"Debt, corruption ruining Afghan airline"

Thursday, March 29, 2007

Debt, corruption ruining Afghan airline
By Jason Straziuso
The Associated Press


KABUL, Afghanistan --Afghanistan's national airline could be days from
collapse due to corruption, mismanagement and a crippling airplane lease
that has drowned the struggling airline in debt.

The government is scrambling to court investors to privatize up to 75
percent of state-owned Ariana Afghan Airlines, and is tallying its assets in
case the company is liquidated, an Associated Press investigation has
learned.

The collapse of the 52-year old airline, which survived the Taliban regime
despite international sanctions, would be a potent symbol of failure by the
administration of President Hamid Karzai and would reinforce growing
perceptions of corruption and incompetence.

"If Ariana collapses, it will be a very heavy blow for people's trust in
government," said Ziauddin Zia, deputy commerce minister.

Afghanistan would lose 50 percent of its international flight capacity.
Ariana is blacklisted from flying to European Union countries because of
safety concerns; it mostly flies to the United Arab Emirates, India, and
Turkey. U.S. Embassy and United Nations employees are also banned from
flying the airline due to safety concerns.

Ariana's former maintenance director told The Associated Press that the
airline's safety department issues licenses and certifications to mechanics
and pilots in exchange for $200 to $500 bribes.

Yousuf Sultani, who left his post in February and now lives in the United
States, also said Ariana has 500 people on its maintenance department
payroll but that only 30 work.

Afghanistan's Transportation Minister, Niamatullah Ehsan Jawid, acknowledged
the airline is beset by corruption that prevents it from turning a profit.
Ariana employs some 1,800 people but operates only seven planes.

Among the estimated $14 million in immediate debts Ariana owes is a $1.9
million bill to Chicago-based Boeing Co. for two leased 757s, which must be
paid by Saturday. Ariana also owes some $7 million to its Afghan fuel
supplier, which could turn off the pumps any day.

"If they are patient we can continue, if they are not we will have to stop
(flying) tomorrow," said Abdul Rahman Sultani, Ariana's vice president of
finance. "Either the Afghan government helps us or we stop our service."

Ariana owes $41 million overall, Sultani said. It earned $3 million profit
last year on an estimated $74 million in revenue. It lost $25 million the
year before.

Ariana's acting president -- Engineer Raz Mohammad Alami, named last week
after Ariana lost its second president in six months -- hopes the U.S. will
intervene and ask Boeing for leniency, though Boeing has already pushed back
the due dates on some of the debts Ariana owes.

"My message for Boeing is that they are aware that the international
community is helping Afghanistan and Boeing knows that there was 25 years of
war in this country," said Alami, also the deputy transportation minister.

"We have been very lenient, and we will continue to do everything we can to
help Ariana, just like we do all our customers," said Brian Walker, Boeing's
communications director for the Middle East and Africa. He did not
elaborate.

Since the fall of the Taliban regime, Ariana has received considerable
foreign support. India donated Airbus jetliners to help the airline recover
from the U.S.-led invasion, when six jetliners sitting on runways were
bombed.

But Kabul's debilitated airport still can't provide satisfactory security
checks, Jawid said.

"You can give a border police officer $50 and you can transport anything" on
a flight, Jawid said.

Flight schedules are erratic, flight attendants typically don't conduct
preflight seat-belt checks, and a pilgrimage flight to Mecca that Ariana
chartered on a Boeing 747 this year carried 640 people -- some 25 percent
over maximum capacity, according to a company publication.

But it was the leased Boeing 757s -- which Ariana was never able to use as
it wanted -- that could cause financial ruin.

The planes, contracted in 2005, couldn't be delivered for over a year
because of leasing agreements and security requirements, said Abdul Ahad
Mansoori, Ariana's former president. As the planes sat idle in London and
Paris last year, Ariana was accruing about $1.1 million in monthly debt for
the lease, parking, maintenance and flight crews, said Sultani, Ariana's
vice president of finance.

Boeing would not allow the planes to be based in Afghanistan, so Ariana
hired France-based Eagle Aviation to register and operate the planes out of
Paris, said Mansoori. Eagle would not allow its flight crew to be based in
Kabul, so they were instead based in Dubai, meaning Ariana was paying for
expensive plane parking and hotels for the crew, he said. Eagle earlier this
month stopped flying routes for Ariana, saying it hadn't been paid $3
million it was owed, Mansoori said.

Afghanistan's attorney general's office is investigating whether any Afghan
officials improperly benefited from the contracts. Deputy Attorney General
Mohammad Aloko said the office hadn't named any suspects, but Transportation
Minister Jawid and other officials question whether former Ariana President
Mohammad Nader Atash profited from the deal.

"I worked with integrity and honesty," Atash said of his tenure between May
2005 and fall of 2006.

Atash, a university professor and researcher and with no experience in the
airline industry before his appointment, alleged that a high-level
government mafia wants Ariana to fail so officials can start -- and profit
from -- their own airline. He declined to name the officials, saying to do
so could put him in danger.

"They thought that if Ariana is not there it's open season for themselves,"
Atash said by phone from his home in Virginia.

Jawid said he would let 75 percent of Ariana be privatized if an outside
investor wanted to take over the company. He said he planned to meet with
executives from Dubai-based Emirates airline next week. Other investors are
said to have expressed interest but no firm offers have been made.

Jawid is also contemplating another proposal. He plans to ask U.S.
Ambassador Ronald Neumann next week if the U.S. could help with the Boeing
contracts in exchange for the value of the planes bombed by the U.S.
military during the invasion in 2001.

The U.S. Embassy said it wouldn't comment until it saw the specifics of any
such request.

At least Ariana's Afghan-based fuel supplier, which is owed some $7 million,
appears ready to grant the airline more leeway.

Abdul Ghafar Dawi of the supplier Dawi Group said he will continue to give
Ariana the 60 to 80 tons of fuel it uses every day.

"Ariana is the dignity of Afghanistan," Dawi said. "All my friends say it
will collapse, but I love Ariana."

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