PIA’s accumulated losses jump to Rs319b

Losses mount following non-stop operations on loss-making routes

KARACHI: Pakistan International Airlines' (PIA) accumulated losses continued to soar as they increased Rs11.52 billion to Rs319.10 billion in the quarter ended March 2017 due to non-stop flights on several loss-making routes, according to a bourse filing.

The state-owned airline continued to fly on several loss-making routes to Europe and the US.



PIA has decided, in principle, to temporarily suspend flights to and from New York, which alone was causing a loss of Rs2.25 billion per year, said Adviser to Prime Minister on Aviation Sardar Mehtab Ahmed Khan recently.

PIA was not booking seats for the New York flights for November onwards, it was learnt.

The national carrier has also lost much business on domestic routes to international airlines under the open skies policy of the government.

The government has allowed Gulf airlines, particularly UAE carriers, to operate to and from multiple airports in Pakistan, which is driving up PIA losses.

"The open skies policy, though creates competition, but unfortunately other (international) airlines were given frequencies (on local routes) in the past while not considering the national airlines. Now, no new requests for frequencies are being entertained," Khan added.

An industry official said, "PIA is (also) operating several below-cost flights on different routes to attract higher traffic. The practice is not only causing losses, but it is also impacting true competition."



The national carrier has recently resumed flights to Bangkok, offering up to 40% discount till November 30, he said.

The airline, however, has developed a new business plan under new Chief Executive Officer Musharraf Rasool Cyan. The plan, besides giving a new business strategy, would also demand a bailout package next week.



Khan hoped the new plan, if approved, would positively impact the airline's financial health in the next two to three years.

"PIA will increase its fleet strength to 50 aircraft by 2019, which is part of the business plan."

Losses double

PIA's losses increased 90% to Rs11.48 billion in the quarter ended March 31, 2017 from Rs6.03 billion in the same quarter of last year, according to consolidated profit and loss accounts of the airline sent to the Pakistan Stock Exchange.

Accordingly, the loss per share increased to Rs2.19 from Rs1.15 for A class ordinary shares of Rs10 each. The loss per share for B class ordinary shares of Rs5 each rose to Rs1.10 from Rs0.58.

It earned net revenue of Rs24.61 billion in the quarter compared to Rs24.76 billion in the same quarter of previous year.

The revenue, however, failed to translate into profit due much higher cost of services (fuel and other costs) at Rs27.78 billion as opposed to Rs23.07 billion in the corresponding period of previous year.

Losses further piled up with the addition of increased distribution cost and administrative expenses, which were running into billions of rupees.

Finance cost alone increased to Rs3.62 billion from Rs3.25 billion.

Separately, PIA reported its financial results for the full year ended December 31, 2016. It booked a loss of Rs45.24 billion, which was 41% higher than Rs32.13 billion in the prior year.

Published in The Express Tribune, October 14^th, 2017.

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