PIA - Pakistan International Airlines (PK, Islamabad International) is spending almost half its monthly revenues on servicing its debt, according to a report in the Pakistan Today outlet, forcing the state-owned carrier into talks with the country's finance ministry to discuss a moratorium on domestic debt repayments.

According to the report, PIA's total debt now stands at PKR482 billion Pakistani rupees (USD1.63 billion). This can be broken down as follows - PKR109 billion (USD369.2 million) owed to external entities such as lessors and MRO facilities; PKR113 billion (USD328.8 million) owed to two banking consortiums, namely the National Bank of Pakistan-Habib Bank Limited consortium and the Standard Chartered Bank consortium; and PKR260 billion (USD880.8 million) owed to nine domestic banks. It is this last cohort PIA is reportedly seeking a repayment holiday on. The nine banks and the amounts owed to them are:

  • Bank of Punjab is owed PKR56 billion (USD189.7 million);
  • Askari Bank is owed PKR43 billion (USD145.7 million);
  • Jahangir Siddiqui Investment Bank (JS) Bank is owed PKR34 billion (USD115.2 million);
  • National Bank of Pakistan (NBP) is owed PKR33 billion (USD111.8 million);
  • Faysal Bank is owed PKR32 billion (USD108.4 million);
  • Habib Bank Limited is owed PKR29 billion (USD98.2 million);
  • Bank Islami is owed PKR22 billion (USD74.5 million);
  • Albaraka Bank is owed PKR9 billion (USD30.5 million); and
  • Soneri Bank is owed PRK5 billion (USD16.9 million).

Earlier this week, ch-aviation reported that PIA had secured an additional PKR18 billion (USD61 million) in emergency funding from two undisclosed domestic banks amid reports the government had refused to provide any further financial bailouts and that the airline's day-to-day operations were in peril amid a lack of working capital.

Before that latest funding round, Pakistan Today said PIA was spending PKR7.5 billion (USD25.4 million) per month to service its domestic debts and a further PKR3.1 billion (USD10.5 million) monthly to service its debt to external parties. Presently, the airline is only generating monthly revenues of around PKR22 billion (USD74.5 million), meaning approximately 48% of its income goes to servicing debt.

While precise details remain unclear, PIA has allegedly told the finance ministry that a moratorium on principal and interest repayments is needed to allow it to reorganise its financial affairs. The banks, many wholly or partially state-owned, are likely to be more amenable to directions from the Pakistani government than lessors and other foreign entities.

Separately, the current government continues its renewed push to partially privatise PIA, something previous administrations have tried and failed to do over the years. The current leadership wants to hive off the debt into a separate entity and establish a public-private partnership with a foreign airline which would then take a 40% stake in PIA in exchange for putting a significant amount of equity into the airline and taking day-to-day control of it. Last month, the government amended legislation to allow the partial privatisation to proceed.

On September 19, Pakistan Minister for Privatisation Fawad Hasan Fawad chaired a meeting with stakeholders, including attendees from the prime minister's office and PIA, to discuss the airline's restructuring and privatisation. Reportedly, they agreed on a timeline to initiate and complete the process. However, this timeline was not made public. The current caretaker prime minister, Anwaar-ul-Haq Kakar, is on board with the plan and is pushing for its speedy resolution. In July, a PIA official told ch-aviation that the airline's restructuring was critical and "not at all optional."