Govt is Considering to Divide PIA into Two Companies

Privatization Commission (PC) is considering a proposal to divide Pakistan International Airlines Corporation (PIAC) into two companies – PIA-I and PIA-II – with the objective to hand over liabilities including interest payment of Rs. 180 billion loans to the government.

The PIA-II would be an operational side of the national flag carrier with a clean balance sheet, while outstanding liabilities of the national airlines would be parked in PIA-I and the government would be responsible for their payment.

This was stated by Secretary Aviation Division Muhammad Irfan Ellah in a briefing on PIA to the Members of Public Accounts Committee (PAC) on Tuesday.

Syed Khushid Shah headed the committee meeting.

The corporation has devised a strategy for core and non-core business of the national flag carrier. Some important departments of the organization like flight kitchen, medical, training center and marketing will be outsourced, advertisements asking for EOIs on this have already been published.

While, flight operation, cabin and cockpit crew, finance, IT and admin departments will remain under PIACL control. Similarly, some departments of engineering section will be under PIACL control, while overhauling, maintenance and repairing will be privatized.

In its recommendations, PAC asked the government to park Rs. 180 billion legacy loan for at least five years so that the loss making entity could be turned into a profitable organization.

Auditor General of Pakistan Rana Asad Amin endorsed PAC’s recommendations and cited that the government also parked Rs. 260 billion liabilities of DISCOs and made payment from government’s kitty.

Showing its dissatisfaction over explanation of PIA management for declining profit of the entity despite the downward trend in fuel prices, the committee directed AGP to conduct a detailed audit of PIA to determine reasons behind its financial losses.

The committee also recommended the government to utilize proceeds from the sale of Roosevelt Hotel New York and Hotel Scribe Paris, owned by PIA for retirement of its swelling debt.

Chairman Committee observed that the profits of these hotels against book value of hotels were less than 0.5 percent against international standard. Globally, 6 percent profit on investment was considered a valuable gain and PIA was earning only $1.5 million annually from these hotels. “The management can even earn 3 percent profit on bank deposits”, he argued.

Member Committee Mian Manan said that the PIA management could retire all outstanding of PIA by selling these hotels.

The committee also directed the PIA management to buy aircrafts from manufacturers directly to save public money as leasing company charged more than the manufacturers. He further observed that aircrafts leasing from Sri Lanka was not a good decision, adding the Sri Lankan Company played role of a broker and earned profit from both sides – purchaser and seller.

Syed Khurshid suggested that PAC should play a supervisory role to bail out the PIA from financial crunch and recommended that monthly briefing on the performance of PIA should be made a feature of PAC proceeding for some time.

He further said that Aviation Policy failed to address the grievances of aviation sector and public, adding the aviation policy should be revisited.

Secretary Aviation Division said that a private Chinese Airliner would start its operation in Pakistan as license had been granted. It would start its domestic operation in December-January 2017, he added.

He further clarified that it was misconception that PIA sold routes to other airliners, adding the air route agreements were inked between the countries on reciprocal basis and air companies could not sell any route at their own.

“The airline can sell only slots allocated at various designations like Bangkok and Heathrow Airport”, he explained.