Exchange rate, financing cost: PIA incurs Rs 17.3 billion loss on Rs 152 billion debt

Pakistan International Airline (PIA) suffered a loss of Rs 17.3 billion on account of exchange rate and financing cost on Rs 152 billion borrowed by the organisation. Sources said officials of national flag carrier during a presentation to Prime Minister Raja Pervez Ashraf about the financial health of the organisation stated that indebtedness stood at Rs 152 billion with Rs 54 billion fleet loan and Rs 98 billion non-fleet loan.
PIA suffered Rs 4 billion exchange rate loss on Rs 54 billion fleet loan in addition to Rs 1.5 billion debt servicing. On non-fleet loan of Rs 98 billion, the organisation suffered exchange rate loss of Rs 2.1 billion in addition to Rs 9.7 billion financing cost. The current state of the affairs in PIA is very bleak with management holding ageing fleet, volatile fuel price are responsible for the situation. An official said that no one in PIA accepted the reality that there is something wrong in the management. He said PIA was overstaffed as compared to global airlines and the volume of non-fleet expenditure of Rs 98 billion was very high.
However, he said that human resource rationalisation plan was also part of the business plan and the management claim was that it would help reduce the cost by Rs 3.8 billion over five years period. The other factors, according to PIA management, interest on non-fleet loans, geo political situation, aviation policy, and services on commercially unviable routes were responsible for the huge loss to the organisation. The average fleet age of PIA was 26 years. The PIA management has reportedly informed the Prime Minister about its transmission plan and stated that the operational side included induction of fuel efficient aircraft and discontinuation of service on loss making routes. The management claimed that these measures would help improve revenue and reduce fuel cost.
On the human resources side, the management maintained that the reduction in non-operational areas would be done in normal and gradual manner and HR rationalisation plan would result in reduction of cost considerably.
The PIA management was of the view that internal reforms and fleet renewal would lead to revenue enhancement and cost reduction and consequently the entity would turn into profit making organisation. However, the official said that given the track record of PIA, a few could lend credence to the claim of the management that it would turn the organisation around.