline stated that the entire cost of debt payments for this fiscal year would climb to Rs37 billion as a result of an increase in interest rates.