PIA seeks Rs 55bn from government to fly high

[Imran Khan]

PIA seeks Rs 55bn from government to fly high

* PIA MD tells Senate airline to recover from losses by end of 2010 if provided the required financial help
* Says no plan to reduce fares, Haj fares calculated for oil purchase hedged at $120 a barrel

By Muhammad Bilal

ISLAMABAD: The Pakistan International Airlines (PIA) management on Monday told the Senate Standing Committee on Defence that it needed Rs 55 billion from the government to steer the airline out of financial crisis.

“Our business plan is ready and it will be submitted to the Economic Co-ordination Committee (ECC) of the Cabinet on November 18. We need sovereign guarantee from the government for the required Rs 55 billion,” PIA Managing Director (MD) Aijaz Haroon said while briefing the Senate body at the Parliament House.

Earlier, ECC Chairman Senator Nisar A Memon asked Haroon about the money the government, itself faced with a financial crunch, should inject into PIA to improve its financial situation.

The committee members also raised concerns over the airline’s continued losses and asked the MD if there were any plans being considered to privatise PIA.

Recovery: Haroon said PIA would recover from its losses by the end of 2010 if it were provided the required financial help. Responding to a number of queries by lawmakers, he said increased fuel prices and fluctuating exchange rate had badly hit PIA.

He said the organisation had accumulated losses of Rs 38 billion until September 2008, adding that PIA had taken a loan of $1.4 billion to buy new aircraft that was continuously accumulating due to depreciation of the Pak rupee.

However, Haroon assured the committee that efforts were being made to control the losses, especially operational.

Fares: Replying to members’ concerns, he said the airline has no plan to reduce its fares including the Haj fare. He told the standing committee that the Haj fare was calculated on oil prices hedged for this particular purpose at $120 per barrel.

The Senate body directed the managing director to submit details in the next meeting, expected early next month, on hedging so that it could determine if the issue was handled properly.

The Standing Committee on Defence also asked Defence Secretary Kamran Rasool to conduct an audit of all purchases made by the airline, including those made by the previous management.

The committee also sought details of the employees reinstated in PIA and its financial implications in the next meeting. The MD informed the meeting that services of 4,800 contractual employees were regularised while 180 persons, whose services were earlier terminated, were reappointed.

 

[fatman17]

Pakistan Airline to Pledge New York, Paris Hotels to Raise Cash

By Naween A. Mangi

Nov. 19 (Bloomberg) -- Pakistan International Airlines Corp., on course for a fourth straight annual loss, plans to raise 30 billion rupees ($379 million) by pledging two hotels as it struggles to raise funds amid the credit crunch.

``We are an organization no one wants to invest in,'' Managing Director Mohammad Aijaz Haroon said in an interview in his Karachi, Pakistan office yesterday. The airline's Roosevelt Hotel in New York and Hotel Scribe in Paris will be put into a new business, which state-owned companies will be invited to invest in, he added.

The nation's largest airline also plans to cut 5,000 jobs, or 28 percent of its workforce, by shifting workers to outsourcing companies after failing to get a cash injection from Pakistan's cash-strapped government. The carrier, which is 88 percent state-owned, is also battling higher fuel costs and a travel slowdown caused by the global recession.

``There are no prospects for this airline,'' said Habib-ur- Rahman, who manages 4.5 billion rupees in stocks and bonds as chief executive of Karachi-based Atlas Asset Management Ltd. ``It's a drain on the national exchequer and the government should examine its viability and wind it up.''

PIA, as the carrier is also known, posted a loss of 38.4 billion rupees in the first nine months compared with 10.9 billion rupees a year earlier.

The carrier expects to get government approval for the hotel plan next week, Haroon said. Investors will receive a guaranteed rate of return from the hotels, which are worth more than 60 billion rupees, and the carrier would pledge to buy them back in about five years, he added.

Wall Street, Malcolm X

``One way out of our problems is to go to the market and sell our assets,'' Haroon said. ``But that's not a smart decision because there's no money in the market.''

The 45th street, Madison Avenue, Roosevelt Hotel has been featured in several movies, including ``Wall Street,'' ``Malcolm X,'' and ``Maid in Manhattan,'' according to its Web site.

The money raised will be used to partly pay off the airline's short-term debts amounting to 55 billion rupees, said Haroon. The 53-year-old took charge of the company in May after three decades at the carrier as a flight captain.

Pakistan International's shares, which have dropped 33 percent this year, were untraded at 4.20 rupees on the Karachi Stock Exchange yesterday.

The airline will shift employees to outsourcing companies to manage operations such as catering and ground services, Haroon said. The airline has 18,000 employees now.

``There will be some resistance to this plan, but we will have to explain the benefits to employees.''

The carrier this year hedged fuel for the first time and plans to hedge as much as 30 percent of its fuel needs.

Pakistan International plans to expand its fleet to 59 aircraft by the end of 2010 from 40, Haroon said. The airline would begin flights to Barcelona and Dublin next year.

To contact the reporter on this story: Naween A. Mangi in Karachi at nmangi1@bloomberg.net.

 

[EAGLE_EYE Defender]

PIA is our national airline n we just cannot let it go going in loss,
the government must give the financial need to help our national airline in one of the top airlines of the world once again, n besides being a public sector institute it also works 4 dA benefit of people rather than just private benefit