PIA747
3rd Oct 2003, 00:59
Just came across this article on the PIA deal with Air Jamaica to lease 6 A310 aircrafts. Can anybody confirm this report? or is it just another Propaganda stunt by the Pakistan media.
http://www.satribune.com/archives/sep21_27_03/P1_pia.htm
PIA's New Multi-Million Dollar Air Jamaica Deal Has Huge Kickback Potential
By Khalid S. Butt
KARACHI: The recent Pakistan International Airlines (PIA) multi-million dollar deal with Air Jamaica, for leasing six old A-310 jet craft, is being increasingly questioned by aviation industry experts.
PIA has signed the dry lease deal for 10 years at the rate of $200,000 per aircraft, but these planes cannot fly on long routes without refueling.
A PIA official said two aircraft would join the fleet in November, two in December and two in June 2004 under the dry lease agreement. Dry lease gives the leasing airline an option to purchase the aircraft at the end of the lease period.
The A-310s would replace some aging Airbus A-300 planes. The agreement comes ahead of the introduction of new Boeing (BA) 777 aircraft next year into PIA’s fleet. The first three planes will be inducted by March 2004.
Experts say the Air Jamaica deal is more about leakages of funds and kickbacks than hiring of aircraft as leased aircraft are of an older vintage of A-310. This twin-engine aircraft has no ‘Trim Tank’ that was installed in the later versions. Thus, PIA will be forced to ply these aircraft on domestic and regional routes only.
The second problem is in the Pratt and Whitney engines. PIA engineering does not have the facility to maintain and overhaul these engines. Thus PIA has to spend more money in more contracts for maintenance of these engines.
According to a former director marketing of the PIA, the management is already negotiating with Pratt and Whitney for the maintenance of the engines at the rate of $400 per flying hour. If these planes will fly 12 hours daily at an average, PIA will pay Pratt and Whitney around $201,600 per week for maintenance.
Experts say the present deal is an action replay of the PIA deal for six Jumbo jets with Cathay Pacific.
Cathay Pacific (also a Sabre client) suffered a loss in 1998 for the first time in its 35-year history. On March 10, 1999, Cathay’s Chairman Mr. Peter Sutch while announcing the 1998 financial results put the loss at HK$ 542 million (1US$= HK$7.7) incorporating HK$ 607 million as the prevalent market value of his fleet of 13 B747-200/300 aircraft.
Cathay decided to get rid of its fleet of 7 Jumbo jets (B747-200) and six B747-300 aircraft. So the 13 aircraft were for sale for US$ 78 million or US$6.6 million per aircraft.
PIA could buy 6 aircraft for US$40 million! Behold the all-fixing lease PIA worked out. It is a marvel of taking a company for a ride. Instead of buying six aircraft, PIA decided to spend almost $200 million on leasing and maintenance etc of these six jets for just 24 months.
The details of these costs to PIA, in addition to any financial charges, include:
1. $275,000 per aircraft per month x 6 aircraft x 24 months is $39.6 million.
2. Heavy maintenance @ $1510 per flight hour for a guaranteed minimum of 3666 to 3999 flight hours per aircraft per year is US$70 million for 24 months.
3. Insurance for hull value of $35 million each hull, third party liability value of $1.1 billion and foreign object damage (FOD).
4. Spare parts support & consignment package @ 1% of value per month.
5. All maintenance & spares expenditure for up to but not including ‘C’ check.
6. Maintenance & support arrangements with Rolls Royce for the RB211 engines and with other equipment vendors like Matsu****a for in-flight entertainment equipment etc.
7. Tooling and training etc.
8. Line Replaceable Units (LRUs) required by PIA in greater quantities than per agreement e.g. two additional RB211 engines.
9. Auxiliary Power Unit (APU) – Line maintenance and LRU replacement.
10. Airworthiness directives and service bulletins.
11. Cost of using common parts from PIA inventory.
12. Aircraft on Ground (AOG) coverage etc.
The additional cost to keep three of its B747-200 in operation to support the Cathay aircraft should also not be ignored. The leased aircraft cannot be used for Haji flights. And some of the costs will never be known.
PIA thus leased 6 planes for upwards of US$200 million, or over Rs. 11.5 Billion when PIA could have bought these aircraft for just $40 million or Rs 2.3 billion. What a deal for Cathay!
Now, the same game plan is ready for the implementation with Air Jamaica by people appointed by General Pervez Musharraf.
http://www.satribune.com/archives/sep21_27_03/P1_pia.htm
PIA's New Multi-Million Dollar Air Jamaica Deal Has Huge Kickback Potential
By Khalid S. Butt
KARACHI: The recent Pakistan International Airlines (PIA) multi-million dollar deal with Air Jamaica, for leasing six old A-310 jet craft, is being increasingly questioned by aviation industry experts.
PIA has signed the dry lease deal for 10 years at the rate of $200,000 per aircraft, but these planes cannot fly on long routes without refueling.
A PIA official said two aircraft would join the fleet in November, two in December and two in June 2004 under the dry lease agreement. Dry lease gives the leasing airline an option to purchase the aircraft at the end of the lease period.
The A-310s would replace some aging Airbus A-300 planes. The agreement comes ahead of the introduction of new Boeing (BA) 777 aircraft next year into PIA’s fleet. The first three planes will be inducted by March 2004.
Experts say the Air Jamaica deal is more about leakages of funds and kickbacks than hiring of aircraft as leased aircraft are of an older vintage of A-310. This twin-engine aircraft has no ‘Trim Tank’ that was installed in the later versions. Thus, PIA will be forced to ply these aircraft on domestic and regional routes only.
The second problem is in the Pratt and Whitney engines. PIA engineering does not have the facility to maintain and overhaul these engines. Thus PIA has to spend more money in more contracts for maintenance of these engines.
According to a former director marketing of the PIA, the management is already negotiating with Pratt and Whitney for the maintenance of the engines at the rate of $400 per flying hour. If these planes will fly 12 hours daily at an average, PIA will pay Pratt and Whitney around $201,600 per week for maintenance.
Experts say the present deal is an action replay of the PIA deal for six Jumbo jets with Cathay Pacific.
Cathay Pacific (also a Sabre client) suffered a loss in 1998 for the first time in its 35-year history. On March 10, 1999, Cathay’s Chairman Mr. Peter Sutch while announcing the 1998 financial results put the loss at HK$ 542 million (1US$= HK$7.7) incorporating HK$ 607 million as the prevalent market value of his fleet of 13 B747-200/300 aircraft.
Cathay decided to get rid of its fleet of 7 Jumbo jets (B747-200) and six B747-300 aircraft. So the 13 aircraft were for sale for US$ 78 million or US$6.6 million per aircraft.
PIA could buy 6 aircraft for US$40 million! Behold the all-fixing lease PIA worked out. It is a marvel of taking a company for a ride. Instead of buying six aircraft, PIA decided to spend almost $200 million on leasing and maintenance etc of these six jets for just 24 months.
The details of these costs to PIA, in addition to any financial charges, include:
1. $275,000 per aircraft per month x 6 aircraft x 24 months is $39.6 million.
2. Heavy maintenance @ $1510 per flight hour for a guaranteed minimum of 3666 to 3999 flight hours per aircraft per year is US$70 million for 24 months.
3. Insurance for hull value of $35 million each hull, third party liability value of $1.1 billion and foreign object damage (FOD).
4. Spare parts support & consignment package @ 1% of value per month.
5. All maintenance & spares expenditure for up to but not including ‘C’ check.
6. Maintenance & support arrangements with Rolls Royce for the RB211 engines and with other equipment vendors like Matsu****a for in-flight entertainment equipment etc.
7. Tooling and training etc.
8. Line Replaceable Units (LRUs) required by PIA in greater quantities than per agreement e.g. two additional RB211 engines.
9. Auxiliary Power Unit (APU) – Line maintenance and LRU replacement.
10. Airworthiness directives and service bulletins.
11. Cost of using common parts from PIA inventory.
12. Aircraft on Ground (AOG) coverage etc.
The additional cost to keep three of its B747-200 in operation to support the Cathay aircraft should also not be ignored. The leased aircraft cannot be used for Haji flights. And some of the costs will never be known.
PIA thus leased 6 planes for upwards of US$200 million, or over Rs. 11.5 Billion when PIA could have bought these aircraft for just $40 million or Rs 2.3 billion. What a deal for Cathay!
Now, the same game plan is ready for the implementation with Air Jamaica by people appointed by General Pervez Musharraf.