Cash Crunch Continues: PIA Faces Flight Cancellations as Fuel Supply is Cut

Pakistan International Airlines (PIA) is grappling with severe operational disruptions as its fuel supplier, Pakistan State Oil (PSO), suspended Jet A1 deliveries. On October 22, PIA was forced to cancel 77 out of 81 scheduled flights, comprising 52 international and 29 domestic services. The fuel supply cutoff is a recurring issue as PSO aims to compel negotiations and secure payments from the debt-laden state-owned airline.

Late-night discussions between PIA and PSO resulted in a commitment by the airline to make daily payments of PKR 100 million (USD 359,000) to reduce its outstanding debt. In exchange, PSO agreed to resume a “restricted” supply of fuel. Despite this arrangement, PIA had to cancel 26 flights on October 23.

This recent fuel supply disruption follows threats by PSO earlier this month to cut or restrict fuel supply due to PIA accumulating a debt of approximately PKR 26 billion (USD 93.3 million). The ongoing financial challenges faced by PIA have prompted renewed calls for the acceleration of the airline’s partial privatization process from Pakistan’s caretaker prime minister, Anwaar-ul-Haq Kakar.

In mid-September, PIA secured a PKR 18 billion (USD 64.6 million) loan from two Pakistani financial institutions to address payroll obligations and stabilize flight operations. However, reports indicate that the airline has approached banks for an additional PKR 1.5 billion (USD 5.4 million) in emergency funding and requested a government guarantee for a PKR 7.5 billion loan (USD 26.9 million). The government has expressed a reluctance to continue bailing out the airline, emphasizing the need for financial institutions to lend with some form of guarantee.

Simultaneously, a PIA delegation has traveled to Kuala Lumpur to negotiate a lease dispute with Asia Aviation Capital Limited (AACL), a subsidiary of Capital A. The disagreement involves two out-of-lease A320-200s parked at Jakarta Soekarno-Hatta, with PIA expressing interest in purchasing the aircraft. The talks are ongoing, and if a settlement is reached, PIA intends to acquire the planes for its fleet.

As PIA grapples with financial pressures and operational challenges, stay tuned for updates on the airline’s efforts to secure funding, resolve disputes, and navigate its path forward.