Airline suffers Rs 3.2 billion loss in third quarter: PIA chief 'confused' as losses mount

Six months into the job, the head of Pakistan International Airlines (PIA) said on Thursday he was still wondering how to turn around the company as losses since the start of 2006 exceed half a billion dollars.
PIA Chairman Zafar Ahmad Khan told reporters he was "confused and disappointed" after the airline on Wednesday reported a quarterly loss of 3.2 billion rupees, taking its accumulated loss from the start of last year to 35.5 billion rupees ($584.3 million).
That total is about 2.5 times the market capitalisation of the state-run company. "Right now there is disappointment over the results but this is reality and now we have to come up with a new game plan and new techniques," Khan said at a press conference in Pakistan's financial capital of Karachi.
Khan said while privatisation of PIA was "way down" on the government's agenda, he personally would prefer it. "I come from a school of thought that these institutions should be privatised, but this is my personal view," he said.
Khan gave no clues as to when he expects PIA, which has been losing money since 2005, to turn profitable. "I am confused right now, disappointed, and was hoping the airline would do better in these three months and it is my responsibility," he said.
"However as long as I am sitting in this chair, I will look at the future and I will want to make plans in the best interest of PIA." PIA plans to then replace its fleet of Boeing 747s and finally its Airbus 310s, Khan said.
Khan said cutting cost by laying off some of the 18,200 employees at PIA, which has a fleet of 42 aircraft, was not an option he was looking at right now.
BUSINESS RECORDER ADDS: National flag carrier, Pakistan International Airline (PIA), has suffered a loss of Rs 3.2 billion during the third quarter of 2007 calendar year and the overall losses of airline amounted to Rs 35.5 billion mainly due to decline in passenger load on the UK and Saudi Arabia routes.
Addressing a press conference at a local hotel on Thursday, PIA Chairman Zafar A Khan said the airline's financial results were not satisfactory and its losses during the first nine months of current calendar year increased by Rs 10.9 billion reaching Rs 35.5 billion. The losses stood at Rs 24.6 billion on January 1, 2007.
"The financial situation of national airline is at alarming stage due to rising losses and the financial results of third quarter (July-September) are unexpected, as we were expecting that some decline in the loses," he added. He expressed his dissatisfaction about the second quarter results, and said that the board of directors had also expressed concern over these losses.
"Our policies for reduction in the losses are not fruitful and PIA is still facing a serious financial crisis," the PIA Chairman said. He said that the airline's sales of UK and Umra had declined during the third quarter, which is the chief reason for continuous rise in deficit.
"Umra sales have declined mainly due to the less visa issuance by the Saudi Arabia as compared to last year, while there is a drop in UK business due to high competition," he said. "The Federal government is not giving a subsidy to the PIA to meet losses, but it is playing a role of guarantor for borrowing from the banks," he added.
He said that PIA had decided to reduce the fleet age from 13 year to 10 years aimed at reducing fuel and maintenance cost, and added:"To achieve this objective, new aircraft are planned to be inducted and old aircraft will be phased out. "In the second phase, Boeing 737 would be replaced with Airbus A-320, first delivery of which is due in 2009," he added.
Zafar said that PIA's workforce stood at 18,200 employees, which was around 100 percent over the required workforce, he said, adding that it came to 400 employees per aircraft, instead of standard figures of 200 per aircraft. He clarified that there was no plan of downsizing. However, he added the airline would soon introduce a voluntary retirement scheme. According to him, the engineers' go-slow policy has affected the airline's punctuality. He added that the management was negotiating with engineers and their demands would be fulfilled.