Pakistan’s PIA A320 Lease Dispute Resolution: ECC Approves PKR 8 Billion Financing

In a significant breakthrough, Pakistan’s Economic Coordination Committee (ECC) has reportedly given the green light for bridging finance of PKR 8 billion (USD 28.9 million) to resolve the long-standing dispute between PIA – Pakistan International Airlines and Asia Aviation Capital Limited (AACL). The dispute involves two A320-200s grounded at Jakarta Soekarno-Hatta since September 2021.

According to an official statement from the Ministry of Finance after an October 27, 2023 meeting, the ECC has approved the aviation division’s proposal for bridge financing through the Civil Aviation Authority’s resources. The funds will enable PIA to address overdue payments to AACL, amounting to over USD 31 million in unpaid basic rent, redelivery rent, maintenance reserves, and contractual interest.

The dispute, currently before the UK courts, prompted a delegation of PIA and Pakistani government officials, led by CEO Muhammad Amir Hayat, to travel to Malaysia for negotiations with AACL. A PIA spokesman has indicated that these negotiations are in their “conclusive stages.”

As part of the deal, PIA will take ownership of the two aircraft upon payment. AACL commits to delivering the first aircraft within 10-15 days and the second within the following month.

However, PIA faces additional challenges, as unpaid fuel invoices totaling PKR 26.8 billion (USD 96.8 million) have led Pakistan State Oil (PSO) to demand payment or risk disruptions to fuel supply. In response to the outstanding dues, PSO took to social media, highlighting the strain on its finances and the need for PIA to settle its outstanding balance.

Recent talks between PIA and PSO resulted in an agreement to temporarily boost PIA’s credit limit by PKR 500 million (USD 1.8 million), allowing scheduled flights to operate without interruption. PIA’s monthly fuel bill stands at around PKR 8.5 billion (USD 30.7 million).

Despite these financial challenges, Pakistan’s Caretaker Prime Minister, Anwaarul Haq Kaka, has affirmed the government’s commitment to supporting PIA during its partial privatization process. PIA, facing significant losses and liabilities, is seeking further financial support to stay operational until the privatization is complete.

With debts amounting to PKR 713 billion (USD 2.56 billion), PIA’s restructuring is crucial to addressing financial woes, and the government aims to secure additional bank financing while paving the way for partial privatization and new minority shareholders.