PIA financial results

The Pakistan International Airlines (PIA) shows a net loss of Rs2.95 billion during the first quarter (July-September) of the FY2006-07, due to high fuel price and lower passenger revenue amid competition from regional and local airlines, said Finance Ministry on Thursday.
During the quarter under review, it generated revenues of Rs18.263 billion while its expenditures on operational activities and interest payments stood at Rs21.215 billion, revealed financial improvement plan (July-September, 2006) released by the Ministry. It is worth noting that PIA targeted to earn a profit of Rs501 million in this quarter but, unfortunately it has shown Rs2.95 billion losses for the same period.
"Actual revenue of Rs 18.263 billion achieved in the first quarter July-September 2006 is short by Rs 624 million against the target of Rs 18.905 billion. Major decrease of Rs 1.01 billion is in Passenger revenue whereas cargo revenue and non-transport revenue has increased by Rs 60 million and Rs 308 million respectively. Decrease in Passenger Revenue is because of lower traffic due to competition from regional and local airlines", the bulletin of the ministry said.
Out of total expenditure of Rs 21.215 billion, its operating cost was Rs 19.907 billion against the estimates of Rs 16.97 billion for the quarter. During this period fuel expense rose to Rs 9.045 billion as against the target of Rs 6.511 billion. Fuel cost recorded an increase of 39 percent over target (33.9 percent due increase in price and 3.9 percent due increase in quantity). Aircraft rental increased to Rs269 million from the original target of Rs182 million, increased by Rs114 million. The ministry says, "Increase in flight equipment rental expense is due to wet leasing of increase freighter aircraft".
Financial cost is also showing an increase owing to additional borrowing including the bridge loan for purchase of 49 percent shares of PIA-IL and requirement of additional working capital. Further rise in interest rates has increased interest payments.
The bulletin further states, "Increase in other indirect cost is due to extra ordinary provision, against stores obsolescence (Rs100 million) as per policy, provision against construction of University Road Karachi by CDGK (Rs75 million) and exchange loss net (Rs98 million) due currency fluctuations and increase in selling and distribution expenses (Rs124 million)".
Net cash & bank balances have reduced by Rs777 million against the target. This is mainly due to operational loss of Rs2.556 billion as against a positive target of Rs1.579 billion. Secondly to meet the cash deficit due operational losses medium/short-term borrowings amounting Rs3.650 million were arranged during the quarter.