Govt acts to put PIA back on track

[Abbas Ali]

By Khaleeq Kiani

ISLAMABAD, Nov 22: The government has asked the management of Pakistan International Airlines (PIA) to make full disclosure of its financial position and future business plans as a pre-condition for allowing the airline’s restructuring.

Adviser to the Prime Minister on Finance Dr Salman Shah told reporters here on Wednesday that many factors, including oil prices and other structural problems, were responsible for the current financial crisis faced by the national flag carrier.

He declined to comment on measures being considered by the government for the restructuring of the corporation, which continues to suffer on an average Rs1 billion a month, but said it was Pakistan’s national asset and would be put on a sound footing very soon. He said the airline had a big market and there was no reason why it could not be made a profitable entity.

He did not say how much public money would have to be injected to bail out the company whose total losses exceeded its assets by more than Rs22 billion.

Sources said the government had made up its mind to sell some assets of the PIA Investment Limited (PIAL), including the Roosevelt Hotel in New York whose majority shareholding came to PIA recently in a deal with a Saudi prince.

Secretary Finance Tanveer Ali Agha said the government could not provide guarantees or inject money unless the company made full disclosures of its financial position. He said a restructuring package would hopefully be prepared in consultation with PIA’s financial advisers. This would include relief on loans in the kind of interest and repayment restructuring.

He said fuel price was one of the reasons, but other structural problems were to be blamed more and added that several other airlines were earning profits or were able to break even despite facing similar fuel price trend. He said the corporation had submitted its restructuring plan to the government and the finance ministry had also appointed a financial adviser to examine it, adding that a bail-out package would be based on future business plan of the company.

The weak financial health of PIA came to light recently when its internal auditors said conditions indicated the existence of a “material uncertainty which may cast significant doubt about the corporation’s ability to continue as a going concern”.

The corporation’s chartered accounts Anjum Asim Shahid Rahman and Ford Rhodes Sidat Hyder & Co wrote in their note to the half-yearly report that the corporation incurred a gross loss of Rs74 million and a net loss of more than Rs6.1 billion during the half year ended June 30, resulting in accumulated losses of over Rs17.9 billion of the balance sheet date.

The corporation's current liabilities exceeded its current assets by Rs20.326 billion, the auditors said. They said due to lack of adequate audit trail to support the carrying value of inventories at moving average costs as result of problems with the inventory management system, they could not verify the valuation of capital spares and consumable stores and spares with carrying value of more than Rs3.7 billion and over Rs2.4 billion, respectively.

Source: DAWN

[Moin]

They have a white elephant on their hands which they refuse to surrender, yet they are only able to keep it on life support. If they pull the plug, its the end.

[PK777]

I highly doubt after 50+ years of govt support they are going to pull the plug.

[Moin]

Oh no, they won't pull the plug. I'm just saying for the sake of argument that the state of the airline is such that if they stop financially assisting PIA, it will collapse and they realise that.

They will never let that happen though as PIA is their only key to foreign travel 'as and when we want it', an airline where they can choose whether or not to pay their way without any chance of reprisal.

They will keep it afloat with small cash injections, just enough to keep it going and able to cater to their needs. Nothing more.