The government of Pakistan allowed Rs 5.6 billion guarantees to revive two grounded aircraft of Pakistan International Airline. The decision was taken at a meeting of the Economic Coordination Committee of the cabinet presided over Finance Minister Asad Umar. The ECC did not approve about Rs9 billion financing to the Pakistan International Airlines (PIA).
The PIA is “facing challenges of accumulated liabilities from Aircraft Lessors, vendors and service providers like General Authority of Civil Aviation, Saudi Ground Services and international fuel suppliers regarding the suspension of services. The aviation division demanded Rs8.4bn government guarantee, besides Rs485 million cash grant to repair in-flight entertainment system.
The finance ministry did not agree to the financing and asked PIA to provide complete data as to how such financing would generate additional revenue for the PIA. Also, it wanted to reconcile payments due to foreign suppliers, service providers and vendors.
On the other hand, the ECC, allowed Rs5.6bn guarantee to enable the PIA to revive two grounded aircraft on an urgent basis to secure some new routes as part of the overall route rationalisation plan and smooth Haj operations.
The finance minister also allowed upward adjustment in government guarantees issued against dollar-denominated loans of the PIACL to offset difference arising out of exchange rate depreciation. The official statement released after the meeting said: “additional guarantees to PIACL of Rs5.6bn for repair and maintenance of engines and acquisition of related spare parts for operationalising grounded planes would strengthen route rationalisation initiatives and add to revenue generation of the national flag carrier,”.