Pakistan International Airlines Corporation is looking forward to revert back in the black expecting to earn a profit of Rs 2.4 billion this year compared to a loss of Rs 2 billion it suffered last year, the Managing Director of state-owned PIAC Ahmed Saeed has said. He also added that next year the airline hopes to achieve a targeted profit of Rs 3.5 billion for which the budget has already approved.

He was speaking at a ceremony held in Karachi to mark the appointment of Citigroup as the Guranteed lender under the US Eximbank supported financing for the purchase of three new Boeing 777-200Ers by the PIAC. The signing ceremony was attended by Mr. Ahmed Saeed and Country Corporate Officer of Citibank Pakistan Mr. Zubyr Soomro.

The purchase of three new Boeing aircraft will be financed through a long-term 12-year foreign currency loan backed by a guarantee of the United States Export Import Bank subject to obtaining requisite approvals. The total outlay of the financing for the three aircraft is approximately $ 340 million and the Citigroup is also involved in fulfilling PIA's pre-delivery finance needs of $ 150 million. The Citigroup has already disbursed $ 85 million under the joint mandate given to it and other banks including Islamic Development Bank, United Bank Limited and Citigroup's affiliate, Saudi American Bank.

Citibank's relationship with the PIAC exceeds three decades. It financed the acquisition of 3 DC-10s in 1973, arranged Rs 3 billion through the first-ever local currency future receivable securitization in the country in 1999. In 2001, PIA was the first Pakistani corporate entity after the nuclear explosion in May 1998 that Citibank took to the international markets which allowed the airline to use its own receivables to raise $ 54 million from international investors.

Mr. Zubyr Soomro said that though the global aviation industry continues to suffer from the post 9.11 environment amidst increased concerns about air travel, recessionary trends in the US and impending slow-downs in European economies the PIA's decision to revamp its fleet comes at an appropriate time because of exceptionally prices of aircraft in the international market and financial costs that are at an all-time low. He added that besides the 'tough' global environment, the PIA was further confronted with challenges on the local front such as the war in Afghanistan which resulted in reduced traffic and increased insurance cost and the closure of Indian airspace for an extended period of time.

However, he said that the PIA has been able to achieve a significant turn-around as the new management has taken some important revenue enhancement and strategic cost cutting measures. For instance, route restructuring for effective capacity utilization, restructuring of balance sheet and debt re-profiling with continual equity injection from the major shareholder, the Government of Pakistan, and outsourcing of administrative functions and focus on service to change the image of the airline.

Talking on a lighter note MD PIA, Mr. Ahmed Saeed, called PIA's relationship with the Citibank has been one of love-hate. "When I took over the charge of MD everyday there was news item in the press and the high officials of the Citibank told us it would just not be able to lend us any money because of such and such news item. However, the Citibank arranged $ 150 million financing for us in no time."

He claimed that when the present management took over the PIA's equities were in the negative and the airline was declared by some as 'a non-going concern.' "Today it is a going concern and will remain a going concern. We have not resorted to any salary cuts though we did suspend the unions for sometime and found other ways to improve our revenue such as closing operations on non-productive routes and rescheduling flights.

Talking about plans in the near future, he said that PIA intends to acquire a number of used aircraft to replace aging Fokkers after the Haj season- which will end about three months from now. "And a year later by the first half of 2004 we will have the three new Boeing 777-200Ers."

The PIA MD said that "we have little to play with. We are over-staffed and in the next five years we would have to let 5,000 people go but we will also induct 1,000 people. We also have a 10-year marketing plan to turn PIA into a profitable organization never to need the government support to meet its liabilities in future."

Good and comforting words indeed. However, only time will tell if PIA's decision to initiate its fleet replacement programme at this point in time when both domestic and international travels reels from reduced traffic and increased insurance costs were the right move.