PAKISTAN INTERNATIONAL AIRLINES CORPORATION
S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
May 3 - 16, 2010
Pakistan International Airlines (PIA) Corporation's principal activity is to provide air transport services including provision of engineering and other allied services. PIA is the flag carrier airline of Pakistan based in Karachi.
It is the 31st largest airline in Asia, operating scheduled services to 35 destinations throughout Asia, the Middle East, Europe and North America, as well as a domestic network linking 23 destinations.
Its main bases are Jinnah International Airport Karachi, the Allama Iqbal International Airport, Lahore and the Benazir Bhutto International Airport Islamabad/Rawalpindi. The airline's secondary bases include Peshawar International Airport, Faisalabad International Airport, Quetta International Airport, and Multan International Airport from which it connects the metropolitan cities with the main bases, the Middle East and the Far East.
The airline is owned by the government of Pakistan (87 per cent) and other shareholders (13 per cent).
PIA post tax losses was 83 per cent in 2009 on the back of fuel cost reduction, a comparatively stable Pak rupee, prudent financial management and higher revenues. The post-tax financial loss came down to Rs5.82 billion in 2009 from Rs36.14 a year ago. The drain caused by depreciation of rupee was limited to Rs6.71 billion in 2009, 72 per cent less than Rs24.12 billion in the preceding year.
A significant reduction of loss testifies that the management capitalised on the opportunities offered by a changing macroeconomic environment on both global and domestic fronts and successfully tackled the challenges of 2009, closing at a much better results. Net reversal of Rs8,852 million in deferred taxation has been recorded which has resulted in a significant reduction in amount of loss after taxation for the year. The reversal is caused due to recognition of deferred tax asset on account of unused tax losses related to unabsorbed depreciation amounting to Rs91,709 million.
FINANCIAL PERFORMANCE (RS IN MILLION)
INDICATORS 2009 2008 2007 Operating profit/loss (4,064.99) (31,636.12) (5,935.08) Profit/loss after tax (5,822.43) (36,138.64) (13,398.71) Fixed assets 133,647.52 115,123.49 95,600.63 Current assets 16,880.56 15,039.28 13,251.33 Current liabilities 68,817.62 72,528.40 52,611.55 EPS (Rs) (2.72) (17.79) (6.61)
PIA is owned by the government of Pakistan. In the late 1990s, the government of Pakistan considered selling the airline to the private sector due to the persistent losses suffered by the airline. The government announced the privatisation plans but they were never implemented. Several steps towards outsourcing of non-core business have been initiated. Catering units (starting with Karachi Flight Kitchen), ground handling (starting with ramp services) and engineering, are to be gradually carved out of the airline and operated as independent companies.
The entire Hajj Operation was conducted through PIA's own fleet in 2009 and has been quite a success. PIA operated direct flights from Karachi, Islamabad, Lahore, Peshawar and Quetta, while connections via Karachi were provided to passengers from other cities. PIA carried approximately 118,000 Hujjaj during the Hajj Operation. In 2009, the Hajj operational performance showed excellent technical reliability of 99.5 per cent.
REVENUE (RS IN MILLION)
REVENUE 2009 2008 Passenger 84,510 79,479 Freight 4,982 5,459 Others 5,072 3,925
PIA also operates an extensive cargo delivery system within Pakistan. PIA Cargo transports a range of goods across Pakistan as well as to international destinations. These include meat and vegetables, textiles, paper products and laboratory equipment.
In 2003 PIA launched "PIA Speedex", a courier service in Karachi, Lahore and Rawalpindi/Islamabad; expanding within a year to 12 cities. Today, the airline offers over 70 locations within Pakistan, with shipments collected and delivered from customers' homes. From 2004 to Sep 2007, PIA Cargo operated two Airbus A300 Freighter aircraft through MNG Airlines under wetlease/ACMI to Haan and Luton; initially these also operated to Amsterdam, Basel and Cologne.
During 2009, PIA signed an agreement with Thales for the purchase of a new Boeing 777 Full Flight Simulator Level D and associated options. The new simulator uses key technologies to drive down operational costs, exceed the latest environmental directives and reduce the carbon footprint of the device. The acquisition of this full flight simulator will result in improved training standards, better coordinated crew scheduling and planning.
Currently, PIA faces many challenges due to loss in profitability. For increasing their profits, PIA's strategy should be vital pursuit of higher revenue generation and to continue focus on cost rationalisation. In addition, new initiatives should be launched to increase revenue through third party engineering sales, revamping of cargo business by improving physical and technological infrastructure, development and launch of innovative products to maximize revenue generation and increase in market share.