The ECC allows PIA to lay off 25% of its workforce through a voluntary separation scheme
- ECC approves Rs 457 billion restructuring plan for PIA.
- Prime Minister’s adviser Dr Ishrat Hussain said PIA’s restructuring plan would convert a loan of Rs 457 billion into equity.
- The restructuring plan will be implemented after obtaining the approval of the federal cabinet.
ISLAMABAD: The Economic Coordination Committee (ECC) on Wednesday authorized PIA to launch a voluntary departure plan (VSS) to lay off 25% of its workforce, making it about 3,500 employees. It also approved a Rs 457 billion restructuring plan for the national carrier.
The meeting approved Rs330 million for the Ministry of Defense for aircraft maintenance. The restructuring plan will be implemented after obtaining the approval of the federal cabinet.
The ECC asked the authorities concerned to further refine the restructuring plan and reconcile the figures before presenting a final plan to the cabinet.
The PIA has asked the government for 13 billion rupees to implement the VSS to lay off about 25% of a total workforce of 14,000, indicating that around 3,500 employees will be relieved under the restructuring plan.
Prime Minister’s adviser on institutional reforms, Dr Ishrat Hussain, while explaining the ECC’s decision, said PIA’s restructuring plan would convert the Rs 457 billion loan into equity as the accounting adjustments would be carried out in stages to clean up PIA’s balance sheet.
He said that PIA’s balance sheet is negative and therefore requires a restructuring plan on an immediate basis.
Dr Hussain said there would be no cash injections, but loans and debts would be converted to equity on a phased basis and PIA would be restructured.
The ECC, which held its meeting under the chairmanship of Finance Minister Hammad Azhar, was informed on Wednesday by a summary submitted by the Civil Aviation Authority (CAA) that PIA’s total losses climbed to $ 457 billion. rupees as of 30-09-2020, including GoP- guaranteed loans of 201.8 billion rupees, GoP loans of 55.6 billion rupees, PIA balance sheet loans of 53 billion rupees and profit margin on loans of 16 billion rupees. Thus, in total, loans and profit margin peaked at Rs 326.4 billion.
PIA’s balance sheet further revealed that debts to PSO amounted to 16.4 billion rupees, CAA to 86.7 billion rupees and unpaid tax debts to 14.7 billion rupees. Thus, in total, debts to various government institutions amounted to 117.8 billion rupees. In total, PIA losses amounted to Rs457 billion.
The ECC has now approved that the GoP guaranteed loan of Rs 201.8 billion be converted to equity, as this outstanding amount will be repaid in accordance with the amortization schedule for fiscal year 2020-2021 to 2026-2027.
Outstanding GoP loans of Rs 55.6 billion will be settled as book entry and PIA’s balance sheet loans of Rs 52.9 billion will be repaid in the form of an amortization schedule. Debts to government institutions in the amount of Rs 117.8 billion will be settled subject to an agreement between CAA, PSO and FBR to waive as receivables. The VSS amount of Rs12.9 billion has already been approved by the government.
The ECC was further informed that PIA’s assets stood at Rs 147.5 billion while its liabilities soared to Rs 457 billion, demonstrating the financial health of the national carrier heading for complete disaster. PIA’s short-term assets stood at Rs53.2 billion.
The assets retained in the form of total tangible fixed assets were estimated at Rs 82.6 billion and the total non-current assets of PIA stood at Rs 88.9 billion. Other assets including stores and spare parts amounted to Rs 2.4 billion, trade debts to Rs 14.8 billion, advances to Rs 1.6 billion, commercial deposits to Rs 2.5 billion, short term receivables at Rs 8.8 billion, cash and bank balance at Rs 8.6 billion and VSS cash payment at Rs12.9 billion.
According to a statement released by the Ministry of Finance after the ECC, the Aviation Division submitted a summary to the ECC regarding the restructuring plan of Pakistan International Airlines Corporation Ltd (PIACL).
The PM adviser on institutional reforms and austerity made a detailed presentation on human resources and operational restructuring of PIACL. He drew attention to the various restructuring options and described measures to minimize losses and transform PIACL into a financially viable entity. This included restructuring human resources through VSS, hiring aviation experts, modernizing the fleet, streamlining routes, product development and revenue improvement measures.
After detailed consultation, the ECC recommended that PIACL’s restructuring plan be submitted to the cabinet at a later date, after reconciliation of the tax payable figures, with an instruction to cap the future debt that PIACL could incur on its improved balance sheet. , once the restructuring plan is implemented, concludes the statement.