Year 2011 - PIA Losses Surged by 29 Percent

[Abbas Ali]

Tuesday, May 01, 2012

KARACHI: The loss-after-tax of Pakistan International Airlines (PIA) surged by 29 percent to Rs26.76 billion for the year ended on December 31, 2011 from Rs20.78 billion incurred in 2010, a statement said on Monday.

Accordingly, this translated into a loss per share (LPS) of Rs9.73 for ‘A’ class ordinary shares of Rs10 each against the LPS of Rs8.39 in 2010. The LPS for ‘B’ class ordinary shares of Rs5 each stood at Rs4.87 against Rs4.20 in 2011, according to the profit and loss accounts of the airlines available with the Karachi Stock Exchange.The national flag carrier earned revenue of Rs116.65 billion, which was eight percent higher than Rs107.53 recorded in 2010.The exchange loss increased by 101 percent to Rs4.21 billion against Rs2.09 billion incurred in 2010.

Source: The News

[Abbas Ali]

PIA in the doldrums

MAY 02, 2012



After a staggering CY10 for Pakistan International Airline in terms of turnover with revenues growing by 14 percent and the primary business segments showing remarkable growth, the much awaited annual results for CY11 announced on April 30th CY12 reflected the horrifying performance round the year.

Sale revenues inched up by eight percent during CY11 versus CY10 primarily due the passenger business segment representing roughly 85-90 percent of the total revenues.

However, these receipts were once again were not enough to absorb the cost shock.

Cost of service shot up and this was mainly on account of a 41 percent jump in aircraft fuel expenses during CY11.

Aircraft fuel constitutes more than 50 percent of the total cost of service, and escalating oil prices during the year, especially the latter half dented the gross profit where gross margins fell from 13.9 percent in CY10 to 1.4 percent in CY11.

Hence volatility in crude oil prices directly impacts the airlines operating costs.

The deterioration of rupee versus the greenback wreaked havoc on the profitability of the company during CY11, unlike CY10 which somewhat stable exchange rate.

Every year, PIA suffers heavy losses on account of exchange rate translation.

CY11 was no different, as the net exchange loss doubled from Rs2.09 billion in CY10 to Rs4.22 billion in CY11.

As a result operating margins tumbled from the meagre 0.67 percent in CY10 to -15.38 percent in CY11.

Other operating income that increased two-fold during CY10 on account of higher derivative income and reversal of the provision for CAA claims in CY10 and has remained a source of hope during times of disarray did no good to the profits at the year end.

Hence the profitability during CY11 was further axed by a dip in other income by 76 percent.

The net profit during CY11, consolidated and unconsolidated both, plunged by 29 percent with unconsolidated net margins deteriorating further into negative.

As expected, CY12 did not start off well for PIA as the results of 1QCY12 depict an even ghastly picture.

Where the revenues remained flat for the quarter versus 1QCY11, the costs surged to new heights.

Volatility in the fuel market and the inefficiencies at the public sector organisation weighed heavily on profitability.

With some respite in the other income, loss after tax for 1QCY12 stood at Rs7.8 billion, with profitability plummeting further by 84 percent.

PIACs financial performance is extremely vulnerable to three major risks.

One is the fuel price risk due to volatility in crude oil prices.

The companys gross margins and operating margins remain extremely sensitive to future fuel price movements.

Second is the currency risk especially when the rupee is expected to cede its ground further.

Thirdly, the company is exposed to interest-rate risk and given the situation in the eurozone, the financing linked to Libor are heavily strained.

Not to forget the operational inefficiencies, nepotism and unwarranted appointments debilitating the operating performance.

Source: brecorder.com

[Amaad Lone]

PIA can never make money again.

Right now its the cost of fuel, next year it will cost of debt servicing in dollars.

Every year the management will find a reason to declare losses and ask for bailout money.

Lazy workers of PIA.

[Abbas Ali]

PIA 2011 Annual Financial Performance Report is now available on airline's official website on following link:

Link: PIA - Corporate Reports

PIA share in domestic and international flights in 2011

76% percent in domestic market.
39% percent in international market.

Source: PIA

Seat Factor Percentage 2006 to 2011

72% in 2011

Source: PIA

Passenger Revenue 2006 to 2011


Source: PIA

Cargo Revenue 2006 to 2011


Source: PIA

Breakdown of Revenue by Business Segments


Source: PIA

Revenue by Segment 2006 to 2011


Source: PIA

Revenue Utilization by Geographical Segments


Source: PIA

Performance comparison between 2010 and 2011


Source: PIA

Cost Composition 2006 to 2011


Source: PIA

Six Year Summary


Source: PIA

Abbas

[Amaad Lone]

PIA needs to improve its load factor.

For example off season flights with fewer passengers should be re-routed.

Why fly Lahore-London 60% full, when you can fly it 90-100% full if it goes Lahore-Rome-London.

[faisal-777]

PIA needs to improve its load factor.

For example off season flights with fewer passengers should be re-routed.

Why fly Lahore-London 60% full, when you can fly it 90-100% full if it goes Lahore-Rome-London.

I think those 60% are there probably because of the facility of direct flight. If it is to stop in Rome, why not instead go for Emirates which makes a stop at DXB and is better and comfortable choice

[Abbas Ali]

I think those 60% are there probably because of the facility of direct flight. If it is to stop in Rome, why not instead go for Emirates which makes a stop at DXB and is better and comfortable choice

Emirates option includes aircraft change and stay at Dubai Airport with its duration depending on connecting flight schedule.

In example suggested by Amaad, the PIA aircraft will only make a stopover at Rome.

I think a flight with a brief stopover is considered as a better option compared to aircraft change and stay at an airport.

Abbas

[rayyanullah]

This is not the age of Hop,Skip and Jump. Passengers want to get to destinations as fast and quickly as possible. Remember the days of Karachi-Dubai-Cairo-Paris-New York. Try the same routing today and see how many passengers you can find.
Another point to consider is that most European transit stations now require a transit visa for the Green Passport holders.

[Amaad Lone]

PIA already flies to many European cities in which two cities are connected by one flight.

Lahore-Oslo-Copenhagen-Lahore

Lahore-Milan-Paris-Lahore

Lahore-Amsterdam-Frankfurt-Lahore

If these flights can be operated with good loads then why not:

Lahore-Rome-London-Rome-Lahore
Lahore-Rome-London-Rome-Lahore
Lahore-Athens-London-Athens-Lahore
Lahore-Athens-London-Athens-Lahore
Karachi-Milan-London-Milan-Karachi
Karachi-Milan-London-Milan-Karachi

Without operating any extra flight, PIA can revive two or three European stations.

The flight will remain in the 12 hour duty time so only one crew will operate.

Plus the landing charges will be more then compensated if the station can fill in the extra 25% seats.

PIA has huge losses, and must raise extra revenue from the same flights.

I think those 60% are there probably because of the facility of direct flight. If it is to stop in Rome, why not instead go for Emirates which makes a stop at DXB and is better and comfortable choice

If you have better ideas then please share on how to raise revenue without increasing cost.

[Max]

How can margins be any better with ~ 450 employees per plane.

[faisal-777]

I think those 60% are there probably because of the facility of direct flight. If it is to stop in Rome, why not instead go for Emirates which makes a stop at DXB and is better and comfortable choice

If you have better ideas then please share on how to raise revenue without increasing cost.

Well I was just commenting on your idea that many travelers might be chosing PIA because it offers direct flights to their native country. I am no aviation expert, just a rookie or should I say, armchair expert. My point is simply that while having a stopover can somehow guarantee filling the unfilled seats, you have fear of losing some people who bought ticket just because it was direct flight.