Aug 12 - 18, 2002

It is indeed a reassuring development that the 2 major commercial enterprises in the public sector Pakistan International Airlines and Pakistan Steel have shown significant improvement in their financial affairs during the last 2 years and have come out of the "red" after a long time.

The Pakistan International Airlines Corporation (PIAC)_ has achieved almost a turn around in its financial position during the outgoing financial year. Improvement in the financial health can also be judged from the fact that PIA's Rs 10 share which was being traded for Rs. 2.45 last year has moved up to Rs 7.40 now. "Despite the turmoil in the aviation industry, PIAC is committed to budget a profit of Rs. 2.4 billion for the year 2002," said Lt. Gen (Retd) Hamid Nawaz Khan, Chairman of the PIAC in the annual report for the period ended December 2001. The report said "The financial results for the year 2001 present a significant and impressive turnaround in the airlines fortunes".

"The operating revenues of Rs. 43.6 billion increased by Rs. 4.4 billion from Rs. 39.2 billion last year, an increase of 11.2 per cent. There is an after-tax loss of Rs. 2.2 billion as against the phenomenal loss of Rs. 5.3 billion last year," the report said. This gradual improvement has been achieved as a result of various measures initiated after June 2001, despite the fact that the global airline industry has been passing through dire straits," the report added.

The year 2001, turned out to be the most difficult year, the airline industry has over experienced. It was a disastrous year for the global airline business. Never before have the industry conditions changed so fast and so fundamentally for the worse. The total losses in the airline industry were enormous and scores of employees have lost their jobs world wide as the airlines struggled to survive the crisis. The aftermath of the September 11 incident in the USA and the subsequent acts of terrorism have dramatically strengthened the decline. It was not until late December 2001 that some signs of recovery in aviation could be detected.

The PIAC was faced with multifarious problems, internal as well as external. The situation was addressed comprehensively of by formulating a business plan which was then approved by the government. The plan was meticulously implemented and today the national carrier has attained a reasonable level of profitability.

As a turnaround strategy and cost-saving measure, PIAC had also adopted a tactic to eliminate non-productive positioning flights as well arresting excessive capacity. The passenger seat factor improved to 66.5 per cent over 65.6 per cent last year. Particularly during the second half of 2001, the seat factor touched 69.9 per cent as against 63.8 per cent in the first half.

On the other hand, rigorous efforts were made to enhance cargo business through increased capacity and better utilization on all routes specially on the prime onghaul sectors. The creation of hub at UK also helped. During the year, the cargo uplift was enhanced by 3.75 per cent as compared to last year. The cargo load factor for the year 2001 stood at 55.4 per cent in comparison to the corresponding period of the previous year which was 49.04 per cent. Overall RFTKs (Revenue Freight Tonne Kilometers) increased by 13.5 per cent over 2000.

Airline reported a profit of Rs. 403 million for six months ended December 31, 2001 as against the target of break even level. There was no default on long-term loan borrowings. All fuel bills and payments towards sales tax are up to date. The airline was able to retire loans on three A320 Aircraft and they have now come under the ownership of the airline.

The vision and constant monitoring by management enabled the airline to tackle these multifarious problems and emerge successful when almost all other were going down. This was also made possible without resorting to massive layoffs as done by other airlines because of the stringent cost cutting measures.

Lt. Co. Muhammad Afzal Khan (Retd), Chairman Pakistan Steel claimed at a meeting of the Karachi Chamber of Commerce and Industry (KCCI) that the sales income of Pakistan Steel recorded the highest-ever figure of Rs. 17.54 billion for the year 2001-2002 as against the target of Rs. 15.6 billion. This was made possible through appropriate reductions in the prices of steel products. At the same time the Pakistan Steel earned a profit of Rs. 552 million, which indicated a marked improvement in the management policies. Another encouraging aspect was the payment of annual debt instalments to banks for the first time in the last several years. The debt servicing discharged during the year 2001 was stated to be Rs. 2.4 billion while an amount of Rs. 2.2 billion was paid on July 1, 2002. It was for the first time over the last several years that the Pakistan Steel was able to reduce its debt burden, which stood at Rs. 19.11 billion when the present management took over.

The long-postponed aim of reducing the excessive staff strength to a level commensurate with the size and capacity of the mill, was also put through by the present management. The chairman disclosed that the scheme of offering incentives for voluntary retirement was successfully implemented, whereby the staff strength was reduced from 20,533 to 13.652 persons on payment of compensation amounting to remarkable achievement of the management, considering the possibility of staff resistance from the workers' union and also liquidity problems. Both these aspects were taken care of in a smooth execution of the scheme.