Corporate results: PIA continues to fly in troubled skies

Company’s losses extend 28% in 2012 to Rs32.4 billion.

KARACHI:

Pakistan International Airlines (PIA) recorded a loss of Rs32.4 billion in 2012, up 28% over the previous year, as the national flag carrier continued its struggle to contain rising costs while operating an aging fleet of aircraft.

Revenues for the year dropped to Rs124 billion from Rs127 billion in 2011, reflecting problems faced in keeping a sufficient number of aircraft in operation.

PIA has released the full year results for 2012 along with income statements for the first quarter of 2013.

While the cash-strapped airline did post a gross profit of Rs4.57 billion in 2012, it was down from the previous year’s Rs5.8 billion.

Administrative costs increased 9% to Rs12.2 billion, in the absence of efforts on part of the management to lay off excess employees or withhold increases in salaries.

“It is mismanagement all around,” said a PIA official, when contacted for comments. “PIA has a fleet of around 39 aircraft, but only 24 of them are in operation. On the other hand, the number of employees remains the same.”

PIA is operating close to 100 flights a day, down from 150 a few months ago, as more aircraft have been grounded for want of repairs.

The PIA management has been arguing for a government-sponsored bailout package to replace its aging fleet, but so far Islamabad’s response has been slow.

And even though the airline’s average seat occupancy ratio remains over 78%, it has not helped in compensating for its high expenditures. “Competition with Middle East-based carriers is tough. We wish we could raise the fares, but that is not easy,” the airline official said.

Payments for fuel and spare parts, which have to be made in foreign currencies, also mounted pressure on PIA’s finances, especially as the rupee depreciated. PIA recorded an exchange loss of Rs6.7 billion, up 59% from Rs4.2 billion recorded in 2011.

A company spokesman said PIA will be inducting four Airbus A320 aircraft later this year. “We were expecting at least a dozen new aircraft last year, but approval for them never came,” he added.

Maintenance and fuel consumption costs of existing aircraft remains high, he continued. “Even then we were able to make a gross profit, something that is appreciable.”

The national flag carrier’s poor financial performance continued in 2013. In the January-March quarter, the airline posted a Rs7.4 billion loss, which is still marginally better than what it incurred in the same period of last year. This was mainly because the airline was able to control its operational expenses somewhat.

However, a raise in the salaries of employees, including pilots, was reflected in the 77% year-on-year jump in administrative expenses to Rs3.2 billion.

Lotte Chemicals Pakistan

After tax loss for the quarter ended March 31 2013: Rs164.37m, down from a profit of Rs151.11m for the corresponding period last year.

Lotte experienced a drop of Rs373m YoY in revenue bringing the total figure down to Rs13.03b. Analysts expected lacklustre profit margins for PTA-PX, Lotte’s primary, to result in lower revenue, but were not expecting the company to post losses. Finance income dropped from Rs129.57m to Rs18.73m.

PICT

After-tax profit for the quarter ended March 31 2013: Rs635.65m, up from Rs402.49m for the corresponding period last year.

A rise in revenue from Rs1.76b to Rs2.03b, and a fall in operating, administrative and finance costs buoyed pre-tax profits to Rs977.97m, up from Rs616.01m the previous year. The company decided against any cash dividend or bonus shares.

Published in The Express Tribune, April 27^th, 2013.

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