Pakistan International Airlines Corporation Limited (PIACL) has apparently settled a $26 million lease issue with Asia Aviation Capital Limited (AACL) over two aircrafts.
It was determined at a recent meeting that a court verdict against PIACL may result in a binding compulsion to pay a claimed amount of $31.3 million to AACL. Caretaker Prime Minister Kakar had then authorized the Pakistani side to travel to Kuala Lumpur on October 9, 2023. The team was successful in persuading AACL to settle the matter for a total of $26 million, Business Recorder reported earlier today.
Notably, the leasing agreement with AACL required that the aircraft be redelivered after necessary repairs at a certified maintenance and repair facility. As a result, when the lease expired, PIACL positioned the aircraft in Jakarta in September/October 2021. The aircraft were scheduled to be redelivered in six to eight months. However, this schedule could not be followed, resulting in a dispute between AACL and PIACL over who was to blame for the delay.
As a result of the dispute, there was litigation in 2019 and 2021. PIACL was ordered to pay AACL $12.058 million. On September 11, PIACL received a Court Notice from AACL’s lawyers, requesting an immediate payment of $31.3 million liability on the two aircraft.
Consequently, PIACL’s UK-based counsels Norton Rose & Fullbright sought time to respond to AACL, which was granted.
It was determined that an adverse verdict against PIACL may result in the binding compulsion to pay the claimed amount of $31.3 million. Caretaker Prime Minister Kakar had then authorized the negotiation team to travel to Kuala Lumpur on October 9, 2023. The Pakistani side was successful in persuading AACL to settle the matter for a total of $26 million.
The Ministry of Aviation informed that the negotiation team brought the outcome of the negotiations to Kakar’s attention on October 11, 2023, which was attended by ministers and senior officers from the Ministry of Aviation and PIACL.
Kakar was informed of the final settlement of $26 million which comprised the cost of two aircraft, which were recently valued at $20.75 million. All sides agreed that a settlement of $26 million was in the best interests of the national flag carrier.
The Ministry of Aviation requested that the Economic Coordination Committee allow for a settlement agreement with AACL in accordance with the letter of intent and that the Finance Division be directed to arrange a grant of Rs. 7.3 billion through grant on priority, allowing PIACL to clear outstanding dues of AACL.
It was suggested that the funds be arranged through bridge financing between PIACL and the Civil Aviation Authority, subject to PIACL recoupment on future arrangements. The ECC consented in principle to a Rs. 8 billion bridge financing between PIACL and Civil Aviation Authority for the settlement and transfer of title of two aircraft and to meet immediate working capital requirements.
