Financial position of the national flag carrier, Pakistan International Airline (PIA), has reached alarming stage, as losses till March this year amounted to Rs 28.4 billion, while further losses of around rupees three billion are expected in the second quarter (April-June) of the current year.
Addressing a press conference at PIA head office here on Thursday, PIA Chairman Zaffar A Khan said PIA's losses during the last 15 months had increased by 140 percent, which stood at Rs 11.8 billion at the end of 2005, while during 2006, it suffered losses of Rs 12.8 billion and during the first quarter (January-March) of the current year stood at Rs 3.8 billion.
He said that the second quarter results of the current year had not yet been received, but he apprehended that the losses of the second quarter would not be lower than the first quarter's losses.
To meet the financial losses and run the institution, he said the PIA borrowed over Rs 30 billion on the Federal government's warranty. The PIA Chairman said that the year 2006 was an extremely challenging for the airlines industry and most of the airlines experienced pressure on their profitability.
According to IATA reports, its member airlines suffered a loss of over 41 billion dollars (Rs 2500 billion) during the past five years, as the major caused was unprecedented increase in fuel prices since early 2005, which peaked in August 2006. Some of the airlines managed to minimise additional fuel cost through timely fuel hedging, while PIA had to fully bear the additional cost, he added.
Zaffar A. Khan said that imposition of ban on PIA in the March this year by European Union (EU) had put serious and negative impacts on the PIA's brand, therefore, resumption of flights to the EU was the first priority.
"To combat EU-operating restrictions, the PIA finalised a fully charged recovery and restoration plan by the management and 11 aircraft, out of 20, had been approved by the EU," he added.
The PIA aircraft restored operations to the community included three Boeing 747-300, two Boeing 747-200, six Airbus A-310, while PIA also had achieved the ISO-9001-2000 quality management system (QMS) certification, Zaffar said.
He said that PIA would take short-term and some long-term measures to come out from financial crisis and the first priority of the airline was to provide safety and reliability to the passengers.
To make PIA operations viable and to offset the heavy losses incurred in the preceding year, a business plan for 2007 had been approved by board of the directors and the Sales Department had been given the revenue target of Rs 74.1 billions, which was 32 percent higher than over last year's sales, he said. He said that PIA had decided to reduce the fleet age from 13 year to 10 years, aimed at reducing fuel and maintenance cost.
"To achieve this objective, new aircraft are to be inducted, while the old ones will be phased out and in the first phase," he said, and added that Fokker aircraft had been replaced with ATR aircraft. He said the rising fuel prices were the main reason behind the increasing losses and PIA's fuel expanses had reached Rs 33.4 billion in 2006.
The PIA Chairman said that the airline also introduced some cost cutting measures to partially offset its financial losses, and pointed out that withdrawal of discounts to journalist was part of these measures. However, he assured newsmen that it would be restored in the future. "PIA is also planing to introduce Sukuk bond worth rupees two billion for three years and initial work on this project had been finalised," he said.
Zaffar said that PIA's workforce stood at 18,200, which is around 100 percent over the required workforce. He said the PIA's workforce per aircraft stood at 400 employees, as against the standard strength of 200 workers per aircraft. Chief Financial Officer Abdul Aleem and other officials were also present at the briefing.
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