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clickhappy
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PIA 777 Scandal?

Mon Apr 17, 2006 11:55 pm

This was being discussed in another thread, but deserves it's own, so I broke it out.

Secret Documents Reveal PIA Owns No B-777 Aircraft

http://www.satribune.com/archives/apr25_may1_04/P1_pia.htm

Is this a big story in Pakistan?
 
FlyDeltaJets
Posts: 1631
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 1:40 am

It only seems like a big deal because they lied about it. If they had just originally said that they were leased. It would have been no issue. Also why is the lease through the One Dollar Company. It sounds like a front for some illegal activities. PIA needs to shed some light on this.
The only valid opinions are those based in facts
 
mrcomet
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 1:55 am

$140,803,561 per 777. I think thats a good price.
The dude abides
 
aa1818
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 2:55 am

I thought PIA purchased 772LRs from Boeing?? Or are these a/c separate from that deal?? (The article speaks of 772ERs)

AA1818
“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
 
khobar
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 3:30 am

"A special purpose vehicle company, Taxila Limited, was incorporated in Cayman Islands. The shares of Taxila Limited are held by a trustee (Maples Finance Limited) on trust for a charitable trust (Taxila Limited Trust). As part of the financing structure, the purchase agreement between Boeing and the PIA was assigned by the PIA to Taxila Limited pursuant to the purchase agreement assignment dated December 15, 2003. The purchase agreement assignment specifically stated that the purchase agreement would be re-assigned by Taxila Limited to the PIA upon the release of the “Lien of the Security Documents”. In other words, once US Exim Bank guaranteed facility was repaid by the PIA, the deeds for the airplanes would revert back to PIA."

Let's read that again: The purchase agreement assignment specifically stated that the purchase agreement would be re-assigned by Taxila Limited to the PIA upon the release of the “Lien of the Security Documents”. In other words, once US Exim Bank guaranteed facility was repaid by the PIA, the deeds for the airplanes would revert back to PIA. Furthermore:

"The above-mentioned structure is a standard/typical finance lease arrangement, which is commonly employed, inter alia, by many airlines to finance the acquisition of aircraft. Notwithstanding the legal ownership of the aircraft by Taxila Limited, all the rewards and obligations of the aircraft are carried by the PIA. Taxila Limited has entered into a 12-year lease agreement with PIA.

"Under the lease agreement, PIA is required to pay rent in an amount at all times equal to the corresponding quarterly payment required to be made by Taxila Limited under US Exim Bank guaranteed financing. It is cardinal legal principle that in evaluating a transaction, it is the substance and not just the form that should be adhered to.

"The special purpose vehicle set up in the form of Taxila Limited is in effect and in substance a financing arrangement put in place to comply with the terms of US Exim Bank. The transaction structure, as reflected in the documents for the financing of these aircraft, clearly establishes the financing nature of the transaction whereby the concepts of flow through and limited recourse are clearly established. In other words, in a finance lease the SPV (Taxila Limited in PIA’s case) is only a conduit and the actual payment obligations are of the PIA and all recourse under this financing arrangement is to the PIA as the principal obligator."

http://www.dailytimes.com.pk/default.asp?page=story_9-5-2004_pg7_39
 
azza40
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 7:15 am

oh well if PIA dont own the planes! for us spotters, all we care about is that the plane is in their livery, and it is enjoyable to see!

thats my veiw on the kerfuffle!

Aaron  sly 
Not been on here for a good 2/3 years!
 
dl021
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 7:47 am

I guess you could say that the bank owns my house, under the same circumstances. Once I get done paying the bank back I get the deed to my property back.

I wonder why this is a big deal? They're financing the airplanes with an open ended lease which means they buy them for a residual value at the end of the lease, where they paid less than regular finance payments (similar to balloon payments).
Is my Pan Am ticket to the moon still good?
 
khobar
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 8:42 am

Quoting DL021 (Reply 6):
I guess you could say that the bank owns my house, under the same circumstances. Once I get done paying the bank back I get the deed to my property back.

Exactly, and well done for putting things into perspective. Welcome to my respected users list.
 
saturn5
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 9:01 am

I fail to see significance of this story. Did someone break a law, steal money or engage in some other illegal activities?. Did the purchase transaction involve laundered monies, Cosa Nostra or perhaps Mr. Khodorovsky is the true owner here? If none of the above then I have nothing better to do than go to bed ... Big grin
 
cricket
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 6:55 pm

You give a journalist with no idea of business and economics the details of a complex financial deal they won't be able to make head or tail of it. Therefore, they'll just call it controversial. Few airlines (even SQ and EK sometimes fall into this category) have the funds to buy aircraft outright - cash down. Think of it this way, how many of us can afford to purchase a brand new car cash down? Especially if that car happened to be a supercar (like the 777 is for aircraft - sorry for the analogy, couldn't help myself!  Silly)
And airlines like PK will never have the cash resources to stump up for a cash-down payment of a narrowbody, can't buy a 777 just because they felt like one in the morning. I would like to see how complex the financial instruments on the Boeing-AI deal will be, because I know that AI is approaching commercial banks for loans for the 777's and 787's they're buying.
A300B2/B4/6R, A313, A319/320/321, A333, A343, A388, 737-2/3/4/7/8/9, 747-3/4, 772/2E/2L/3, E170/190, F70, CR2/7, 146-3,
 
AngelAirways
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 9:55 pm

Actually this journalist is a bit thick and there is nothing out of the ordinary.

The aircraft are under a finance lease with an SPC (special purpose company) created just for the purpose of this financial transaction.

Many airlines structure these methods of finance for tax savings and other reasons. its too complex to explain here, but Iberia for example proudly boast as being the leaders in this type of "creative" finance which is totally legal, and saves a lot of money (mainly in taxes). (Most of their 346s are 'owned' by SPCs in the cayman islands etc.

Not to mention that United, US airways, American et al have all re-financed aircraft which they formerly owned in similar ways since 2001.
 
Desh
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 11:09 pm

Yep- it seems to be a regular financing deal - I assume PIA isnt all that flush with cash to buy stuff outright ...

BTW I do think the guy in the picture needs to be prosecuted just for that dance move he is is doing - (is it a dance move ?) - grandma did not need to see that ...
"History is merely a list of surprises. It can only prepare us to be surprised yet again." - Kurt Vonnegut
 
Saleem
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 11:23 pm

According to my discussion with one PIA senior staff member, due to some issues PIA cannot buy these aircrafts directly or Banks were not comfortable in lending money so an alternative arrangements were made. That's it

Nothing probably SCANDAL...
 
max999
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 11:37 pm

“Basically Citibank controls all the corporate and financial strings. The footprints of Finance Minister Shaukat Aziz, now on leave from Citibank, are visible all over the deal,” a former World Bank official who saw the PIA documents observed in Washington.

The current Pakistan finance minister, Shaukat Aziz, used to work for Citibank, and it is Citibank who owns the 777s through proxy. And now Mr. Aziz is giving millions of dollars of business to his employer-on-leave through a government owned entity. Did Mr. Aziz, through his position as finance minister, make sure that Citibank was involved in this lease deal? There's definitely some conflict of interest here.
All the things I really like to do are either immoral, illegal, or fattening.
 
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zeke
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 11:39 pm

Quoting Khobar (Reply 4):
Let's read that again: The purchase agreement assignment specifically stated that the purchase agreement would be re-assigned by Taxila Limited to the PIA upon the release of the “Lien of the Security Documents”. In other words, once US Exim Bank guaranteed facility was repaid by the PIA, the deeds for the airplanes would revert back to PIA. Furthermore:

This is incorrect, as the original documents in the first post indicate. The PIA board has not agreed to purchase the aircraft, they have agreed to lease them.

Quoting Saleem (Reply 12):
According to my discussion with one PIA senior staff member, due to some issues PIA cannot buy these aircrafts directly or Banks were not comfortable in lending money so an alternative arrangements were made. That's it

Of the 462 777-200s that have been registed in accordance with the Cape Town Convention, these appear to the only ones leased in such a fasion.

Airlines that are presently leasing 777-200s

Air China 10
Air France 18
Air New Zealand 2
Alitalia 6
All Nippon AW 21
American AL 47
Asiana AL 4
British AW 45
Cathay Pacific AW 4
China Southern AL 9
Continental AL 16
Delta AL 8
Egyptair 5
El Al 4
Emirates AL 9
GECAS/Alitalia 4
ILFC/Aeroflot RIA 2
ILFC/Aeromexico 2
ILFC/Air Austral 1
ILFC/Air Europe Italy 2
ILFC/Air France 7
ILFC/Air New Zealand 3
ILFC/Asiana AL 3
ILFC/China Southern AL 1
ILFC/Continental AL 2
ILFC/KLM 7
ILFC/Varig 2
ILFC/Vietnam AL 4
Japan AL 18
Japan AS 7
Kenya AW 3
KLM 6
Korean Air 11
Kuwait AW 2
Lauda Air 3
Malaysia AL 15
Mid East Jet 1
PIA 3
SALE/Malaysia AL 2
Saudi Arabian AW 23
Saudi Oger Ltd 1
Singapore AL 46
Thai AW Int 8
United AL 58
Vietnam AL 4

How many of these airlines apart from PIA are getting "parts, service and labor free of charge" from Boeing ?
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
DAYflyer
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RE: PIA 777 Scandal?

Tue Apr 18, 2006 11:39 pm

Who cares? Really, does it matter if they leased them??
One Nation Under God
 
FlyDeltaJets
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 12:12 am

According to the N-Number registry all of DL's 777's are owned by Delta Air Lines Inc.
The only valid opinions are those based in facts
 
norcal
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 12:44 am

Quoting Zeke (Reply 14):
How many of these airlines apart from PIA are getting "parts, service and labor free of charge" from Boeing ?

Maybe all of them, maybe some of them. You can't definitively claim that PIA is getting special treatment without the details of these other airlines' deals. All you have right now is a conspiracy theory. These deals are very complicated and are normally not released to the public as they all usually have non-disclosure agreements.

Quoting DAYflyer (Reply 15):
Who cares? Really, does it matter if they leased them??

No it doesn't matter, he is just trying to find mud anywhere to try and tarnish the image of the 777. He is trying to rationalize the A340's losses to the 777 and since he can't do it on technical merit he is going to claim market dumping. Both sides do it in here, as Boeing boosters claim Airbus dumps the A320 on the market. Both sides' claims are ridiculous and people really should just learn to open their mind and admit that sometimes the "other side" has the better product.
 
airbazar
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 12:56 am

What do you mean it's not a big deal? PIA is not a private company. They operate with governemnt money. Would you like to be lied about the deals your tax dollars pay for? You don't find it at all strange that there is no public information about the deal between PIA and this "one-dollar" company?
 
khobar
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 1:03 am

Quoting Zeke (Reply 14):
This is incorrect, as the original documents in the first post indicate. The PIA board has not agreed to purchase the aircraft, they have agreed to lease them.

The document you refer to states (as best as I can make it out): "PIAC be and is hereby authorized and empowered to execute, enter into, perform its obligations under and deliver the following in connection with Ex-Im Bank Guaranteed Financing:

(ii) A Master Lease Agreement between Taxila Limited as Lessor and PIAC as Lessee (the "Lease Agreement") for a 12 year term, for acquiring three B777-200ER aircraft along with General Electric XXX engines, with such terms as may be considered satisfactory to PIAC in accordance with the requirements of the Commitment Letter and/or Term Sheet and (signature).

Please provide the Master Lease Agreement to support your allegation that, contrary to what PIA claims, the title to the aircraft and engines will not revert to PIA at the end of the respective lease terms.

Quoting Zeke (Reply 14):
Of the 462 777-200s that have been registed in accordance with the Cape Town Convention, these appear to the only ones leased in such a fasion.

You'll have to be more specific.

Quoting Zeke (Reply 14):
How many of these airlines apart from PIA are getting "parts, service and labor free of charge" from Boeing ?

Where did you get the idea that PIA was getting "parts, service, and labor free of charge from Boeing" that isn't covered by the deficiency/acceptance agreement between PIA and Boeing?
 
khobar
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 1:14 am

Quoting Airbazar (Reply 18):
You don't find it at all strange thatrnthere is no public information about the deal between PIA and thisrn"one-dollar" company?

 Confused
http://www.dailytimes.com.pk/default.asp?page=story_9-5-2004_pg7_39
 
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zeke
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 2:40 am

Quoting NorCal (Reply 17):
No it doesn't matter, he is just trying to find mud anywhere to try and tarnish the image of the 777.

Hang on, you suggesting that I also published the articles? What do you think prompted the PIA employees to risk the jobs to expose all this information to the public ?

Do you realise the risk they put themselves in ? Are you suggesting they did so because the think they should have leased 340s ?

Sit back and think for a minute what drove these people to act the way they did.

Most people working for airlines are proud of the organisations they work for, and always try and resolve issues internally. Only when things get really desperate people feel they have no alternative but to go to the press.

This is one of the main reasons I think there is something in this, all the paperwork suggest something is odd, looking at the stamps on the documents I would suggest the persons leaking this information is also privy to what has not been documented.

Dont forget what banking experts think of the documents provided ""Basically Citibank controls all the corporate and financial strings. The footprints of Finance Minister Shaukat Aziz, now on leave from Citibank, are visible all over the deal," a former World Bank official who saw the PIA documents observed in Washington."

Also the 150 million down payment was done via Ijara, so PIA not only will have to pay Taxila Limited, the will also have pay the Ijara.

Quoting Khobar (Reply 19):
Please provide the Master Lease Agreement to support your allegation that, contrary to what PIA claims, the title to the aircraft and engines will not revert to PIA at the end of the respective lease terms.

Dont need to, look at the board resolution, it does not authorised the purchase of the aircraft, only a 12 year lease for 3 aircraft and engines.

Quoting Khobar (Reply 19):
You'll have to be more specific.

Help yourself, all the details are available here https://www.internationalregistry.aero/irWeb/

Quoting Khobar (Reply 19):
Where did you get the idea that PIA was getting "parts, service, and labor free of charge from Boeing" that isn't covered by the deficiency/acceptance agreement between PIA and Boeing?

From the first article

Quote:
"Resolution of such conditions will be accomplished by Boeing as described in the Attachment," the letter said but forbade PIA from making the Attachment public as "Boeing considers the commitments to PIA described in the Attachment to be privileged and confidential information." But Boeing promised in the letter to meet its commitments and provide parts, service and labor free of charge.



Quoting Airbazar (Reply 18):
What do you mean it's not a big deal? PIA is not a private company. They operate with governemnt money. Would you like to be lied about the deals your tax dollars pay for? You don't find it at all strange that there is no public information about the deal between PIA and this "one-dollar" company?

It would be legal for PIA to pay Taxila Limited, and then for Taxila Limited to pay PIA a dividend. This would not be illegal under any law, just not the best use of public funds.
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
jacobin777
Posts: 12262
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 3:00 am

Quoting NorCal (Reply 17):
No it doesn't matter, he is just trying to find mud anywhere to try and tarnish the image of the 777. He is trying to rationalize the A340's losses to the 777 and since he can't do it on technical merit he is going to claim market dumping. Both sides do it in here, as Boeing boosters claim Airbus dumps the A320 on the market. Both sides' claims are ridiculous and people really should just learn to open their mind and admit that sometimes the "other side" has the better product.

I was thinking along the same lines.. checkmark 

these kinds of transactions happen all the time......

some people were unhappy because PK purchased and leased 777's instead of A340's.....bold stroke of genius if one asks me!

this has been a non-issue from the word "go"
"Up the Irons!"
 
khobar
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 5:01 am

Quoting Zeke (Reply 21):
Dont need to, look at the board resolution, it does not authorised the purchase of the aircraft, only a 12 year lease for 3 aircraft and engines.

The Board Resolution authorized execution of the MLA. It's no surprise that document is not included.

Quoting Zeke (Reply 21):
Help yourself, all the details are available here https://www.internationalregistry.aero/irWeb/

And?

Quoting Zeke (Reply 21):
But Boeing promised in the letter to meet its commitments and provide parts, service and labor free of charge.

I asked where you got the idea that PIA was getting freebies outside the deficiency/acceptance agreement (i.e. under warranty). I am not sure why you thought reiterating that Boeing agreed to fix known deficiencies under warranty was the answer.
 
behramjee
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 5:14 am

Articles containing the various scandals that plagued PIA between 2001-2004 i.e. during Mr Ahmad Saeed's reign as Chairman can be found using the following web links :

How Top Bosses are Bilking PIA, Under Official Supervision
http://www.satribune.com/archives/may2_8_04/P1_pia.htm

Billions of PIA Profits are Manipulated Statistics
http://www.satribune.com/archives/aug31_sep6_03/P1_pia.htm

PIA Cheating Thousands of Umra Passengers Going to the House of Allah
http://www.satribune.com/archives/jun27_jul3_04/P1_pia.htm

PIA to Pledge Entire Fleet to US: Registers Aircraft in Cayman Islands Company
http://www.satribune.com/archives/oct11_18_03/P1_pia.htm

Angry Senators, MPs Grill PIA Chairman on B-777 Deal
http://www.satribune.com/archives/jun13_19_04/P1_pia.htm

PIA Chairman Concedes Mistakes: Names Crony as DE, Announces Petty Dividend
http://www.satribune.com/archives/may30_jun5_04/P1_pia1.htm

PIA Sends SOS to Musharraf, Jamali to Save it From Financial Losses
http://www.satribune.com/archives/may30_jun5_04/P1_butt.htm

PIA Chairman Caught Red Handed Buying His Own Company Shoes
http://www.satribune.com/archives/may30_jun5_04/P1_shoes.htm

What is Musharraf's Cousin Doing in the PIA Kitchen?
http://www.satribune.com/archives/may23_29_04/P1_pia.htm

PIA's Much Touted Retrofit Program Collapses Costing Millions of Dollars
http://www.satribune.com/archives/may9_15_04/P1_pia.htm

PIA A-310 Lease Faus Pax Costs Millions to Airline
http://www.satribune.com/archives/mar7_13_04/P1_pia.htm

PIA's Top-Heavy Managers Having a Big Party After Defying the Prime Minister
http://www.satribune.com/archives/jan25_31_04/P1_pia.htm

Despite Tall Claims, PIA's Boat is Sinking Fast
http://www.satribune.com/archives/jan4_10_04/P1_pia.htm

PIA's New Multi-Million Dollar Air Jamaica Deal Has Huge Kickback Potential
http://www.satribune.com/archives/sep21_27_03/P1_pia.htm
 
jacobin777
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RE: PIA 777 Scandal?

Wed Apr 19, 2006 5:24 am

Quoting Behramjee (Reply 24):
Articles containing the various scandals that plagued PIA between 2001-2004 i.e. during Mr Ahmad Saeed's reign as Chairman can be found using the following web links :

poltics plays are role, certainly......look at AI and MH...however, PK has done a good job turning around, and the are making a profit, was well as expanding, even with such high fuel..
"Up the Irons!"
 
khobar
Posts: 1336
Joined: Fri Mar 17, 2006 4:12 am

RE: PIA 777 Scandal?

Wed Apr 19, 2006 6:01 am

Quoting Behramjee (Reply 24):
Articles containing the various scandals that plagued PIA between 2001-2004 i.e. during Mr Ahmad Saeed's reign as Chairman can be found using the following web links :

www.satribune.com
www.satribune.com
.
.
.
.
I think I see a pattern.

It seems the "opposition" can't quite decide what they're annoyed about.

[Edited 2006-04-18 23:13:14]
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: PIA 777 Scandal?

Wed Apr 19, 2006 6:18 am

Quoting Khobar (Reply 26):
It seems the "opposition" can't quite decide what they're annoyed about.



Quoting Jacobin777 (Reply 22):
some people were unhappy because PK purchased and leased 777's instead of A340's.....bold stroke of genius if one asks me!

one of your answers...
"Up the Irons!"
 
AirbusCanada
Posts: 525
Joined: Mon Nov 15, 2004 5:14 am

RE: PIA 777 Scandal?

Wed Apr 19, 2006 6:49 am

Quoting Cricket (Reply 9):
Few airlines (even SQ and EK sometimes fall into this category) have the funds to buy aircraft outright - cash down

acutally, the emirates purchase of 340-500 was financed by a consortium of Japanease, Middle eastern and Europian banks.
 
khobar
Posts: 1336
Joined: Fri Mar 17, 2006 4:12 am

RE: PIA 777 Scandal?

Wed Apr 19, 2006 6:57 am

Speaking of the Emirates A340-500's -

Emirates Completes Airbus A340-500 Financing Programme

Emirates has signed an agreement with two UAE banks, National Bank of Dubai (NBD) and Emirates Bank Group (EBG), for the US$119.5 million financing for the last of the 10 Airbus A340-500s the airline has on firm order.

The financing, structured as an operating lease over a 12-year term, carries a weighted average cost of funds 0.9 per cent over six-month Libor (London Inter Bank Offered Rate).

http://www.scoop.co.nz/stories/BU0509/S00404.htm