The federal government has laid out a comprehensive framework to handle the division of assets and liabilities for Pakistan International Airlines (PIA) as part of its ongoing privatization efforts. This strategic move aims to streamline the airline’s operations and make it more attractive to potential investors.
PIA’s assets and liabilities will be split between the airline itself and a newly established holding company. The government has disclosed that PIA’s total asset value stands at Rs 171.43 billion. Post-privatization, these assets, along with associated liabilities, will be distributed between the holding company and the new entity taking control of the airline.
The breakdown of PIA’s assets indicates that out of the Rs 171.43 billion, a significant portion amounting to Rs 146.57 billion will be transferred to the new management. Meanwhile, Rs 24.86 billion worth of assets will remain with the holding company. This allocation ensures that the core operational components of PIA are adequately equipped to continue functioning effectively under new management.
PIA currently faces a substantial deficit of Rs 830 billion. To address this, Rs 202 billion of the deficit will be managed directly by PIA, while the holding company will take on the remaining Rs 628 billion. Consequently, the new company will begin operations with a Rs 55.70 billion deficit. This approach is designed to ensure that the new entity is not overly burdened from the outset, allowing for a more sustainable business model moving forward.
As part of the privatization strategy, the government plans to separate PIA’s operations into core and non-core segments. This division will facilitate a more focused approach to managing the airline’s various functions and assets. Core assets, essential for daily operations, include aircraft valued at Rs 92.62 billion, technical equipment, operational offices, long-term deposits worth Rs 6 billion, trade debts, advance deposits of Rs 22.35 billion, and other receivables totaling Rs 16.83 billion. These assets will be handed over to the new PIA management.
The new PIA management will also inherit several liabilities, including Rs 15.63 billion in long-term financing, Rs 30 billion in aircraft leases, Rs 27.26 billion in employee salaries, and Rs 121 billion in trade and other payables. This comprehensive transfer of assets and liabilities is designed to ensure that the new management has a clear understanding of its financial obligations from the outset.
The holding company will assume responsibility for Rs 628 billion in losses and liabilities. This significant burden aims to isolate the new PIA management from the airline’s historical financial issues, allowing them to focus on revitalizing and growing the business. The holding company’s role will be critical in managing and mitigating these liabilities, ensuring they do not impede the airline’s future progress.
This privatization effort reflects the government’s commitment to reviving PIA and restoring its status as a leading airline. By strategically managing the division of assets and liabilities, the government aims to create a more viable and competitive airline. The involvement of a holding company to manage substantial portions of PIA’s debt is a strategic move to present a financially healthier entity to potential investors.
The privatization of PIA is expected to bring about significant changes in the airline’s operational dynamics. With new management and a clearer financial structure, PIA can potentially regain its competitive edge in the aviation industry. The strategic allocation of assets and liabilities aims to provide the new management with a solid foundation to build upon, ensuring the airline’s long-term sustainability and growth.
