The federal government has approved Rs457 billion worth restructuring plan for Pakistan International Airlines.
The federal government approved Rs457 billion worth restructuring plan for PIA in order to make the national flag carrier financially feasible but without having a business plan in place. The Economic Coordination Committee (ECC) gave approval for PIA to launch a Voluntary Separation Scheme (VSS) to lay off 25% of its workforce that makes it 3,500 employees. It also approved a restructuring plan of Rs457 billion for the national carrier.
The meeting also approved Rs330 million for the Ministry of Defense for the maintenance of aircraft. The restructuration plan will be executed after getting approval from the federal cabinet.
The ECC meeting was chaired by the Finance Minister Hammad Azhar. However, the plan may not achieve the anticipated objectives, as it has been approved without a business plan and would not be ready in the next 6 months.
The ECC further approved to divide the PIA into two companies, one; Good PIA that will have only Rs137 billion liabilities along with core assets, second; the Bad PIA that will pick Rs457 billion liabilities and will retain the ownership of its non-core assets.
“After a detailed consultation, the ECC recommended the restructuring plan of PIACL for onward submission before the Cabinet, after reconciliation of tax liability figures, with a direction to place a cap on future debt, which PIACL could take against its improved balance sheet, once restructuring plan is implemented”, stated the Ministry of Finance.
Moreover, in March 2020, the government had directed Dr. Ishrat Hussain to prepare the PIA’s restructuring plan.
“With a negative equity of Rs460 billion comprising bank loans of Rs326 billion and other payables of Rs118 billion at its balance sheet, the company neither remained a self-sustained entity commercially nor operationally efficient and sustainable,” the ECC was informed.