Pakistan International Airlines, heralded by the Pervez Musharraf government as a major success story, may hit a major air pocket with the Karachi Stock Exchange declaring it a 'defaulter,' a media report has said.

"The country's economic barometer, Karachi Stock Exchange, has declared PIA as a 'defaulter' as of May 1, 2004," the South Asia Tribune has reported in its latest issue.

Quoting documents obtained by it, the report said the KSE served the final notice to place PIA on the defaulters' counter on April 2 after the airline failed for the seventh consecutive year to announce a dividend for its shareholders, despite the claims of billions in profits earned by it last year.

The KSE notice was issued after the PIA board approved the balance sheet for the year ending December 31, 2003, in which 'a pre-tax profit of Rs 3,700 crore was claimed. However, the PIA board again failed to announce any dividend.'

The report said under the stock exchange rules 'non-distribution of dividend without any sound reason makes a company a defaulter unless KSE agrees to grant extension in declaration of dividend on acceptable grounds.'

The auditors of PIA accounts had raised 'serious objections' to the newly approved accounts, the report said and quoted a senior airlines official as saying that over 15 pages of audit objections were raised on 'irregularities and omissions which had not been explained in the accounts.'

To avoid payment of dividends, the PIA was regularly seeking and getting extensions from the KSE for the past three years but when the airline officials started claiming that in 2003 they will have a profit of over Rs 300 crore, the KSE asserted that the public shareholders should be given a piece of the pie.

The South Asia Tribune said the 'scandal' raised serious questions besides continuing losses to the shareholders.

"If PIA is unable to pay a 10 per cent dividend totaling Rs 67 crore from its projected profits of Rs 3,700 crore, the question is are these profits for real? What to talk of Rs 67 crore, PIA was unable to pay even Rs 7.5 crore to its minority shareholders. That proved the claims of huge profits were smokescreens to make a fool of the military rulers," the report said.