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Invariably from the year 2004 PIA ,a loss making public entity

News Desk by News Desk
May 13, 2025
in National
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Invariably from the year 2004 PIA ,a loss making public entity
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By: Shahzada Ahsan Ashraf

Invariably, from the year 2004, PIA, a loss-making public entity, started raising demands from the exchequer for financial support to relieve the burden of its rising debts.

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In exchange, successive governments asked the cash-strapped airline to present its business plan, viz-à-viz restructuring plan, which might enable the airline to pay off its debts in due course by becoming profitable.

Each time, the borrowing, instead of helping the airline improve its financial ability to pay back, made the carrier’s performance further deteriorate in successive years, as no parameters for performance checks were put in place for the airline to assess its (board vs. management) level of seriousness and their ability to adhere to its business/restructuring plan and follow the timelines in letter and spirit.

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To keep this loss-making, cash-strapped public entity afloat, the national exchequer has doled out billions of rupees from its funds.

At present, the lethargy of PIA (board and management) has brought it to the verge of collapse due to an unmanageable financial crisis, or simply put, serious cash flow problems, with liabilities as high as 743 billion PKR. This is five times more than the total assets of PIA.

Once again, following the historic borrowing methods adopted by PIA through its ministry, an MoA moved a summary on “financial support for PIA and its restructuring plan,” demanding 23 billion, which the government initially declined before deciding to pursue PIA’s expeditious sell-off.

Meanwhile, it approved a 14 billion bailout package without any performance check parameters or assessment of its ability to return the funds in the agreed time!

For the last twenty years, the government has been following a non-serious policy, especially regarding PIA:

  1. On making this loss-making entity profitable with a one-time bailout package based on the business/restructuring plan presented by PIA’s management, duly approved by its board and finally vetted by its ministry, where the parameters for performance checks and reviews with timelines were never monitored or pursued rigorously and vigorously.
  2. On seriously pursuing PIA’s privatization.

The government has always pursued the policy of “ahda teeter aadha batair” (half partridge, half quail).

With the choice between two options—privatization of PIA or restructuring with a bailout package—the government must act and proceed without any political or hidden agenda.

The concept of hiring foreign consultants to turn it into a going concern was planned and, at times, materialized, but not a single recommendation was put forward for deliberation or given importance for implementation.

At this juncture, with the airline burdened by a financial crunch to the tune of 743 billion PKR, it is necessary to estimate the value of privatization, i.e., the value of assets, which are around one-fifth of the financial load on the airline.

In economic terms, the government may recover one-fifth (1/5) as mentioned above, with four-fifths (4/5) of the liability remaining on the exchequer. On the contrary, the continuation of bailout packages may increase the liabilities fourfold.

Privatization of the sick entity is a hard and harsh solution, whereas restructuring is a softer solution. In restructuring, the only lapse is the fixation of responsibility.

Here, the exchequer, as the lender, while approving bailout packages, forgets the 5 C’s of credit:

  1. Character
  2. Capacity
  3. Capital
  4. Collateral
  5. Conditions

Most importantly, the borrower in this case, PIA, and its level of responsibility and willingness to meet its obligations under the business or restructuring plan with conditions set by the lender (the government) must be emphasized.

The government must fix responsibility on:

  1. The ministry, which vets the plan.
  2. The board, which approves the plan.
  3. The management, which prepares the plan.

A government monitoring plan is needed to review the airline’s progress, ability, and capacity in meeting all those parameters of success and profitability. Management should only be answerable to the board, the board to the ministry, and the ministry to ECC/CEC. Likewise, responsibility flows down the line.

Privatization may not yield better results (gain 1/5 and leave 4/5 of the liability with the government) than what can be achieved through a single bailout with conditions (liability remains 4/5), but the assets remain with the government, and the entity’s sickness can be removed through proper restructuring.

(The writer is a Former Chairman and Managing Director PIA, Former Federal Minister of industries and production)

Disclaimer: The views expressed on this website are those of the individual authors and may not reflect the opinions of the site or its owners.

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