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PIA revenue up by 2.5pc, expenditure by 8.89pc in 10 years

Updated November 15, 2018

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A fresh special audit report on the accounts of the Pakistan International Airlines (PIA) between 2008 and 2017 indicated that the national flag carrier lost its market share drastically both on domestic and international routes during that period as the number of its passengers declined. — Email/File photo
A fresh special audit report on the accounts of the Pakistan International Airlines (PIA) between 2008 and 2017 indicated that the national flag carrier lost its market share drastically both on domestic and international routes during that period as the number of its passengers declined. — Email/File photo

ISLAMABAD: A fresh special audit report on the accounts of the Pakistan International Airlines (PIA) between 2008 and 2017 indicated that the national flag carrier lost its market share drastically both on domestic and international routes during that period as the number of its passengers declined.

The report submitted to the Supreme Court suggested that 5.6 million passengers travelled by the PIA in 2008, but this number fell to 5.48m in 2016, while the market grew manifold during this period.

The apex court is seized with a case regarding reports that accumulated losses of the airline stood at Rs360 billion, while total liabilities amounted to Rs406bn by the end of last year against its assets of Rs111bn, besides plans were afoot to sell it off at a throwaway price.

According to a fresh special audit report submitted to SC, the number of passengers fell from 5.6m to 5.48m

Earlier, a similar report of the Auditor General of Pakistan had blamed the absence of professional and experienced leadership for the present state of affairs of the national carrier, regretting that it was being run like a non-business entity.

The fresh audit report stated that other airlines like Emirates, Qatar, Etihad and Turkish took advantage of the revised aviation policy in Pakistan and increased their flights from different locations and attracted PIA passengers by offering them more value for money.

An analysis of traffic information showed that over the years the PIA lost passengers, mostly due to a reduction in flights and Available Seat Kilometres.

PIA’s revenue was Rs88.8bn in 2008 and Rs91.2bn in 2017, showing a slight increase of 2.5 per cent, while its expenditure went up by 8.89pc to Rs136bn from Rs125bn during this period.

The airline sustained a net loss of Rs36.2bn in 2008 and Rs44.9bn in 2017 and due to huge fixed cost under the head of salary, finance cost and exchange loss, it was overburdened heavily.

The audit report regretted that the airline was unable to continue as a going concern without the government’s support as it had accumulated losses of Rs361bn up to December last year.

The cost of sales is 116pc of the revenue which effectively means that the PIA sustained operational loss to the extent of 16pc of its revenue and the management failed to take necessary measures to slow down or reverse the trend of increasing cost of services and spiralling fixed costs.

The management never undertook any austerity measures to cut the costs because they knew that in the end, the government will infuse more equity to bail out the airline. The overall loss will further increase in the coming years due to increase in the cost of services, finance cost and other related costs.

Due to financial constraints, the audit report regretted, the PIA had been acquiring aircraft on both dry and wet lease since 2007. The audit team observed a number of irregularities in leasing of aircraft like no due diligence/preparation of feasibilities showing no commercial, financial and engineering viabilities.

All the feasibilities during the past 10 years are devoid of outputs projected in them, the report said and added that obsession for Airbus A320 and ATR-72 aircraft had been noticed since 2013-17 without realisation of the airline’s commercial interest. Only A320 has been preferred in all procurements when other aircraft like A330 and A319 were offered at very good rates, the report said.

Likewise, ATR-72 aircraft were purchased beyond the existing need, hence the airline was overburdened with billions of rupees of expenditure without a single penny of profit from ATRs.

Ironically, the PIA did not have maintenance and overall capabilities for Airbus A320 and ATR inducted between 2014 and 2015, including in-house engine repair/overhaul capabilities. The airline inducted 11 A320 and ATR-72 aircraft, but due to the absence of such capabilities expenses of maintenance and overhaul and engine rentals have increased beyond Rs16bn, the report said.

Apart from revenue on passengers, the cargo has dropped dramatically due to leasing of narrow-body aircraft. The PIA earned cargo revenue of Rs5.4bn in 2008, which fell to Rs3.6bn in 2016, as compared to 20pc of total revenue as per industry practice.

Published in Dawn, November 15th, 2018

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