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Pakistan stuns Airbus, opts for
Boeing
ISLAMABAD - In a dramatic
about turn, Pakistan International Airlines (PIA) has
announced that it will buy US-made Boeing 777s instead
of the French-made Airbus-310 in a major overhaul of the
national carrier.
At the weekend, in leaks to
the local media, PIA indicated that it would buy the
French craft. However, in a move that reflects deep
divisions within the PIA board, the decision was
reversed 24 hours later.
Lieutenant-General
(retired) Hamid Nawaz Khan, the secretary of defense and
chairman of PIA, announced at a briefing on Monday that
PIA would buy eight Boeing aircraft - three in 2003, two
more in 2006 and three more by 2010. The aircraft are
part of a US$2 billion phased fleet replacement program
to buy 11 planes by 2011. The average age of PIA's
planes is 23 years old.
The PIA chairman said
that there had not been any pressure on the government
from any side to purchase a particular brand of plane
and that the decision was "the best commercial decision
to revive the past glory of the national flag carrier".
However, it has been noted that the reversal
came just hours after the US signed a $3 billion debt
forgiveness deal with Pakistan, bringing the country a
step closer towards winning the cancellation of a
further $1 billion of debts to the US.
Pakistan's Finance Minister, Shaukat Aziz, said
that the agreement to postpone the debt by more than 20
years gave Pakistan "space to spend money on poverty
reduction". The latest rescheduling deal is more
sweeping than one signed by the US and Pakistan last
December covering about $500 million of loans. Not only
does it involve more money, but Pakistan has 38 years to
repay the bulk of the loans - $2.3 billion - and a
15-year holiday from interest payments. Repayment of the
remaining $700 million has been put on a 23-year time
frame, with a five-year rest from interest payments. The
loans involved were for projects ranging from
agriculture to defense spending and funds to support
importers.
It has also been noted that France
has not yet rescheduled Pakistan’s debt under a Paris
Club agreement signed last year between Pakistan and the
lenders.
Khan said that the government would
cover 15 percent of the planes' costs, while the rest
would come from financial institutions. He said that he
hoped the current slump in the airplane market would
help the airline get favorable terms on financing and
prices, including discounts of up to 38 percent. The
government agreed earlier this month to contribute $150
million over three years as equity to help the state-run
airline finance the purchase of the first three planes.
The plan received a boost after the airline
opened talks with the US Export-Import Bank, which
resumed financial assistance to Pakistan following
Islamabad's support of the US-led anti-terror coalition
after September 11. The Export-Import Bank offered loan
guarantees if the airline bought Boeing's 777-200 ER,
and Airbus offered a long-term financing plan for
purchase of new 340-300 aircraft.
PIA's improved
financial performance - the government said that it
would post an operating profit this year - comes after
years of losses due to inefficiency, higher fuel costs
for older aircraft and overstaffing. The state-owned
airline has more than 40 planes and 22,000 employees.
"PIA actually made a profit of 400 million rupees [$8.2
million] from June to December in 2001," Khan said.
"This year they have made 1 billion rupees profit from
January to August."
The Pakistan government also
confirmed earlier this month that PIA had completed the
acquisition of six used 747-300 passenger aircraft from
Cathay Pacific Airways Ltd, which PIA had leased over
the past three years.
Khan said that the
International Monetary Fund (IMF) had called for the
privatization of PIA to reduce its losses and make it
more competitive. "We had recently met the IMF mission
members when they were here and told them that we are
not against the privatization of PIA," he said. Khan
said that a number of steps had been taken to improve
the performance of the organization. However, he said,
the PIA management would welcome some organized
disinvestment of the airline.
(Asia Times/Asia
Pulse)
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