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Home National

Some Facts about PIA

Editor Isb by Editor Isb
May 14, 2025
in National, Latest
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pia restructuring
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By Shahzada Ahsan Ashraf

Invariably, since the year 2004, PIA, a loss-making public entity, started raising demands from the ex-Chequers to support it in terms of finance to relieve the burden of its rising debts.

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

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shahzada-ahsan-ashraf
Writer

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 judge its board’s seriousness and their ability to adhere to its business/restructuring plan and follow the timelines in letter and spirit.

To keep this loss-making, cash-strapped public entity afloat, the National Exchequer has doled out billions of rupees from its kitty, and now, at present, the lethargy of PIA’s board and management has brought it to the verge of collapse due to unmanageable financial crises, 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, MOA moves a summary on “financial support for PIA and its restructuring plan” demanded 23 billion, against which the government first declined and decided to go for its expeditious sell-off.

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

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

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

The government has always pursued the policy of “ahda teeter aadha batair.” With the choice, the government, on either of two options, i.e., privatization of PIA or restructuring with a bailout package, on the table, must act and proceed without any political or hidden agenda.

The concept of having foreign consultants for the sake of making it a going concern was planned and at times materialized, but not a single recommendation was put forward for deliberations or given importance for its implementation.

At this juncture of time and position of the airline, burdened with a financial crunch to the tune of 743 billion PKR, it is worthy to estimate the basis of privatization, i.e., the value of assets, which are around one-fifth of the financial load on the airline. In the economic equation, the government may get a total of one-fifth (1/5) as mentioned above, with four-fifths (4/5) liability remaining on the ex-Chequers. On the contrary, the continuation of bailout packages may enhance the liabilities fourfold.

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

Here, the ex-Chequers, as lenders, while approving bailout packages, forget the 5 C’s of credit:

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

Most importantly, the borrower in this case, PIA, its level of responsibility and willingness to meet its obligations on the business or restructuring plan with conditions by the lender, i.e., the government, must fix the responsibility on:

  1. Ministry, who vet the plan.
  2. Board, who approved the plan.
  3. Management, who prepared the plan.

A monitoring plan by the government to review the progress, ability, and capacity of the airline in meeting all those parameters of success/profitability.

Management should only be answerable to the board, and the board should be answerable to the ministry, and the ministry to ECC/CEC. Likewise, responsibility goes down the line.

Privatization may not give better results (gain 1/5, and liability remains in government 4/5) than what can be achieved through a single bailout certainly with conditions (liability remains 4/5), but the asset remains with the government, and the entity’s sickness is removed through surgery.

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

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