PIA continued to bleed in 2015 despite unprecedented low fuel prices

National flag carrier has announced after-tax-loss of Rs20.55 billion in nine months till September 2015

KARACHI: 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.