Pakistan Air Seeks $532 Million to Fund Boeing Planes
By Patricia Kuo
June 6 (Bloomberg) -- Pakistan International Airlines Corp. will borrow $532 million in its biggest dollar-denominated loan to fund the purchase of three new planes after the European Union in March barred most of its fleet from flying into the region.
The airline hired ABN Amro Holding NV to arrange the loans, M. Abdul Aleem, the Karachi, Pakistan-based carrier's chief financial officer said in an e-mailed response to questions. Pakistan's government and the U.S. Export-Import Bank will guarantee a 12-year, $470 million part of the loan, he said.
Pakistan International will use the loan to fund 85 percent of the purchase cost of three new Boeing Co. 777 aircraft, allowing it to better cope with rising travel demand, Abdul said. The airline is under pressure to upgrade its fleet after the 27- nation EU in March limited it to using only 777s for flights to the region, citing safety concerns.
``It seems like a wise move to buy planes for Europe because that is a major area of sales and this can prove very positive,'' said Atif Malik, research analyst at JS Global Capital Ltd., in Karachi, who has a ``hold'' recommendation on the stock.
The carrier's shares, which have gained 0.7 percent this year, fell 2.1 percent to 7.10 rupees at the 2:15 p.m. local time close on the Karachi Stock Exchange.
Pakistan International aims to increase the fleet to 52 planes in the next five years from 41 now, as Pakistan's economic growth boosts air travel demand.
Traffic Growth
``Our traffic is estimated to grow between 6 percent to 8 percent a year,'' Aleem said.
Pakistan's economy is forecast to grow 7.2 percent in the year starting July 1, quickening from a 7 percent pace in the previous 12 months, Akram Sheikh, deputy chairman of the Planning Commission, said on May 31. Growth has averaged 7.5 percent in the past four years, more than double the 3.4 percent pace from 1999 to 2002.
The company hired Zaffar A. Khan as chief executive officer in April to replace Tariq Kirmani, who resigned in March after the E.U. barred all but seven of its flights on safety concerns.
Demand for travel and tourism in Pakistan is forecast to expand 6.6 percent this year to 733.6 billion rupees ($12 billion), according to London-based World Travel and Tourism Council. The market is expected to reach 1.95 trillion rupees by 2017.
Pakistan International in 2002 ordered eight Boeing 777 aircraft in its biggest purchase. Deliveries will be completed in 2008.
The airline, 88 percent owned by the government, is in the final stage of negotiations to buy new narrow-body planes to replace seven Boeing 737-300 aircraft, Abdul said.
At the end of March, Pakistan International had 13 billion rupees of loans that must be repaid within a year, according to its earnings report.
Pakistan International is expanding even as its loss widened to 3.95 billion rupees in the three months ended March 31, from 3.08 billion rupees a year earlier, because of rising costs. Revenue rose to 17.68 billion rupees from 16.84 billion rupees.
To contact the reporter for this story: Patricia Kuo in Hong Kong at
pkuo2@bloomberg.net
News Source:
Bloomberg
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