PIA’s Accumulated Losses to Cross Rs 48 Billion in 2018

The accumulative losses of Pakistan International Airlines (PIA) are likely to cross Rs 48 billion in 2018 compared to around Rs 44 billion in 2017 due to rising fuel prices and exchange rate depreciation, official sources revealed.

Sources, speaking on the condition of anonymity, said that Pakistan Tehreek-e-Insaf (PTI)-led government is yet to come up with any strategy to control the increasing deficit.

“Prime Minister Imran Khan has neither seeked any briefing on PIA nor given any direction in the 100-days plan to arrest the losses and increase the revenue of the airline”, said officials adding that PM has been given briefing twice on another loss-making entity – Pakistan Railways – so far.

PIA spokesperson Mashood Tajwar told that Finance Minister Asad Umar has been given a briefing on PIA’s business plan and another briefing to PM Khan is expected soon.

When asked about the business plan, Tajwar said the PIA fleet would be expanded by procuring more aircraft on lease, closure of loss-making routes and increase in the use of technology, which would help in its revival.

Sources said that PIA incurred losses of around Rs 44 billion in 2017 and around Rs 42 billion in the first 9 months of 2018 so far which would reach Rs 48 billion by end of 2018 due to a rise in fuel prices and depreciation of local currency against the dollar.

PIA incurred a loss of Rs 36.13 billion in 2008, Rs 5 billion in 2009, Rs 20.7 billion in 2010, Rs 26.77 billion in 2011, Rs 30.5 billion in 2012, Rs 44.3 billion in 2013, Rs 31.7 billion in 2014, Rs 32.5 billion in 2015, Rs 45.38 billion in 2016 and Rs 44.11 billion in 2017.

Sources said that PIA generates about Rs 8 billion in revenue on average per month while expenditure stands at Rs 10 billion. To cover the gap of about Rs 2 billion per month, it has no other option but to seek loans. PIA pays about Rs 3 billion per month as interest on loans taken in the past.

About 50 percent of the expenditures of every airline are made up of the fuel cost and when the oil price was $100 per barrel in 2012-13, the airlines suffered heavily. But when the oil price declined to $35 per barrel, every airline earned huge profits, but PIA continued to incur losses.

Currently, PIA has around 15000 staff for its 32 aircraft or around a 480 employee-to-aircraft ratio against the average ratio worldwide of around 150-200 employees per aircraft. Sources further said that the national carrier issued free tickets to 229 people from June 2016 to June 2018 and such practice results in losses worth millions every year.

The Auditor General of Pakistan (AGP) presented a 10-year special audit report of PIA in the Supreme Court and has attributed the national carrier’s chronic losses to lack of professional and experienced leadership.

The carrier’s accumulated losses in 2009, according to the audit report, were Rs 73 billion which swelled to Rs 360.39 billion by 2017.

The audit report gives a break-up of the factors that contribute to PIA’s annual losses and poor financial performance such as inefficient fuel management, unnecessary expenses on crew, performance of subsidiaries, poor supply chain and contract management, inefficient engineering and maintenance department, non-professionalism, untrained staff, overstaffing, fake-degree holder staff and pilots, out of turn favors by the government to competitors and lack of modern industry-specific knowledge.

Giving recommendations, the AGP suggested that the National Aviation Policy needs to be reviewed. Further, an efficient Board of Directors (BoD) needs to be constituted to turn around the airline, CEOs/MDs should be appointed on merit, unnecessary interference from the government, interference of various staff/officers association has to be stopped, policy on merit-based postings and strong internal control needs to be adopted, it added.