Non-Payment: Willis Files Suit against PIA in US Court

By Omed Hajjana

Willis Leasing, the lessor, has filed a lawsuit against Pakistan International Airlines (PIA) in a US court for non-payment.

In order to avoid any adverse decision, two A-320 aircraft engines leased by them are being removed and forced to return to them.

Pakistan International Airlines’ (PIA)’s foreign operations are under threat as it has received notices from Saudi Arabia and facing a court case from the lessor.

Sources said that PIA’s Hajj operations were also at stake as GACA KSA has issued a notice for payment of the full outstanding amount of USD48 Million to avoid suspension of operations including Haji flights.

As many as 56,000 Hujjaj have already traveled to KSA and their repatriation operation will not commence until GACA payments are made.

Additionally, AerCap, one of PIA’s lessors impounded PIA’S 13-777 aircraft on May 29, 23 at Kuala Lumpur, Malaysia which was later released under court order after making overdue payment and pledging PIA receipts through IATA Clearing House.

Allianz insurance broker has issued a termination notice and if overdue payments are not made, insurance cover will not be available resulting in suspension of PIA operations entirety.

Sources said that in June, YATA had also issued the last warning for payment of its outstanding dues of USD 2.8 million in June. It warned that PIA could suspend operations due to failure of complying notice, resulting in the suspension of PIA’s IATA membership.

This payment has been made on 23 June, 2023 with great difficulty. However, if the existing cash flow problem continues, this situation is likely to re-emerge in the near future,” Aviation Division informed the economic coordination committee (ECC) last month.PIA to generate $30m for Roosevelt Hotel New York

The Ministry called for releasing a mark-up amount of PKR 22.9 billion to continue the operations of PIA.

The Ministry therefore requested approval of the ECC that sending a claim of Rs 22.944 billion, on account of markup up to June 2023 may be released enabling PIACL to overcome its cash flow issues.

Ministry of Aviation briefed the forum that a meeting was held in Prime Minister’s Office on 30th December 2017 wherein it was decided that markup on the debt of PIA would be picked up by GOP for five years (from July 2018 to June 2023) and its payment would be made directly to the lenders.

As a result, the government paid markup on GoP Guarantee Loans of PIA to the lenders from July 2018 till November 2022.

An amount of Rs. 15 Billion had been allocated during Financial Year 2022-23 against the demand of Rs. 31.5 Billion.

Out of it, an amount of Rs. 14.689 billion was utilized up to November 2022.

It was added that markup from December 2022 to June 2023, amounting to Rs. 13.155, was sent to Finance division to release additional funds of Rs 22 94 billion, however, the same was not released.

The ministry sites that due to the non-release of additional funds, markup payment support exacerbated the already persistent cashflow problem of PIA.

The Ministry shared that PIA was severely constrained in making markup payments from its available operational cash flows.

The Ministry informed that the diversion of operational cash flows to markup payments had led to the delay in payments in relation to PIA’s core operational obligations.

It was explained that the same included payments in relation to various services without which flight operations were not possible such as payments in relation to the lease of aircraft and airport services.

The Economic Coordination Committee (ECC) of the Cabinet considered the summary submitted by the Ministry of Aviation regarding “Actual Markup Payable on GoP Guaranteed Loans” and directed Finance Division to provide an amount of Rs.4.00 billion to PIAC through Technical Supplementary Grant (TSG).

It also directed to facilitate PIAC to secure loans amounting to Rs.13 billion from commercial banks to overcome its cash flow issues.