The financial turbulence at Pakistan International Airlines (PIA) has reached a critical juncture, with the airline perilously close to grounding additional aircraft due to an acute cash flow crisis. Already, PIA has taken the drastic step of grounding five of its 13 leased aircraft, and another four are poised to meet a similar fate, as disclosed by the Ministry of Aviation. The urgency of this situation has been further compounded by impending disruptions in the supply of spare parts from both Boeing and Airbus, expected to commence by mid-September.
In response to this dire scenario, the Ministry of Aviation has issued an emphatic warning to the federal government, shedding light on PIA‘s mounting arrears owed to creditors, aircraft lessors, fuel suppliers, insurers, international and domestic airport operators, and even the International Air Transport Association (IATA).
In an effort to navigate these pressing financial challenges, the ministry has urgently petitioned for Rs. 23 billion in financial support while also seeking the suspension of duties, taxes, and service charges to domestic agencies. Nevertheless, this plea is lacking a well-defined and viable business plan to accompany it.
The complexity of PIA’s impending restructuring, expected to span an estimated eight months, adds to the growing concerns. With the government of Pakistan holding a substantial 92 percent stake in PIA, a formidable challenge lies ahead in ensuring the airline’s continued operation throughout the restructuring process.
The roots of PIA’s financial struggles trace back to the late 1990s and can be attributed to several factors, including heightened competition from emerging regional airlines, internal mismanagement, and inadequate funding for expanding its fleet. As of December 31, 2022, PIA’s staggering debt and liabilities had reached Rs. 743 billion, a sum five times greater than the total value of its assets, underscoring the gravity of the situation.
