Inside Financial Markets

PIA debt soars to Rs 185 billion from Rs 162 billion in four years

PIA’s debt has jumped from Rs 162 billion in 2012 to Rs 185 billion in November 2016, as the national flag carrier is overburdened with debt where more loans are taken to adjust pervious loans, Federal Secretary of the Aviation Division, Muhammad Irfan Elahi told the Senate Standing Committee in the Cabinet Secretariat on Tuesday. Irfan Elahi, who is Director of the Pakistan International Airlines Corporation Limited (PIACL), said the latest figures for 2016 are still under audit.

He said dues payable by the PIACL to the Civil Aviation Authority are Rs 49.162 billion, and it has to pay Rs 14 billion to Pakistan State Oil (PSO). As far as development work on the New Islamabad International Airport is concerned, the chairman of the committee suggested the authorities to check up if any society within the parameters of airport is in the process of development, which may later on affect the operation of airlines.

Irfan Elahi told the committee that a committee comprising members of the National Highway Authority, the Capital Development Authority, the Civil Aviation Authority and the Rawalpindi Development Authority have been formed to verify and clear the surroundings before issuing an NOC to a society and to commercial buildings. The committee was informed that four ATR planes are still under inspection and only five are working.

Senator Mir Yousaf said that there is only one flight working in Balochistan. Senator Shahi Syed said four ATR planes were malfunctioning and the PIACL realised this only after December’s air crash. The PIACL has informed the committee that it is trying to increase cash inflows for which steps are being taken by the company. The company is in the process of acquiring aircraft which are more fuel-efficient for replacement of its aged fleet. The company is exploring various revenue enhancing strategies by adding new destinations to the PIA network, increasing frequencies and entering into code shares and Special Prorate Agreements with other airlines, besides expansion of the sales network. Cargo business is being improved by entering into a block space agreement on western routes.

Schedule reliability, food quality and passenger handling services are being improved. The company is in the advanced stage of implementation of Enterprise Resource Planning and ancillary modules for efficient financial reporting and strong internal controls.

The steps taken by the government to settle the loan revealed that the government has appointed Dubai Islamic Bank as financial advisor for restructuring of the balance sheet and devising the future course of action for settling loans whereby modalities will be submitted by them. The company’s request for cash support is with Economic Reform Unit (ERU) of Ministry of Finance for bearing the interest cost of the legacy burden by the government and provision of additional funds for other projects for one year.

Presently PIA is not operating on the Dera Ismail Khan sector because of the low passenger load and fleet constraints where it is difficult to meet the operating cost. However, PIA is operating two weekly flights on the Karachi-Quetta-Zhob-Islamabad sector and two weekly flights between Quetta and Multan.

The Senate Standing Committee was informed that it follows the laid-down policy to complete the process of life insurance to which passengers are entitled and for crew who die during aircraft accidents. In line with the policy, the PIACL adopted the procedure to compensate the heirs of the passengers of flight PK-661, which crashed near Havelian on December 7, which 39 revenue passengers and three non-revenue passengers and five crewmembers died.

Through their lawyers insurance brokers have conveyed their agreement to settle the claims. The PIACL will publish an announcement in the newspapers in the middle of January to inform the families of the deceased passengers about the payment of compensation of Rs 5 million in compliance with the Carriage by Air Act, 2012. Letters to family members will be dispatched after the announcement, requesting them to submit the required documents (including succession or guardianship certificate, CNICs and Form B). A basic information questionnaire will also be enclosed with the letter to be filled by the legal heirs. The questionnaire and the required documents will be forwarded to the insurers for releasing the funds for being sent to the legal heirs.

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)