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PIA ends lease deal with SriLankan, US$ 1 million in arrears
View(s):Pakistan’s national carrier has run up more than US$1 million in arrears for the Airbus A330-300 aircraft it wet-leased from debt-ridden SriLankan Airlines last year, authoritative sources said.
The crisis-ridden Pakistan International Airlines (PIA) suspended its lease with SriLankan on February 9 with US$1.3 million still outstanding. It will no longer lease two additional A330-300 aircraft from SriLankan as earlier planned, authoritative sources confirmed.
SriLankan Airlines management maintains, however, that the PIA wet-lease was one of the most advantageous deals the company has ever struck, earning almost US$9 million profit in six months. The figures could not be independently verified.
“They flew more than the contracted number of hours per month,” said Suren Ratwatte, Chief Executive Officer of SriLankan. “So the extra flying was practically all profit for us.” He refused to divulge numbers, saying those could only be calculated once the leased aircraft is returned and the last invoice is settled.
PIA announced in a statement this week that Pakistan’s national aviation policy did not allow it to wet-lease an aircraft for more than six months. It said it has now shortlisted another plane to replace its “PIA Premier” product that was operated on the SriLankan A330-300 between Pakistan and London. New aircraft are to be inducted into the fleet later this month.
The A330-300 that SriLankan leased out to Pakistan, complete with cockpit and cabin crew, is owned by Avolon Aircraft Leasing and Management Services.
It had been acquired by SriLankan in brand new condition. A monthly rental is still being paid to the lessor. In October last year, SriLankan cancelled its long-haul flights to Paris and Frankfurt on the grounds that the routes were loss-making. This was after it struck a deal in July of that year to lease out three A330-300 aircraft (which are used on long-distance routes) to PIA. The first plane was deployed in August on aircraft, crew, maintenance and insurance basis.
But the PIA deal soon came in for censure both here and in Pakistan. Critics say the SriLankan management should have been more circumspect in examining the financials of the Pakistani carrier which has long been in a monetary mess. In Pakistan, newspapers have flagged the high cost of the lease rental charged by SriLankan Airlines.
This week, Pakistan’s The Nation newspaper flagged the “hourly cost of US$ 8,500” charged by SriLankan was too high to have ever made commercial sense PIA. Journalist Amraiz Khan wrote that it exceeded both the revenue generated and the additional cost incurred by launching “PIA Premier”.
Meanwhile, sources from among SriLankan Airlines crew claimed they had not been given advance notice of the PIA lease ending on February 9. On January 31, rosters were published for the next 28 days with crew allocated to operate PIA sectors from Lahore and Islamabad to London.
“On 8th of February, a sudden mail was sent out to crew from the Chief Pilot that the PIA wet lease has ended with immediate effect and that crew rostered for PIA flights would be placed on alternate duty patterns,” a message circulated among staff said.
The cabin and technical crew were in Islamabad waiting to operate a PIA flight to London. “Hours later, they were stranded as the flight to London was cancelled and they were made to passenger to Karachi and then take UL184 to Colombo,” the message said.
Mr. Ratwatte denied that the lease ended suddenly. “We were expecting it,” he insisted. “The roster was just a plan. We had also been planning for the lease to end for weeks.” Meanwhile, the A330-300 aircraft was ferried from Lahore to Karachi for repainting yesterday. It is likely to be brought back to Sri Lanka on February 26.
SriLankan management will then have to decide how to use its three A330-300s which are a legacy from the Rajapaksa era. They each cost more than US$1 million a month. Curiously, the airline might return some leased A330-200s to the lessors in mid-2017, authoritative sources said. This means they must either ground their A330-330 long-haul craft or fly them unprofitably on short-distance routes which are mostly what SriLankan is now limited to.