PIA awards Rs700mn contract for in-flight entertainment under dubious circumstances

ISLAMABAD: Pakistan International Airlines (PIA) awarded a Rs700 million contract for the upgradation of in-flight entertainment (IFE) in eight ageing Boeing 777 aircraft to a local company that was registered only two months before the tender for the project was floated, according to a report. 

The investigative piece published in The News on Tuesday claimed that the company in question, run by a retired Pakistan Air Force (PAF) officer, Khawaja Moizuddin, is named Avionic Solutions Private Limited and was registered with a capital share of just Rs100,000.

The owner of the firm, Moizuddin, is also allegedly a close friend of suspended PIA CEO Air Marshal Arshad Malik. The Sindh High Court had earlier this year barred Malik from discharging duties at PIA after a petitioner challenged his qualifications for the job. 

When contacted to comment on the developments, a PIA spokesperson termed the allegations “highly unfair and absurd.” 

Avionic Solutions, according to the spokesperson, had extensive commercial, military avionics, and technical support experience, The News reported. 

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Company registered two months before tender floated

However, the documents obtained by the publication contrast with the claims of the PIA spokesperson. They indicate that the company was registered only in March last year, two months before the tender was floated by PIA.  

To put Avionic Solutions' (AS) bid for contract in perspective, another firm, AAR International Corporations, based out of Singapore with 70 years of experience in the relevant field, participated in the bid but lost, according to the report. 

The publication also revealed that while AS was registered to Moizuddin, he had also named his wife and daughter (who is still a student) as directors on the company's board. 

The company had also not filed a single tax return and no auditor had ever evaluated its accounts.

"Avionic Solutions is not a newly-formed company. The Terms of Reference designed for the purpose didn’t specify how much experience the company should have," the PIA spokesperson initially said in defense when contacted by The News. 

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Asked to comment on the allegation that the TORs might have been tailored to suit a particular bidder, the spokesperson said the PIA had wanted “indigenous solutions” for the upgrade, and that there was no other local company having relevant experience in the area. 

IFE systems are digital entertainment systems designed to keep passengers occupied, especially during longer flights. They are used as a marketing tool and considered a need for the modern airline industry. 

Installation and up-gradation of IFE systems is a highly technical job and needs certification from the European Union Aviation Safety Agency and the Federal Aviation Authority of the US Department of Transportation, according to The News. 

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'Partners from family common practice in Pakistan'

In the case in question, tenders for IFE upgrades were invited in June and two companies participated: AAR International Corporation, which was registered in 1951, and Avionic Solutions, which was only two-months-old at the time of the tender. 

Incidentally, PIA's Chief Financial Officer Khalilullah, who signed the award of contract to Avionic Solution, had been hired in the month the tender was floated. 

Avionic Solutions, which secured the contract, did not have any experience of carrying out such a project, a fact eventually admitted by the PIA spokesperson, who had initially been of the view the winner has “extensive experience.” 

The company was registered on the same date (March 18, 2019) with both the Securities and Exchange Commission of Pakistan and the Federal Board of Revenue.  

When asked if it was true that Avionic Solutions was a family-owned company, the spokesman described it as a private limited company that included partners from the family, which he described as, “a common practice in Pakistan.” 

"The evaluation criteria required a registered company which it [Avionic Solutions] was at the time of bid submission," the spokesperson said in response to another question. 

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"The TORs [terms of reference] required a solutions provider that could provide an indigenous, cost-effective solution," the spokesperson said. "The mandatory requirements were of a company that was registered with local companies and taxation regulators and could provide components, services, and support in compliance with FAA Part 21 and PCAA certifications," he added. 

Asked to comment on why PIA allowed a foreign company to participate in the bid if a local company was required for “indigenous solutions”, the spokesperson said the foreign company had a local representative in Pakistan who took part in the bidding process. 

Originally published in The News