Pakistan International Airlines (PIA) is set to receive another bailout package from the government of Pakistan. The package is worth Rs13 billion. Reportedly it will be approved at the meeting of the Economic Coordination Committee (ECC) of the Cabinet, scheduled this week.

There are several implications of this poorly thought out decision. PIA is a chronic problem without a concrete policy to fall back on. On the guarantee of the government, they have been receiving loans and capital injections from the budget. This is not their first bailout; and considering its trajectory, it will not be the last. Their current liabilities are estimated to be around Rs300 billion. The irony is that those leading PIA do not understand that the money that they are consuming comes out of the federal budget. And that is a huge amount, which can be spent on health, education and development; rather for a cyclical failure.

Within the current year, PIA’s guarantee limit was increased by the government from Rs10.5 billion to RS161.5billion. This move was justified with the argument that the company was facing some challenges. The management of PIA gave the statement that due to a plane crash (PK-661), the fiscal challenges of the company had increased. There was no mention of how the company had been operating with a liquidity crisis since quite a few years.

The reason why the problem of PIA not making revenues is chronic is because the government, at the time of these bailouts, does not enforce policy changes. A good model to follow is the International Monetary Fund (IMF). The body structures the bailout into tranches and makes each tranche contingent on structural changes and reform. PIA, which is plagued by overstaffing and inefficiency, needs to be told to make aggressive changes before being given access to bailout funds – otherwise it will be back at the government’s doorstep in a short period of time.