Pakistan’s PIA Overcomes Flight Disruptions Following Credit Boost

Pakistan International Airlines, commonly known as PIA, has hit the spotlight this week after reaffirming its commitment to Pakistan State Oil (PSO), pledging to pay 1.35 billion Rupees (USD 16.18 million) for fuel supplies as well as receiving credit from PSO for 500 million Rupees (around USD 6 million). This has allowed PIA to continue operating amid its inability to cover its fuel bills. The state-owned carrier has long been accused of poor management and burdening the Pakistani Government with debt.

Cancellations throughout its network

Over the past two weeks, PIA’s flight service has been significantly affected, leading to the flag carrier canceling around 375 international and domestic flights. In mid-October, the state oil company, PSO, decided to stop providing fuel to PIA due to its unpaid dues. This came after the airline already used up a credit of 15 billion Rupees (180 million USD) by PSO. That being said, PSO did provide fuel for flights prioritized by PIA, which only paid for fuel for around 20 flights each day. The widespread cancellations over the past two weeks have put passengers in a state of distress.

Photo: Asim Ali Malik/Shutterstock

Decades upon decades of mismanagement by the carrier has weakened the Pakistani Government and, more recently, required a bailout from the International Monetary Fund (IMF) to avoid the country defaulting on its loans. As such, Pakistani Prime Minister Anwaarul Haq Kakar has expressed his concerns with the current state of the airline and has been vocal in ‘fast-tracking’ to privatize the carrier. According to Kakar, if PIA were to be sold, it would improve the airline’s reliability and raise it to the standards of neighboring international carriers such as Air India or Vistara. Furthermore, privatization would allow the airline to return to profitability and improve connection to remote parts of the country.

Kakar first took office in August 2023, following the dissolution of Pakistan’s National Assembly. However, for the privatization to go through, it must be presented to Pakistan’s Economic Coordination Committee. According to Bloomberg, PIA had liabilities of 743 billion rupees (around USD 2.5 billion), thus exceeding its total assets five times over.

Credit boost

Now, in an attempt to further support PIA, PSO extended a 500 million rupee credit to the airline following an agreement on October 27, 2023. With the financial disagreement now being settled, the airline will begin to receive an increase in fuel supply in the coming days. The decision to extend the credit to PIA is an attempt to ease some of the financial challenges that have plagued the airline, as PIA will be able to maintain its operations and receive fuel from PSO for its flights.

Photo: alphonsusjimos / Shutterstock

The state-owned oil company is facing financial challenges. That being said, in a statement, PSO has reaffirmed its commitment to delivering fuel to the airline despite its significant overdue balance in a way that will benefit both entities.

In September, rumors began surfacing that PIA would either be grounded or shut down, but the airline has continued to operate. The airline management team is in turmoil as they have only been making enough revenue from its current operation to cover operating costs and staff salaries. Moreover, in September, the Finance Ministry of Pakistan denied the airline’s appeal for a PKR 23 billion ($78 million) bailout.

What are your thoughts on extended fuel credit for PIA? Let us know in the comments section below.

Source: The Express Tribune