The Economic Coordination Committee (ECC) of the Cabinet has issued a directive emphasizing the prioritization of the privatization of Pakistan International Airlines Corporation Limited (PIACL) rather than pursuing restructuring, according to a news outlet.

On September 6, 2023, the Ministry of Aviation briefed the ECC regarding PIACL, the national flag carrier, disclosing that the government of Pakistan currently holds a 92 percent ownership stake in the company. PIACL, once renowned for its achievements, faced financial challenges since the late 1990s, struggling to compete effectively with emerging regional airlines. The airline’s woes were exacerbated by a lack of entrepreneurial spirit, external influences, internal mismanagement, and the inability to fund the expansion of its fleet. To mitigate losses, PIACL accumulated a considerable debt burden, which has now reached unsustainable levels.

As of December 31, 2022, PIACL’s debt and liabilities amounted to Rs. 743 billion, a figure five times greater than the total value of its assets. The airline recorded total losses of Rs. 86.5 billion in the last fiscal year, including operational losses of Rs. 11 billion. If the situation persists, PIACL’s debt and liabilities are projected to soar to Rs. 1,977 billion, with annual losses reaching Rs. 259 billion by 2030.

It was noted that the Government of Pakistan had underwritten Rs. 383 billion of the current debt liability of PIACL, and as the majority owner with a 92% stake, it bears ultimate responsibility for the remaining obligations.

Over the past decade, numerous efforts have been made to ensure the sustainability of PIACL, adopting two primary approaches. The first approach centered on reviving the airline by reducing costs, enhancing internal management, and expanding the fleet size with financial injections from the Government of Pakistan.

The second approach focused on a comprehensive restructuring encompassing financial, legal, operational, commercial, and human resources aspects, aimed at cleaning the company’s balance sheet and attracting private investment through the divestment of government shares. This approach was initially outlined in the 2017 Dubai Islamic Bank Consortium Report, commissioned by the Privatization Commission, and subsequently in Dr. Ishrat Hussain’s 2020 Report on PIA Restructuring Plan. Additionally, PIA conducted a study in collaboration with IATA to formulate a viable business plan, which also recommended a similar approach and indicated a capital infusion of USD 3.5 billion over five years to expand the fleet from 29 aircraft in 2021 to 49 by 2026. Unfortunately, none of these reports could be implemented for various reasons.

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