Improved Financial Outlook | PIA to obtain $300m Loan without Govt. Guarantee

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KARACHI: Good news are coming out of PIA as a steady stream these days. Pakistan International Airlines (PIA) has managed to earn the trust of international consortium of banks and is eyeing to take a loan up to $300 million without government’s sovereign guarantee.

The willingness of the banks to invest in PIA was revealed by the CEO PIA Air Marshal Arshad Malik during his speech at the Annual General Meeting held at Karachi on December 21, 2019. This made headlines in all major news outlets in the country and can be considered as big feat for PIA as its sole dependence since last decade was on lines of credit and sovereign guarantees extended by the Government of Pakistan.  “Our credit worthiness has improved purely based on an aggressive reforms process undertaken in PIA which has resulted in tremendous improvement in revenues and cost curtailment, improving our bottom-lines,” said the PIA spokesperson Abdullah H. Khan. An international consortium of banks compromising of Credit Suisse, Al-Mashreq Bank and Noor Bank, are going to partner up and extend the loan to the national flag airline.

Like any other airline, PIA’s major chunk of expenses are in foreign currency, not to mention the overflying & navigation, foreign handling charges as well as procurement of new airplanes, their engines, and spare parts, etc., which can only be bought from international market in dollar terms. “Whenever we needed money, our sole option was to go to the government and seek fresh sovereign guarantees,” the spokesman added. “Obtaining these guarantees from the government was a pain staking and overly patient process and could not be completed before three to four months and that too if all the approval chain agreed unanimously”, he said. The requests would always go to the finance ministry, planning commission and State Bank of Pakistan for approvals and NOCs.

The banks are willing to give credit lines or loans without government guarantee purely based on the confidence of PIA’s revenue growth and operational performance, cost savings drive, product improvement and positive perception.

“Because of our performance, and numbers of sales, revenue and profits, which the banks have seen, the money lenders have agreed to extend the loans without government sovereign guarantee.” This money will purely be spent on engine arisings, parts and lease of new aircraft which are critical for the organization for product improvement and expansion, said the spokesperson.

As part of our business plan the airline will also be adding new planes in its fleet. Technically this is an investment in the country, he added.

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