The Economic Coordination Committee (ECC) of the Cabinet has approved Rs. 4 billion in Technical Supplementary grants for markup payment of Pakistan International Airlines (PIA).
Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar chaired the meeting of ECC today.
Sources said that Aviation Division requested the ECC to release pending claims of PIAC amounting to Rs. 22.94 billion on account of markup upto June 2023 enabling it to overcome its cash flow issues.
It is submitted that a meeting was held in PM’s office on December 30, 2017, where it was decided that markup on the debt of PIA would be picked up by GoP for five years (From July 2018 to June 2023) and its payment would be made directly to the lenders.
Consequently, payments of markup on GoP guarantee loans of PIA have been made to the lenders from July 2018 till November 2022.
Ministry of Finance allocated Rs. 15 billion during the financial year 2022-23 against the demand of Rs. 31.5 billion out of which Rs. 14.689 billion was utilized up to November 2022. The markup from December 2022 to June 2023 amounting to Rs. 23.255 have been sent to the finance division for the release of additional funds of Rs. 22.94 billion however no funds so far have been released.
It is reiterated that the non-release of additional markup payment supports has exacerbated the already persistent cash flow problems of PIA. Until now, PIA had been with severe difficulty making markup payments from its available operations cash flows however it has not reached a point where it is unable to make any further payments.
The diversion of operational cash flows to markup payments has led to the delay in payments due in relation to PIA’s core operational obligations. This includes payment in relation to various services without which flight operations are not possible such as payments in relation to the lease of aircraft and airport services.
It may be mentioned that out of PIA’s fleet of 31 aircraft, 13 aircraft have been acquired on lease. Some of the most significant recent instances and notices received by PIA in this regard.
Malaysia detained one of PIA’s aircraft which was later released under court order, similarly, another lessor filed a lawsuit for non-payment in a US court.
Some other lessors including IATA have issued warning for payment of its outstanding dues of $2.8 million which was also made on June 23, 2034, with great difficulty so the aviation division told the ECC that it will not be possible for PIA to continue its operations if markup amounting of Rs. 22.9 billion is not immediately released.
