ISLAMABAD: Losses suffered by the Pakistan International Airlines increased by almost 204 per cent to Rs39.88 billion in the 2008 financial year.

According to a report submitted by the auditor general to the National Assembly’s Public Accounts Committee, PIA’s losses in the financial year 2007 were Rs13.07 billion and its accumulated losses reached Rs72.35 billion by December 2008 against Rs37.16 billion registered by December 2007.

It said the magnitude of the loss depicted an alarming situation which warranted a review of the working of the corporation.

The report said that PIA’s assets as on December 31, 2008 were Rs15.03 billion and the situation portrayed serious doubts over the airline’s ability to meet its short-term debt obligations.

Responding to the findings of the AG report, PIA spokesman Syed Sultan Hasan said that the situation would improve in the current financial year because the management had taken measures to address the issue of rising losses.

‘We have initiated a new marketing strategy and measures have been taken to curtail operational expenses without compromising on quality,’ he said, adding that serious financial burden on the corporation was debt servicing and high cost of fuel.

The AG report also said that the net revenues of PIA increased by 26.6 per cent to Rs89.20 billion in 2008 against Rs70.48 billion in 2007, but its operating expenses rose by 58 per cent compared to previous year’s Rs122.41 billion.

The auditors pointed out that the major reason for PIA’s losses was loose internal controls and ‘not high cost of fuel only’.

The report pointed out 29 audit objections causing losses of Rs4.36 billion, including a loss of $23.58 million or Rs1.43 billion because of unauthorised and irregular expenditure on overhaul of engines.

The objections included irregular appointment of principal and chief instructor at the PIA training centre and the auditor general also objected to non-production of auditable record.

The AG report also objected to the operations of Skyrooms Pvt Ltd, a subsidiary of PIA.

Skyrooms owns and manages airport hotels in Karachi and its accumulated losses had reached Rs90.99 million by December 2008, whereas the paid-up capital of the company was only Rs40 million, leaving a negative shareholders equity of Rs50.99 million.