Citing high lease costs and sub-optimal utilization, PIA Pakistan International Airlines is sending its fleet of leased ATR 72-500s back to the owner. The Karachi-based airline has four ATRs from aircraft leasing company ABRIC Leasing. The lease was due to run until 2021, but PIA has brokered a deal with ABRIC and has already started sending the planes back.
The first ATR72 has already left Karachi
The aircraft in question are AP-BKV, AP-BKX, AP-BKY, and AP-BKZ. According to planespotters.net, the ATRs came to PIA in the middle of 2015 after a stint flying for UTair-Ukraine. All four aircraft have spent much of 2020 parked. One of the ATRs, AP-BKY, has already left Pakistan. Aircraft tracking databases have it landing in Johannesburg on December 14.
Pakistan’s criminal investigation, counter-intelligence, and security agency, the Federal Investigation Agency (FIA), has commenced an investigation into the 2015 leasing deal. At issue is the lease price paid. Pakistani news channel Ary News reports three ATR planes were leased at Rs179,500 per aircraft. That equates to approximately US$1120, so the figure likely reflects a per day rate, or just over US$34,000 per calendar month. The remaining two ATRs cost slightly less.
It is reported the 2015 leasing decision has since cost PIA US$43.7 million, a hit to the bottom line the embattled airline can ill-afford. The airline is said to have assets worth around US$668 million but is carrying debts of nearly $3 billion. Earlier this month, CEO Arshad Malik claimed PIA was on track to become profitable within a few years.
“We are trying to reduce the PIA’s losses with the cooperation of the private sector,” today’s Express Tribune quotes him saying.
“We are facing issues because of the coronavirus pandemic, but the PIA will soon reach new heights.”
According to Arshad Malik, the airline was able to cancel the 2015 agreement by invoking force majeure type clauses due to the events adversely impacting global aviation in 2020.
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Cuts to workforce as PIA tries to get back into the black
Yesterday, the airline also announced it was slashing its workforce from 12,900 to 7,500. In the firing line are employees working in marketing, HR, finance, flight services, and procurement. PIA plans to further reduce employee numbers in 2021 to around 6,000. The initial downsizing is estimated to save PIA approximately $26 million in ongoing costs.
In terms of managing the debt, Arshad Malik said he had a few choices.
“One of the options is to issue investment bonds. The other is a debt-equity swap. The third option we have is that the government can take some of PIA’s assets against the loans to clear our balance sheet, which is already guaranteed by the government.”
Hampering PIA’s efforts to climb out of its financial black hole is a current EU ban on PIA flights. Slapped down for six months mid-year, PIA says the ban has impacted it to the tune of US$1.5 billion. Earlier this month, the EU decided to keep the ban in place beyond the interim six months.
Meanwhile, PIA is left with just 27 planes in its fleet. That includes a dozen Boeing 777s, 11 Airbus A320s, and four ATR72s. All but four of those planes appear to be in the air.
Simple Flying has approached PIA for further comment regarding the return of the ATRs. We haven’t heard back before publication time.