Current rupee-dollar exchange rate

The Pakistan International Airlines (PIA) is likely to seek a freeze on its foreign debt repayment at current rupee-dollar exchange rate to help control accumulated losses, PIA Managing Director Aijaz Haroon told The News on Saturday.

Deprecation of rupee in past two years has swelled the US dollar denominated cost of $1 billion the national flag carrier had borrowed to buy B-777 aircraft, he said.

“Every time rupee depreciates, we have to register billions of rupees of losses,” he said, a day after briefing parliamentarians on financial position of PIA.

“One way to control it is that the government converts our foreign loans in today’s exchange rate and freezes it.”

This will be part of a financial restructuring proposal, which PIA submits to government by mid of next month for adjusting over Rs70 billion of accumulated losses, which have wiped off airline’s equity.

He said it is very unlikely that the government faced with a large fiscal deficit can afford direct equity injection at this point of time.

“But PIA has to be compensated somehow for all the losses which have piled up between 2003 and 2007.”

The proposal, which will be based on future earning projections might also include request for a waver from Civil Aviation Authority (CAA)’s charges, he said.

The PIA has a fleet of 42 aircraft but most of them like Airbus 310s and B-747s need immediate replacement with fuel-efficient airplanes.

Reduction in fuel price and stable exchange rate helped PIA bring down loss to Rs10.77bn in nine months to September 2009 compared with Rs38.4bn it incurred in same period of previous year. It also posted a gross profit after four years.

“Last time PIA had an operating profit was back in Ahmed Saeed’s days,” Haroon said referring to former Pakistan International Airlines MD’s stint till 2004.

“I have asked lawmakers to see only that airline’s liability is settled and we will turn into a profitable organization.”

About the possibility of selling PIA-owned Roosevelt Hotel in New York to pay for past losses, he said it is not the appropriate time to sell a billion-dollar property when real estate market is still recovering in US.

“Besides, what is the point in selling a business which earns PIA $7-8 million annually?”

The PIA has long been criticised as inefficient organization where financial pilferages are rampant. Management is often questioned by National Assembly for unnecessary expenditures.

But Haroon, a B-777 pilot who took office in 2008, says focus has remained on little things like catering service on domestic flights while measures to protect the interest of airline have been ignored.

Over the years, Gulf-based carriers have been allowed to increase flights to Pakistan. Their better service and aircraft have snatched around 80 percent international traffic from PIA.

The national carrier has lobbied successfully in past few years to stop Gulf carriers from expanding operations. But government out rightly rejected a PIA proposal to take some of the frequency back from them, Haroon said.