PIA owes Rs40bn to employees' trust fund, law firm warns buyers

October 18, 2024 (MLN): Pakistan International Airlines (PIA) is currently indebted to the PIA Employees' Pension Trust Fund for approximately Rs40 billion.

Out of this amount, approximately Rs30bn was reported as a liability in the company's Annual Accounts of December 22.

In a public notice issued today by The Aviation Law Firm, on behalf of a group of senior management retired employees of PIA, prospective buyers of PIA were informed about significant liabilities related to the PIA Employees' Pension Trust Fund.

According to the notice, this liability arose from the misuse of Trust funds for operational expenses which is in violation of applicable Trust Fund regulations.

Additionally, interest accrued on this liability and contributions toward the Defined Contribution (D.C.) fund scheme, which has since merged into the Pension Trust Fund, were not included in the reported liability.

The actual value of the Trust Fund may, therefore, exceed Rs40 billion.

In a 2024 extralegal act, part of this liability, amounting to Rs20bn, was transferred to PIA-HOLDCO by the Privatization Commission of Pakistan and the PIACL.

Under Section 6 of the PIA Conversion Act 2016. all retirement benefits, whether funded or non-funded, shall not be changed to the disadvantage of employees/retirees.

Moreover, Trust Fund Laws of Pakistan dictate the requirements for the investment of Trust Funds and protect beneficiaries' interest.

Senior management retired employees have initiated a Constitutional Petition titled "Irshad Ghani & Others versus the Federation of Pakistan" before the Honorable Lahore High Court, Lahore seeking to ascertain the accurate value of the Trust Fund and seeking assurance for continuation of privileges and rights.

Prospective buyers must recognize that any liabilities toward the PIA Employees' Pension Trust Fund will transfer as liabilities to the new shareholders, whether individuals or groups.

The Aviation Law Firm states that buyers must factor these potential obligations into their bid calculations, specifically.

Budgetary provisions for replenishment of the Pension Fund and Anticipated costs to maintain the current level of medical and passage facilities for retirees, as guaranteed by the PIACL Act of 2016, should be considered in financial assessment.

"Your diligence in considering these matters is essential for informed bidding," the notice concludes.

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