Pakistan CAA threatens PIA over $758mn in unpaid debts

The Pakistan Civil Aviation Authority (PCAA) has issued a notice to flag carrier PIA – Pakistan International Airlines (PK, Islamabad Quaid-e-Azam Int’l), indicating that it will cut airport services to the airline, including airbridges, ground power supply and airport IT services, if it does not settle its debts with the regulator by November 1, 2021.

The PCAA, which also operates most of Pakistan’s airports, said the flag carrier owes it PKR127.7 billion rupees (USD758 million).

The authority also indicated that it would start collecting airport and passenger charges directly from travellers beginning October 1, regardless of whether they had already paid the fees included in their ticket when booking with PIA. As of now, the airline collects all the fees from passengers and is then supposed to transfer them to the PCAA. However, the regulator said that out of PKR600 million (USD3.55 million) due in passenger charges since the beginning of 2021, the flag carrier has only transferred PKR550 million (USD3.25 million). In addition, the airline also collected PKR400 million (USD2.4 million) from its customers for the payment of common-use passenger processing system (CUPPS) and baggage reconciliation system (BRS) fees but failed to transfer a single rupee out of this amount to the PCAA.

The PCAA said that during a meeting in May, the airline agreed to pay PKR250 million (USD1.5 million) per month to cover the two types of charges.

However, a PIA spokesman Abdullah Hafeez Khan told Dawn daily newspaper that the flag carrier would seek recourse from the government. He underlined that the flag carrier was currently undergoing wide-ranging, government-approved restructuring and, according to earlier agreements, should be protected from creditors’ claims until PIA’s reforms and balance sheet restructuring had been completed. He added that PIA was unable to repay all of its debts at once due to its legacy losses and the impact of the COVID-19 crisis.