Auditors cite PKR 21.8 billion loss from grounded PIA aircraft

Pakistan International Airlines (PIA) suffered losses of PKR 21.82 billion due to the prolonged grounding of its aircraft, audit officials told a parliamentary committee on Wednesday, though the airline’s chief executive disputed the assessment.

The issue came under discussion during a meeting of Parliament’s Public Accounts Committee (PAC), chaired by Naveed Qamar, while reviewing audit reports of the Aviation Division for the 2023-24 financial year.

Officials from the Auditor General’s Office informed the committee that several PIA aircraft remained grounded for extended periods — ranging from 44 to 239 days, while one aircraft remained out of service for 652 days — resulting in what auditors described as unjustified operational and financial losses amounting to PKR 21.82 billion.

The audit department said the losses were calculated based on the daily revenue of each aircraft multiplied by the number of days it remained grounded. Auditors attributed the delays to management negligence.

However, the PIA chief executive officer rejected the audit’s conclusion, saying aircraft were grounded due to scheduled maintenance and that no financial loss was incurred as a result. He said globally, each aircraft undergoes maintenance for about 25 days annually.

PAC member Bilal Ahmed questioned the audit methodology, prompting officials to explain the basis of their calculations.

Chairman Naveed Qamar directed that the matter be taken up first by the Departmental Accounts Committee (DAC) before the PAC reaches a final decision.

Outstanding liabilities transferred

During the meeting, the committee was also informed that PIA’s outstanding liabilities totaling PKR 688 billion have been transferred to a government-owned holding company as part of the airline’s privatization process. Of this amount, PKR 131 billion relates to unpaid taxes and duties, with PKR 115 billion shifted to the holding company, according to the secretary defense.

Chairman Qamar questioned how the holding company would meet these obligations. The defense secretary responded that the Ministry of Finance has not yet made a decision on the payment mechanism.

The audit also highlighted losses of PKR 8.6 billion due to PIA’s failure to dispose of surplus spare parts and retired aircraft between 2015 and 2021, calling it a violation of rules and evidence of inefficiency. The inventory included spare parts from Boeing 747, Boeing 707, Cessna, SA-310 and WB-737 aircraft.

Officials said spare parts worth PKR 3.8 billion have already been sold, while the remaining inventory will be transferred to the successful bidder under the privatization process.

The committee was told that six Boeing 747 aircraft are currently grounded and have zero book value. These aircraft will also be handed over to the successful bidder, who will decide how many aircraft to retain out of the total fleet of 16.

Additional audit objections included losses of PKR 2.61 billion due to non-implementation of board directives regarding properties, PKR 1.67 billion from irregular payments made without user department validation, and PKR 112 million from procurement carried out in violation of Public Procurement Regulatory Authority (PPRA) rules through non-prequalified vendors.

Responding to the audit objections, officials from the Ministry of Defense said aircraft grounding occurred due to Covid-19-related restrictions, global supply chain disruptions, structural repairs, financial constraints, and payment issues that delayed maintenance.

They said some delays were caused by unscheduled fuselage repairs, which required additional time and materials, adding that aircraft leases had also been reduced to a minimum during the period.

Several other audit objections were referred to the DAC for further fact-finding, after which the PAC will take a final view.