Pakistan Airlines Seeks State Aid After Years of Losses

Pakistan International Airlines Corp., the flag carrier reeling from seven straight years of losses, sought financial assistance from the government for at least a third time since 2007 to pare debt.

The carrier, known as PIA, has asked for 25 billion rupees ($257 million) from the government, Managing Director Muhammad Junaid Yunus said in a Jan. 1 interview at his office in Karachi, Pakistan. The management is in talks with the finance ministry to raise the capital before March, he said.

“I’m praying that we get this,” Yunus said. “This is a government airline, it’s a national asset.”

PIA plans to lease 12 fuel-efficient planes this year, Yunus said, as the company turns for funds to the government, which itself is trying to repair state finances after recording the highest budget deficit in two decades. South Asian carriers Air India Ltd. and SriLankan Airlines Ltd. have also won state funding amid competition from Emirates and Middle East carriers.

Pakistan’s national carrier got government loans of 25 billion rupees in 2007 and about 8 billion rupees in the year ended in June 2009, Yunus said.

“The cash injection won’t bring PIA out of trouble but it will still make things better for them,” said Khurram Schehzad, the Karachi-based head of research at brokerage Arif Habib Ltd. “The implementation of this should be gradual considering the looming elections and the coming budget.”

PIA fell 0.3 percent to 3.81 rupees at the close in Karachi, erasing a gain of as much as 5.5 percent. The benchmark KSE 100 index rose 0.6 percent. The stock more than doubled last year, ending eight straight years of annual declines.

Kingfisher Losses

Fuel costs and rising competition have also hurt other carriers in the region. The Indian government said it may provide as much as 300 billion rupees ($5.5 billion) to unprofitable Air India through 2020. Kingfisher Airlines Ltd., India’s second-biggest carrier by market share in 2011, has halted operations since October after five years of losses.

PIA plans to lease eight A320s and four turboprops, Yunus said. The Airbus planes would be used for services to cities including Dubai, Abu Dhabi, Kuwait and Mumbai. The company will raise bank loans to fund the fleet upgrade after government approval, he said.

The carrier has a debt of 150 billion rupees, Yunus said. PIA posted a loss of 26 billion rupees in 2011, according to data compiled by Bloomberg. It previously reported an annual profit in 2004.

(Updates with closing share price in seventh paragraph.)
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