PIA Reports Reduction in Losses in the First Half of 2019

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Abbas Ali
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PIA Reports Reduction in Losses in the First Half of 2019

Post by Abbas Ali »

PIA has submitted financial result for first six months (January to June) of year 2019.

Revenue
Revenue January to June 2019 94.73 billion rupees
Revenue January to June 2018 65.72 billion rupees

Operating Loss
January to June 2019 5.28 billion rupees
January to June 2018 21.10 billion rupees

Loss Before Tax
January to June 2019 32.74 billion rupees
January to June 2018 38.50 billion rupees

Info source: https://arynews.tv/en/govts-effort-pia- ... ificantly/

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Re: PIA Reports Reduction in Losses in the First Half of 2019

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Revenue
Revenue January to June 2019 94.73 billion rupees
Revenue January to June 2018 65.72 billion rupees

Operating Loss
January to June 2019 5.28 billion rupees
January to June 2018 21.10 billion rupees

Loss Before Tax
January to June 2019 32.74 billion rupees
January to June 2018 38.50 billion rupees
Very impressive growth in revenue almost 30 billion extra revenue over last year.

Operating loss reduced by 75% to 5.28 billion or a reduction of around 16 billion.

Yet losses only down by 6 billion in total. Other losses were 17.4 billion in 2019 that increased to 27.5 billion, is this extra 10 billion the interest that PIA has to pay on its 288 billion debt??

Looks like PIA will once again close the year with heavy losses.

Exchange rates losses must have been huge also, rupee went from 140 to dollar in January 2019 to 162 in June 2019.

While that increases losses as PIA dollar debt goes up in rupee and that difference has to be taken on the balance sheet within 3 months. But should PIA not revalue its dollar based assets as those also go up in value as the rupee depreciates.

PIA 777 fleet must be almost paid off and fully depreciated as most airlines depreciate their fleets over 12 years, and depreciation is a cost also. Might be a good idea to sell the 777s to a company and lease them back, that would help PIA generate a few hundred million dollars and improve the balance sheet and help PIA pay off debt. The eight 777s must at least have a market value of $300 million dollars.
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Re: PIA Reports Reduction in Losses in the First Half of 2019

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Re: PIA Reports Reduction in Losses in the First Half of 2019

Post by ammad »

RS exchange related loss increases to:

5.5 Billion to 8.3 billion: 48% increase in loss:

Finance cost:

From 12.1 billion to 19.2 billion 57.9% increase for losses in this regard.


Final picture: Total losses 32.7 Billion in six months of 2019. That is 15% lesser than that of corresponding year. i.e 38.5 billion.
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Re: PIA Reports Reduction in Losses in the First Half of 2019

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19.227 billion rupees is the finance cost for six months that means for the entire year it would be 38.5 billion rupees

38.5 billion rupees in interest payments that is 250 million dollars.

The hotels worth around 1.5 billion dollars which can reduce the debt by 75% is earning around 10 million dollars a year. By selling the hotels PIA can save every year around 200 million dollars in interest payments.

You do not have to be a math genius to figure out what PIA needs to do.
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Re: PIA Reports Reduction in Losses in the First Half of 2019

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Rupee depreciation drives up PIA revenue in 6 months

In dollar terms, however, the revenue has gone down

By Usman Hanif

Published: November 27, 2019

KARACHI:
Pakistan International Airlines (PIA) has managed to improve its revenue in first six months of the current calendar year, supported by a hefty rupee depreciation, revealed the profit and loss statement that the airline sent to the Aviation Division.

When PIA was contacted, it neither confirmed nor denied the statistics.

“I cannot comment on the report,” said PIA spokesperson Abdullah Hafeez Khan. “It was not issued by us.”
According to a copy of the profit and loss statement available with The Express Tribune, the new administration of the national flag carrier raised its revenue from Rs65.72 billion in the first half of 2018 to Rs94.73 billion in the corresponding period of 2019, an increase of over 44%.

However, the airline still recorded a loss of Rs32.7 billion in the first six months of 2019 against loss of Rs38.5 billion in the same period of previous year, a year-on-year decrease of Rs5.8 billion, which appears to be a significant achievement for the airline.

Afsar Malik, an aviation expert who served the Pakistan Civil Aviation Authority (PCAA) for almost three decades, explained that the gain in revenue stemmed from over 50% depreciation of the rupee against the dollar in the past two years.

“Airlines sell about 80% of their international tickets in foreign currency whereas their financial statements are prepared in local currency, therefore, the revenue is calculated after converting the foreign currency into local currency,” elaborated Malik.

Hence, the rise in revenue from Rs65 billion in first six months of 2018 to Rs95 billion in the same period of 2019 was primarily because of rupee depreciation and not because of PIA’s better performance on international routes, he added. The central bank let the rupee depreciate from nearly Rs106 against a dollar in December 2017 to around Rs160 till June 30, 2019.

“When we convert the revenue into US dollars as per the exchange rate prevailing at the time of recording the revenue, then the receipts in first half of 2019 came in at $594 million compared to $650 million in the same period of 2018,” said the expert. “This shows that the revenue has dropped in terms of US dollar.”

Source: tribune.com.pk
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Re: PIA Reports Reduction in Losses in the First Half of 2019

Post by ammad »

Above report is not accurate as well.

If PIA earns revenue in foreign currency, than the expenses on foreign stations are in foreign currency too. For e.g. Hotel accommodation, Fuel payments, ground handling charges, parking fees, catering charges and many others.

Also, this report looks like some one did pretty cursory research, and not comparing apples to apples.

Foreign exchange value should be the mean value of USD during the last year's six month period versus current years six month period.

Dollar value was not 106 at the last year's six months period.

Definitely financial improvement is there, and 15% decline YoY basis of losses is pretty remarkable and looks like PIA might be able to get rid of "Operational" losses during upcoming six moths, which is hovering around 5 billions PKR for six months.
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Re: PIA Reports Reduction in Losses in the First Half of 2019

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“When we convert the revenue into US dollars as per the exchange rate prevailing at the time of recording the revenue, then the receipts in first half of 2019 came in at $594 million compared to $650 million in the same period of 2018,” said the expert. “This shows that the revenue has dropped in terms of US dollar.”
The expert is not that expert after all. He is assuming the exchange rate was fixed for the entire year. 2019 started with 140 rupees to a dollar went up to 162 by June 2019 and then since than has bounced back to 155.

Same way January 2018 the exchange rate did start at 106 but went on to close at 140 by end of the year, so you can give one exchange rate for the entire year.

best idea is not to convert sales from rupees to dollars and vice versa.
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Re: PIA Reports Reduction in Losses in the First Half of 2019

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PIA records Rs32.7bn loss in first half of 2019

By Malik Tariq Ali

December 13, 20192981

KARACHI: Pakistan International Airline (PIA) and its subsidiary, PIA Investments Limited, continue to bleed massively due to a variety of reasons, ranging from mismanagement to lack of transparency and weak audit controls by independent auditors as well as the Auditor General of Pakistan.

Nur Khan succeeded not because of his Air Force combat experience but his self-assessment capability that he was not well versed in dynamics of running commercial aviation industry, which is subject to strict regulatory controls of countries whose airspace they flyover or land, apart from its own Civil Aviation Authority (CAA).

PIA’s before tax unaudited six-month loss for the period January-June 2019 stands at Rs32.746 billion, which, after taxation, is expected to be in the range of Rs38-39 billion. Although PIA revenue generation in this period has risen by 44pc in terms of Pak Rupee, it does not reflect the actual revenue since almost 55-60pc of its revenue is earned in hard foreign currency through sales at its various international outlets and travel agents.

Rupee devaluation as compared to 2018 is in the range of approximately 39-40pc, while the cost of fuel has increased by over 19pc. PIA route miles decreased as compared to 2018.

The national flag carrier registered a net loss of Rs59.685 billion in FY18, according to the year’s annual report which was signed by auditors with various adverse comments. This loss was higher than that recorded between 2008-2011, when the airline was headed by controversial semi-literate cronies like Aijaz Haroon and Nadeem Yousafzai, who, other than involvement in financial controversies, had no management experience.

The auditors in 2018 Annual Report had mentioned that PIA’s major revenue of almost 43pc came from the Middle East, while revenue generated from Pakistan was 37pc, Europe 14pc, UK 4pc and Canada 2pc.

After the 1971 debacle, PIA was headed by Air Vice Marshal Zafar Chaudhry with Air Commodore Khaqan Abbasi as his second in command. They advised then PM Zulfiqar Ali Bhutto to reduce by half airline’s fleet, routes and manpower. PM ZAB chose to remove him and handed over the airline to Rafique Saigol, who managed to put it back on track. Nur Khan took over from Rafique Saigol and to his credit, he appointed a team of qualified professionals, well experienced in aviation. He did not bring a team from PAF, because he understood that commercial aviation, unlike military aviation, can survive only if it meets marketing requirements, passenger needs, comfort and international safety standards apart from a reliable schedule, ease of booking seats etc.

Since 2015, PIA Investments Limited has been incurring losses, while the management continues to get bonuses. The incumbent PIA Investments MD had initially retired in 2015 but managed to get extensions courtesy his political contacts. In violation of rules, PIA Investment, with its head office based in Karachi, has never held its Board of Directors meeting in Pakistan but instead in Paris or New York (not giving access to Auditor General of Pakistan).

When the present management took over, they were expected to restore both financial and administrative experience and reduce operating costs. But unlike Nur Khan, the Air Marshal brought a team from PAF to head almost every department and appointed a CFO on 26 April 2019, who was serving as a director in K-Electric, with no commercial aviation experience.

Instead of appointing a qualified Chartered Accountant as Chief Internal Auditor, he selected an MBA who joined PIA in 2003. This gentleman possesses a Certified Internal Controls Audit diploma, which is not equivalent to a Chartered Accountant. This practice of appointing unqualified individuals as Chief Internal Auditor started during days of Aijaz Haroon.

Transparency in acquisition of commercial aircraft by PIA through lease or hire/purchase agreements saved it from huge losses and pilferage in the past, such as cancellation of deal with SIA for used B747-300 by Benazir Government following review and objection by Parliamentary Committee as compared to non-transparent deals such as alleged DC-10-30 swap with old Boeing 747 200 by AVM Viqar Azeem.

Reports published in the media about “status of implementation of the project of MC-21 passenger medium-range aircraft” made in Russia is a cause for concern. One hopes that any such aircraft deals by PIA are subject to review by relevant parliamentary committees because most of the loans secured are on sovereign government guarantees since national liabilities exceed their total assets.

This unfamiliarity with dynamics of commercial aviation and the need to meet demands of passengers in a competitive market where PIA no longer has a monopoly is reflected in the lack of any progress in replacing and updating existing Inflight Entertainment System, which has been not functioning for over three years. For this, neither the PIA BoD and former MDs can be absolved nor the existing chairman/MD, who in spite of getting sufficient funds in the range of over Rs63 billion, has failed to rectify IFES.

Inflight Entertainment System is an integrated part of aircraft systems linked with cabin call and cabin illumination systems, both controlled by same hardware/software and also caters for different flight situations like emergency warnings etc. Any company authorized to work on any aircraft system must be certified and have required approvals acceptable to EASA for certification otherwise insurance coverage will be compromised. The contract for IFES worth over Rs700 million was given in a nontransparent way to Avionics (Private) Solution Pakistan based in Main Golra Road, although they were registered with RTO on 18 March 2019 while tender floated had a closing date of 8 July 2015 and bids were to open on 15 July 2015 as per Tender PPRA Ref No (TSE) TS392390E.

The auditors have expressed reservations that no meeting of the Board of Audit was conducted in the second quarter of 2019. The Board of Directors have failed to quantify outlay of service delivered by the corporation as a public service obligation. They have also noted that the board failed to establish a pricing mechanism for distinguishing an “arms-length transaction from a non-arms-length transaction”. It has also not quantified six-monthly detailed summaries of accounts.

Source: Profit
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