PIA facing cash crunch as lenders, lessors hold off

Financial institutions are not rushing to the aid of PIA - Pakistan International Airlines after the Pakistani government recently rejected its request for a PKR23b Pakistani rupee (US$74.8m) emergency bailout, instead directing the state-owned carrier to secure commercial bank loans against a partial government guarantee. Last week, ch-aviation reported on the decision of the caretaker government, which drew a line under a series of bailouts. Since then, local media reported that due to the country’s negative credit rating and the dependence on the central bank for foreign exchange, international financial institutions and lessors are steering clear of PIA. US agency Moody's has awarded Pakistan a Caa3 credit rating, and the country's central bank, the State Bank of Pakistan, can limit access to and the export of foreign currencies, leading to lenders and lessors fearing they will not get repaid. Media reports suggest several A320-200s and B777-200ER type aircraft may soon be grounded because of an inability to meet lease payments. Other aircraft are also out or going out of service because of an inability to pay for required spare parts. Reportedly, PIA owes US$2.5m in lease payments, while various airports are also owed money, including US$30m due to GA Havalimani Isletmesi A.S., operator of Istanbul Airport. Saudi airport authorities are also owed US$4.5m. In total, PIA is reported to be carrying debts of PKR750b (US$2.43b).<br/>