- ECC approves a Rs457 billion restructuring plan for PIA.
- Adviser to PM Dr Ishrat Hussain says PIA restructuring plan would convert Rs457 billion loan into equity.
- The restructuring plan will be implemented after getting approval from the federal cabinet.
ISLAMABAD: The Economic Coordination Committee (ECC) on Wednesday gave approval for PIA to launch a Voluntary Separation Scheme (VSS) to lay off 25% of its workforce making it around 3,500 employees. It also approved a restructuring plan of Rs457 billion for the national carrier.
The meeting approved Rs330 million for the Ministry of Defence for the maintenance of aircraft. The restructuring plan will be implemented after getting approval from the federal cabinet.
The ECC directed the authorities concerned to further fine tune the restructuring plan and reconcile figures before presenting a final plan before the cabinet.
The PIA required Rs13 billion from the government to implement the VSS to lay off around 25% of a total workforce of 14,000, indicating that around 3,500 working staff will be relieved under the restructuring plan.
Adviser to PM on Institutional Reforms Dr Ishrat Hussain while explaining the ECC decision said that the PIA restructuring plan will convert the Rs457 billion loan into equity as book adjustments would be done in a staggered manner to clean the balance sheet of PIA.
He said that the PIA balance sheet was negative so it requires a restructuring plan on an immediate basis.
Dr Hussain said that there would be no cash injections, but the loans and liabilities would be converted into equity in a staggered manner and PIA would be restructured.
The ECC, which held its meeting under the chairmanship of Finance Minister Hammad Azhar, was informed on Wednesday through a summary submitted from Civil Aviation Authority (CAA) that total losses of PIA ballooned to Rs457 billion as of 30-09-2020 including GoP-guaranteed loans of Rs201.8 billion, loans from GoP of Rs55.6 billion, loans on PIA balance sheet of Rs53 billion and mark-up on loans of Rs16 billion. So in totality, the loans and mark-up peaked to Rs326.4 billion.
The PIA balance sheet further disclosed that payables to PSO stood at Rs16.4 billion, to CAA at Rs86.7 billion and outstanding tax liabilities at Rs14.7 billion. So in totality, the payables to different government institutions stood at Rs117.8 billion. In totality, the losses of PIA stood at Rs457 billion.
Now the ECC approved that the GoP-guaranteed loan of Rs201.8 billion will be converted into equity as this outstanding amount will be repaid as per the amortisation schedule from the fiscal year 2020-21 to 2026-27.
The outstanding loans from GoP to the tune of Rs55.6 billion will be settled as book entry and loans on the PIA balance sheet of Rs52.9 billion will be repaid as an amortisation schedule. The payables to government institutions to the tune of Rs117.8 billion will be settled subject to agreement among CAA, PSO and FBR to waive as receivables. The VSS amount of Rs12.9 billion has already been approved by the government.
The ECC has been further told that the PIA assets stood at Rs147.5 billion while its liabilities ballooned to Rs457 billion, demonstrating the financial health of the national flag carrier heading towards a complete disaster. The current assets of PIA stood at Rs53.2 billion.
The goods retained in the shape of total property, plant and equipment have been estimated at Rs82.6 billion and total non-current assets of PIA stood at Rs88.9 billion. Other assets, including stores and spares stood at Rs2.4 billion, trade debts at Rs14.8 billion, advances at Rs1.6 billion, trade deposits at Rs2.5 billion, short term receivables at Rs8.8 billion, cash and bank balance at Rs8.6 billion and VSS cash payment at Rs12.9 billion.
According to a statement issued by Finance Ministry after the ECC, the Aviation Division submitted a summary before the ECC regarding the restructuring plan of the Pakistan International Airlines Corporation Ltd (PIACL).
The adviser to the PM on institutional reforms and austerity made a detailed presentation on the human resource and operational restructuring of the PIACL. He drew attention to the various options for restructuring and outlined measures to minimise losses and transform PIACL into a financially viable entity. It included human resource restructuring through VSS, hiring aviation experts, fleet modernisation, routes rationalisation, product development and revenue enhancement measures.
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 the restructuring plan is implemented, the statement concluded.