PIA losses surge to Rs50 billion

Mar 11, 2022 | News

ISLAMABAD: The national flag carrier— Pakistan International Airlines (PIA)— faces losses of Rs 50 billion during the calendar year in 2021 against 34.6 billion in 2020, witnessing a surge in losses by 47 per cent.

The losses of PIA ballooned to Rs 50 billion in 2021 when the Covid-19 pandemic was on a path of recovery. When the Covid-19 was at its peak the PIA losses stood at Rs 34 billion in 2020. There is a need for an in-depth analysis to ascertain why the losses of national flag carrier went up at an accelerated pace when international travelling is opening up and airline’s losses should have been reduced. Total accumulated losses of PIA have been rising and stood in the range of Rs 400 to Rs 500 billion.

The break-up of the financial position of PIA shows that the aircraft fuel cost stood at Rs 22.8 billion during the calendar year 2021 and the loss from operation registered at Rs 15.027 billion. The PIA faced an exchange loss of Rs 7 billion, loss before interest taxation Rs 22.373 billion and finance cost of Rs 27.39 billion. The loss before taxation stood at Rs 49.763 billion and with payment of taxation of Rs 337.7 million.

The official sources said that four major loss-making public sector enterprises included Pakistan Steel Mills, PIA, Pakistan Railways and power sector Distribution Companies (DISCOs) and their accumulated losses on a per annum basis stood at least Rs 300 billion. Now four Chinese companies have qualified for the bidding process of Pakistan Steel Mills (PSM) and the Privatization Commission opened up data centres for these four Chinese companies for undertaking due diligence before completion of its strategic sale. Although, there were expectations that some other players would also participate in the sale of PSM it was encouraging that at least four parties were qualified for PSM sale.

Former Deputy Chairman Planning Commission and renowned economist Dr Nadeem Ul Haque when contacted on Thursday said that deep overhauling of PIA would be required because patchwork would not solve its deep-rooted structural problems. He said that without professional management the PIA or any other PSEs problems cannot be fixed. He suggested that the PIA should be privatized so that it could be run on professional lines. He said that with an existing ratio of human resources per plane, the PIA could not be overhauled. The government will have to take a tough decision either to privatize it by giving free hand to management or restructure it by minimizing political interference and reducing the role of unions. If Ethiopian airlines can be run on professional lines then why not the PIA, he raised the question and added professional management with complete autonomy could provide the solution.

When contacted to Dr Khaqan Najeeb, former head of Economic Reforms Unit, clarified that Covid 19, route bans due to licensing issues, operational inefficiencies, older fleet, the high financial burden due to old debt have all contributed to the rising loss of PIA in 2021. Hopefully, a concerted restructuring plan as the aviation sector opens again can take the airline back to reducing operational loss to near zero in the coming years.

According to a presentation given to Minister for Finance Shaukat Tarin here on Tuesday revealed that a foreign consultant prepared a five-year plan to convert a loss-making entity to profit earning organization. In the first year, the new organizational structure would be in place for strengthening financial discipline. The right-sizing will be implemented and the business and operating process would be revamped through networking re-designing whereby focus would be given on domestic routes and initiate long term fleet planning.

In the second year, the PIA would expand the domestic and regional network and for achieving the desired objectives it would have to prepare for a new fleet through recruitment and training so the PIA would have to start fleet renewal. In the third year, the PIA would have to explore airline partnerships and boost third party revenues. In the fourth year, the PIA would accomplish fleet renewal and would add new international destinations. In the fourth year, the PIA is expected to achieve operating break even. In the fifth year, the hub operation would be reinforced for achieving the objectives of operational and financial stability.

Source: The News

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