Pakistan International Airlines - often referred to as some kind of a giant animal white in colour - has again reported losses. This is certainly no news, but that the losses in 2010 were 4 times than those made in 2009, is definitely news. And come the next session of the parliament, there will be a few questions raised again over the national flag carriers performance.
But there is still hope in the losses - just need to view the financial performance with a different angle. The revenue crossed the Rs100 billion mark for the first time in the airlines history registering a decent 14 percent growth over the last year. The addition of two new international destinations and increasing the frequency of domestic flights seem to have made an impact on the top line.
The company as per the latest available data for 9MCY10 had managed to increase the flight distance by 14 percent over the previous year. The passenger load factor had resultantly improved to 76 percent for the period against an average 70 percent recorded last year.
Though, far from satisfactory still, as the regional load factor benchmark hovers around 80 percent, the record high load factor reflects improving levels of operational efficiency - a phrase not often used for the PIA.
Despite that, the gross margin decreased considerably - but that is not necessarily a reflection of poor handling of matters. The fuel cost, which is a major component of the overall cost, increased massively as the jet fuel prices rose by ~30 percent yoy during the period. Commendably though, PIA seems to have worked hard in keeping the other costs in check, avoiding the worse.
PIA takes a lot of criticism for its exuberant distribution and administrative expenses - defying all odds, the company effectively managed these costs in CY10 keeping it at the previous years level and improving as a percentage of sales by 1 percentage point. The achievement isn remarkable by any standards, but still is something which deserves applause and seems a step in the right direction.
The relatively stable rupee against the greenback also offered a supporting hand as the exchange losses reduced by a third - helping PIA record operating profit, something which had eluded it for seven years.
The increase in loss after tax is primarily due to increase in turnover tax from 0.5 percent to 1 percent and the impact of deferred tax credit on account of aircraft fleet revaluation recognised last year.
Undoubtedly, there are silver linings in the CY10 performance - complacency must not seep in as CY11 could be one tough year as regards the fuel cost following the hike in global oil prices. The Corporation needs to stand tall and take bold steps and not let political decisions take over the economic ones. One hopes, that the positives aren a one-off event and PIA proves true to its slogan, which says, Great people to fly with.
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PIA P&L
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(Rs mn) CY10 CY09 chg
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Revenue 107,532 94,564 14%
Aircraft fuel 44,707 31,522 42%
Other costs 47,852 46,593 3%
Gross profit 14,972 16,449 -9%
Gross margin 14% 17% -20%
Distribution cost 5,888 5,912 0%
Admin cost 7,816 7,181 9%
Exchange loss 2,092 6,502 -68%
Operating profits 720 -3,191 NA
Finance cost 9,300 9,244 1%
Pre tax loss -8,580 -12,434 NA
Loss for the year -20,785 -4,948 NA
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Source: KSE notice
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