Pakistan's national carrier forced to ground aircraft amid severe financial crisis

As it struggles to secure funds to maintain its operations, Pakistan International Airlines (PIA) has reportedly resorted to grounding several aircraft.

Dawn reports thatover the next few months, PIA's core functions and non-core assets are expected to be put up for sale.

Grounding aircraft

Just last week, Pakistan's Ministry of Aviation issued a stern warning and told the federal government that the airlineis grappling with a severe cash flow crisis.

This, the ministry said, has led to arrears with creditors, aircraft lessors, fuel suppliers, insurers, international and domestic airport operators, and even the International Air Transport Association (IATA).

Due to this, Pakistan's national flag carrier has now been compelled to ground five of its 13 leased aircraft, said the ministry, adding that four more aircraft face a similar fate.

Cash injection to save dying airline

The Ministry of Aviation, as per Dawn, also reported that Boeing and Airbus were on the verge of discontinuing the supply of spare parts by mid-September.

Amid mounting concerns, the ministry has requested an immediate "cash injection" of 23 billion Pakistani Rupee (around 77.3 million USD). It has also asked for the suspension of duties, taxes and service charges to domestic agencies.

However, Dawn reports that these requests were not accompanied by a concrete and viable business plan.

The restructuring of PIA is a complex process expected to take around eight months, it added.

Pakistan International Airlines' losses

PIA, which was once known for its slogan "Great People to Fly With," has faced mounting losses since the late 1990s.

The airline's financial difficulties have been attributed to competition from emerging regional airlines, mismanagement, and insufficient funding for fleet expansion.

As of December 31, 2022, PIA's debt and liabilities stood at Rs 743 billion ($2.50 billion), five times more than the total value of its assets. Its losses for the last financial year (2022-23) stood at Rs 86.5 billion ($291 million) said the aviation ministry.

"If the situation continues as such, PIA's debt and liabilities will rise to Rs 1,977 bn ($6.65 billion) and its annual losses will rise to Rs 259bn ($871 million) per annum by 2030," it added. The ministry also warned that Rs 383 billion ($1.29 billion) of the current debt liability of PIA stood underwritten by the government of Pakistan, which it said, as the 92 per cent owner, had the responsibility for the remaining payables.

(With inputs from agencies)

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