ISLAMABAD: While giving the green light for the dismissal of 25 percent of the workforce or around 3,500 people under the Voluntary Separation Program (VSS), the Economic Coordination Committee (ECC) of the cabinet on Wednesday approved a 457 billion rupee restructuring plan for the loss of cash at Pakistan International Airlines (PIA).
The meeting approved Rs330 million for the Ministry of Defense for aircraft maintenance. This PIA restructuring plan will be implemented after obtaining the approval of the Federal Cabinet. The ECC ordered the authorities concerned to further refine the restructuring plan and reconcile the figures before presenting it to the cabinet.
The PIA has requested Rs 13 billion from the government for the implementation of the VSS to lay off around 25% of a total workforce of 14,000, indicating that around 3,500 employees will be laid off as part of the restructuring plan . When contacted, the Prime Minister’s adviser on institutional reforms, Dr Ishrat Hussain, said PIA’s restructuring plan would convert the total loan amount of Rs 457 billion into equity, as accounting adjustments would be carried out in stages to clean up PIA’s balance sheet. He said that PIA’s balance sheet is negative and therefore requires a restructuring plan on an immediate basis.
He said there would be no cash injections, but loans and debts would be converted to equity on a phased basis and PIA would be restructured. He said there were many other government institutions where loans were converted to equity, so the same would be done with PIA to run the national carrier efficiently. The ECC, which held its meeting under the chairmanship of Finance and Revenue Minister Hammad Azhar, was informed on Wednesday through a summary submitted by the Civil Aviation Authority (CAA) that the losses PIA totals reached Rs 457 billion as of 30-09-2020 including GoP- secured loans of Rs201.8 billion, GoP loans Rs55.6 billion, balance sheet loans PIA Rs53 billion and mark-up on loans Rs16 billion, so in total loans and mark-up peaked at Rs326.4 billion.
PIA’s balance sheet further revealed that debts to PSO amounted to 16.4 billion rupees, 86.7 billion CAA rupees, unpaid tax debts of 14.7 billion rupees, so in total debts. to various government institutions amounted to 117.8 billion rupees. In total, PIA losses amounted to Rs457 billion. The ECC has now approved that the GoP guaranteed loan of Rs 201.8 billion be converted to equity, as this outstanding amount will be repaid in accordance with the amortization schedule for fiscal year 2020-2021 to 2026-2027.
Outstanding GoP loans of Rs 55.6 billion will be settled as book entry and PIA’s balance sheet loans of Rs 52.9 billion will be repaid as an amortization schedule. Debts to government institutions in the amount of Rs 117.8 billion will be settled subject to an agreement between CAA, PSO and FBR to waive becoming debts. The VSS amount of Rs12.9 billion has already been approved by the government.
The ECC was further informed that PIA’s assets stood at Rs 147.5 billion while its liabilities soared to Rs 457 billion, demonstrating the financial health of the national carrier heading for complete disaster. PIA’s current assets amounted to Rs53.2 billion. The assets retained in the form of total tangible fixed assets were estimated at Rs 82.6 billion and the total non-current assets of PIA amounted to Rs 88.9 billion. Other assets including shops and spare parts to the tune of Rs 2.4 billion, trade debts Rs 14.8 billion, advances Rs 1.6 billion, trade deposits Rs 2.5 billion, short term receivables Rs 8.8 billion, cash and bank balance Rs 8.6 billion and VSS cash payment Rs12.9 billion.
According to a statement released by the Ministry of Finance after the ECC, the Aviation Division submitted a summary to the ECC regarding the restructuring plan of Pakistan International Airlines Corporation Ltd (PIACL). The PM adviser on institutional reforms and austerity made a detailed presentation on human resources and operational restructuring of PIACL. He drew attention to the various restructuring options and presented measures to minimize losses and transform PIACL into a financially viable entity. It included restructuring human resources through VSS, hiring aviation experts, modernizing the fleet, streamlining routes, product development and revenue improvement measures.
After detailed consultation, the ECC recommended that PIACL’s restructuring plan be submitted to the cabinet, after reconciliation of the tax payable figures, with the instruction to cap the future debt that PIACL could contract against its improved balance sheet. , once the restructuring plan has been implemented, the declaration concludes.