PIA: lost as usual

The symbol of the national flag carrier Pakistan International Airlines (PIA) is mostly green but this colour never translates in the companys profit and loss accounts - which have actually become loss accounts of late. It is all red again - certainly no news there - just that the magnitude of loss has somewhat increased from the previous year.
The national airline did well to boost its revenue but it was more of a forced decision as the rising cost pressures compelled PIA to raise its fares. The increased revenue, however, could not translate into higher gross profit, as a 55 percent year-on-year increase in Jet Fuel prices to Rs47/liter spoiled the show - resulting in a sizeable dip in gross margins.
What follows is the ever so familiar tale of inefficiency that one associates with the PIA. The hefty Rs6.7 billion spent on administrative and distribution activities owe a lot to the overstaffing in the company, which never seems to end regardless of the financial health of PIA.
The PIA slogan says "great people to fly with"; it would only sound more appropriate if great be replaced with a lot of. The airline has as much as 450 employees per aircraft - an indicator considered worst in the world of aviation with the average being 130 persons per craft.
One wonders what is so special with the fleet of 42 planes that it requires these many people to look after. Probably the planes are inefficient or the people, or both.
Bad as it may sound but the word loss seems to have found a permanent place in the companys income statement. The organization has incurred loss so often and so consistently that the account heads which normally read profit/(loss) just reads loss. The falling rupee against dollar did not help matters either, but better hedging during the second quarter could have eased the pressure a bit.
Nothing suggests a turnaround in the company anytime soon with political hiring and variable factors such as the currency and fuel prices remaining ever so vulnerable. It is safe to assume the white elephant would continue causing the national exchequer tens of billion rupees every year unless it is privatized. But who will bid for an airline with nearly 19,000 employees looking after 42 aircrafts anyway? None, would be the answer.

======================================================================

PIA P&L

======================================================================

Rs (mn)                 1HCY10  1HCY09  % chg   2QCY10   2QCY09  % chg

======================================================================

Sales                   49,306  41,921    18%   26,459   20,673    28%

Aircraft fuel           19,469  12,188    60%   10,992    6,335    74%

Other cost of services  23,583  21,771     8%   11,947   10,970     9%

Gross profit             6,255   7,962   -21%    3,519    3,368     4%

Gross margin               13%      19%  -33%       13%      16%  -18%

Distribution cost        3,467   2,611    33%    1,860    1,212    53%

Administrative expenses  3,335   3,352    -1%    1,736    2,174   -20%

Exchange loss            1,566   3,000   -48%    1,902    1,149    65%

Finance cost             4,651   4,784    -3%    2,356    2,370    -1%

Loss for the period     (6,901) (5,395)   28%   (4,372)  (3,347)   31%

======================================================================

Source: KSE notice