The Exim Bank has reiterated its interest in financing Pakistan International Airline's multimillion dollar fleet replacement plan, a highly placed PIA source told Business Recorder here on Tuesday.
The source said that a high-powered delegation from the United States would be visiting Pakistan from Feb 16 to 27 for discussions on economic matters with the government. A senior official from the Exim Bank has especially been included in the delegation to discuss the PIA's fleet replacement plan with the PIA management, the source said.
Photo © Chris Sheldon
The PIA is in dire need of replacing its ageing fleet, particularly Boeing-747-200, F-27 and Airbus B-4 aircraft. These aircraft will be phased out and replaced with modern aircraft to be able to stand in line with the quality airlines of the world.
"If the fleet renewal does not take place by the end of 2002, the PIA will become the backyard airline of its competitors," remarked the source.
The PIA management's strategy had been to concentrate initially on high-cost operational areas and right size the manpower in accordance with the new fleet plan, which would include phasing out of F-27 and Airbus B-4 aircraft.
As required by the Ministry of Defence, the PIA has now developed an in-depth study of various choices available to the airline in the current aviation scenario regarding its fleet replacement.
The aircraft evaluated include Boeing 777, new or slightly used A-340 in combination with A-310 aircraft in support of the PIA's current fleet. The PIA has six A-310 aircraft in its fleet and acquisition of the same type rather than a new type would result in six types of aircraft in the PIA fleet, resulting in huge savings, both in terms of manpower, maintenance, training and inventories.
The Ministry of Finance has reviewed the PIA's fleet replacement plan before putting up final recommendation to President Pervez Musharraf for approval.
The PIA management in Islamabad on Jan. 29 gave a presentation, which was chaired by the Finance Minister. Others who participated in the meeting included the Minister for Privatisation; Secretary-General, Ministry of Finance, and Secretary, Defence and Chairman, PIAC.
The Finance Minister appreciated the performance of the PIA management in overcoming its financial problems and turn around of the airline, which is now consistently recording operating profit since August last year, despite serious negative impact of discontinuation of over-flying Afghan airspace, uneconomic level of flying for the PIA aircraft due to military operations in the region, insurance surcharge, imposed by the under-writers and lately discontinuation of Far Eastern flights due to restrictions on over-flying across India and visa restrictions by most of the countries.
The Finance Minister was briefed that though the PIA had been moving from one crisis to another, yet it had achieved one of the highest seat utilisation on international routes, ie 77.68 percent, which was highest in the history of the national carrier ever achieved.
The Finance Minister was informed that the turn-around had been achieved by reducing the break-even seat factor through various cost cutting measures and re-structuring of the PIA's entire operating pattern.
He was told that while the reduction in fuel prices was generally considered to be substantial, the factual position was that its impact had been offset by the above negative factors.
The turn-around has been achieved essentially because of the management's professional re-structuring of the airline, which had increased the revenue through improvement in yield and other cost cutting measures in operational areas.
From a position where the government was thinking to close down the airline, reaching a stage of recording profits in less than a year, is indeed no mean achievement.
The PIAC Chairman, Lieutenant-General Hamid Nawaz (retd), realising the gravity of the situation, has picked up a team, comprising men of calibre and possessing required business acumen and professional experience. His choice paid dividends and the grit and determination with which the PIA Managing Director, Ahmed Saeed, and Chief Operating Officer, Khurshid Anwar, worked has lifted the airline, buried fathoms deep, to a position of respectability.
The meeting was informed, loud and clear, that unless the PIA's balance-sheet was improved and financial covenants required for acquiring additional loans were met, the PIA would not be in a position to get financial support at its own. The balance sheet can be made acceptable to the financial institutions with the injection of equity so that the fleet replacement plan becomes acceptable to the financial institutions.
The new PIA management has done it and shown results earlier than expected. It is now waiting for a slight push to touch the height of excellence and put the national carrier along side those boasting that they were the best in the world.
The PIA management is anxiously waiting for the presentation before President Musharraf where they are confident they will get the much-awaited nod