PIA continued to bleed in 2015

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Vaqar Khan
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PIA continued to bleed in 2015

Post by Vaqar Khan »

The financial hemorrhage of the Pakistan International Airlines (PIA) continued in the second and third quarters of last year as the national flag carrier failed to generate sufficient revenue owing to the expense of maintaining a huge infrastructure.

PIA on Monday announced after-tax-loss of Rs20.55 billion in nine months till September 2015, marginally lower than the loss of Rs22 billion incurred in the same period of the previous year.

The losses were incurred despite a 42.7% decline in the airline’s fuel bill, which came down to Rs21.68 billion as compared to Rs37.84 billion in the previous year due to a plunge in the global oil market.

While the low fuel prices helped the airline post a gross profit of Rs4.4 billion against a gross loss of Rs1.95 billion in the same period of 2014 it, however, was not enough to cover the fixed costs like lease payments, interest charge, salaries and expense related to the spares and maintenance of aircraft.

“Yes, fuel price surely came down but our competition (Gulf-based airlines) also cut fares by around 35%,” said PIA chairman Nasser Jaffer, while speaking about the continuing poor financial performance of the airline.

In the last couple of months, PIA has leased Airbus 320s and ATR-72s to augment short-haul operation but the impact of added capacity and efficient aircraft would be seen from last quarter onwards when most of the planes were inducted, he said.

After a devastating 2014, when the airline recorded its third highest single-year loss, the new management led by Jaffer was hoping to leverage the global oil slump to plug its financial losses.

The airline has tried to curtail unnecessary fixed costs by suspending flights on some loss-making European routes and recalling staff from there. But at the same time, government opened up more cities in the northern part of the country like Sialkot to foreign carriers, adding to the woes of cash-strapped PIA.

Mismatch between cash coming into the airline from sale of tickets and what it has to pay for running the jets can be gauged from the run-down position of its cash flows.

In the nine-month period, the airline made a net cash of Rs6.67 billion from its operation while the interest payment of just Rs10 billion was enough to dilute all of that. It means that just like yester years, the airline was forced to borrow more from banks to run its day-to-day business and pay old liabilities.

On the other hand, government is also in process of selling a minority stake in the airline as it wants to handover the management control to any private investor, which can turnaround the airline.

But if the majority stake continues to remain with the government, it would largely be responsible to drip-feed the airline in shape of cash against equity and guarantees for commercial loans, just like it has been doing since 2001.

Source: The Express Tribune, 18 January 2015.
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Abbas Ali
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Re: PIA continued to bleed in 2015

Post by Abbas Ali »

Financial statements for the period of six months (January 1 to June 30) ended on June 30, 2015. The airline suffered loss of 14.01 billion rupees (post tax) during this time period.
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Source: PIA

Financial statements for the period of nine months (January 1 to September 30) ended on September 30, 2015. The airline suffered loss of 20.55 billion rupees (post tax) during this time period.
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Source: PIA

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Last edited by Abbas Ali on Tue Jan 19, 2016 7:10 am, edited 1 time in total.
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ammad
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Re: PIA continued to bleed in 2015

Post by ammad »

Drop in net revenue from 53 billion pkr to 46 billion pkr is alarming.
Last edited by ammad on Tue Jan 19, 2016 7:10 am, edited 1 time in total.
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Re: PIA continued to bleed in 2015

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Summary of losses suffered by PIA from 2005 to first three quarters of 2015.

4.41 billion rupees loss (after tax) in year 2005.
12.76 billion rupees loss (after tax) in year 2006.
13.39 billion rupees loss (after tax) in year 2007.
35.88 billion rupees loss (after tax) in year 2008.
5.82 billion rupees loss (after tax) in year 2009.
20.78 billion rupees loss (after tax) in year 2010.
26.76 billion rupees loss (after tax) in year 2011.
33.18 billion rupees loss (after tax) in year 2012.
44.53 billion rupees loss (after tax) in year 2013.
32.22 billion rupees loss (after tax) in year 2014.
20.55 billion rupees loss (after tax) in first nine months of 2015.

Total: 250.28 billion rupees loss accumulated since 2005.

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Re: PIA continued to bleed in 2015

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On top of that see the below

ISLAMABAD:
While harping on about overstaffing at the national flag carrier, the government has quietly recruited another 1,000 people in Pakistan International Airlines (PIA), taking its accumulative losses to Rs254.7 billion.

Last year alone, the PML-N government inducted 400 employees in PIA, according to a briefing given to the National Assembly’s special committee on PIA privatisation. The PIA management and the Privatisation Commission told the panel the national airline added Rs27.8 billion to its losses last year.

The government has repeatedly blamed the previous regime for overstaffing the PIA. But the addition of 1,000 employees in its tenure puts the ruling party in league with the Pakistan Peoples Party, which recruited 1,435 people in the airlines in its last three years. The PPP, however, never hid its intentions of giving jobs to its voters.

During the tenures of both governments, the overall number of PIA employees has come down from 18,036 in 2008 to 14,847 by the end of 2015. Had the PML-N not given 1,000 more jobs, the number would have gone down below 14,000.

In its tenure, the PML-N has on average hired 1.1 employees per day as against the PPP’s average of 1.3 per day during its last three years between 2010 and 2012.

The government has given these jobs at a time when it has committed with the International Monetary Fund of selling off the national flag carrier by June this year – a deadline it is more likely to miss.

On Monday, Finance Minister Ishaq Dar again tried to sell to the special committee the idea of selling the core business of PIA, which the PPP, Pakistan Tehreek-e-Insaf (PTI) and Awami Muslim League (AML) opposed.

Another startling fact that surfaced in the meeting was that PIA’s market share drastically went down as the Civil Aviation Authority (CAA) granted landing rights to other airlines.

This led to a situation where despite 43% reduction in fuel costs and adding 20 new aircraft, the PIA suffered Rs27.8 billion losses during 2015, data shared by the PIA’s chief finance officer (CFO) showed.

The PIA’s market share going down drastically was termed a deliberate attempt by the opposition to destroy the PIA before its privatisation, as the PML-N government allowed additional 286 weekly flights to other airlines since coming to power.

In the past one year alone, the CAA has allowed 108 additional weekly flights, which is disturbing, said Asad Umar of the PTI. “The CAA is selling the national interests and I am not sure whether it is incompetency or someone is making money,” he added.

AML’s Sheikh Rasheed alleged a company owned by the PM’s adviser on aviation, Shujaat Azeem, was providing catering service to 27 airlines. He suspected his role in giving away PIA’s market share.

PIA Board Chairman Naseer Jafar claimed the impact of the addition of new aircraft on revenues would be visible next year. “No one can turn around the airlines in just one year.”

Published in The Express Tribune, January 12th, 2016.
http://tribune.com.pk/story/1025994/bur ... affed-pia/
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Re: PIA continued to bleed in 2015

Post by Amaad Lone »

With the induction of 11 A320s and five ATR72s how does PIA manage to drop the revenue by 10%??

The two 777s came after September, but quite a few of the A320s and ATR72s were in service in the first nine months of 2015.
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Re: PIA continued to bleed in 2015

Post by Amaad Lone »

But at the same time, government opened up more cities in the northern part of the country like Sialkot to foreign carriers, adding to the woes of cash-strapped PIA.
How many weekly international flights was PIA operating from Sialkot that it is upset about the presence of foreign carriers to Sialkot, Faisalabad, and Multan.
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Re: PIA continued to bleed in 2015

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PIA privatisation transaction manager Asad Rasool said the airline incurred Rs27.83 billion losses in the year ended December 31, 2015 despite savings of Rs21 billion in fuel cost and increasing the fleet from 18 to 38 aircraft.
Source: http://tribune.com.pk/story/1048151/bef ... -from-pia/

Summary of losses suffered by PIA from 2005 to 2015.

4.41 billion rupees loss (after tax) in year 2005.
12.76 billion rupees loss (after tax) in year 2006.
13.39 billion rupees loss (after tax) in year 2007.
35.88 billion rupees loss (after tax) in year 2008.
5.82 billion rupees loss (after tax) in year 2009.
20.78 billion rupees loss (after tax) in year 2010.
26.76 billion rupees loss (after tax) in year 2011.
33.18 billion rupees loss (after tax) in year 2012.
44.53 billion rupees loss (after tax) in year 2013.
32.22 billion rupees loss (after tax) in year 2014.
27.83 billion rupees loss (after tax) in year 2015.

Total: 257.56 billion rupees loss accumulated since 2005.

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Re: PIA continued to bleed in 2015

Post by Pakistan-1 »

Why does one part of the government pay taxes to the other part of the government ?
For me that doesn't make sense
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Re: PIA continued to bleed in 2015

Post by Amaad Lone »

Last quarter of 2015 PIA loses over 7 billion rupees.

What is the justification of revenue decreasing by 10% in 2015, with a larger fleet and fares still at previous levels.

The government needs to reform the sector rather then bailing out PIA.

Abolish all taxes and duties on aircraft and parts.
Give a tax break to the aviation sector, making their salaries tax free, that would effectively reduce the wage bill.
Remove taxes on fuel for the aviation sector.

The airline sector needs tax breaks not bailouts if they are to compete with the airlines of the Middle East and Turkey.
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Re: PIA continued to bleed in 2015

Post by Amaad Lone »

PIA revenue in the 3rd quarter 2015 matched the revenue of 2014 3rd quarter.

Fuel bill fell by 4 billion in the 3rd quarter, but other costs rose by 2.5 billion.

PIA needs to change the A320s back to all economy layout so they can compete with Shaheen and Air Blue A320s and A321s.

PIA needs to increase its load factor, fill in those planes flying 30% empty.
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Re: PIA continued to bleed in 2015

Post by Abbas Ali »

According to DAWN News channel, the National Assembly was informed on October 3 that PIA had accumulated loss of 255 billion rupees by the end of year 2015.

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