PIA losses projected at Rs17bn per month

WASIM IQBAL & NUZHAT NAZAR

ISLAMABAD: The operational and revenue losses of Pakistan International Airlines (PIA) are around Rs 17 billion a month projected to increase due to flights restrictions due to the pandemic and grounding of almost one third of the pilots on charges of fake degrees.

The federal government has budgeted an amount of Rs 20 billion for PIA loan and advances for the current financial year 2020-21 against a revised estimate of Rs 27.1 billion for financial year 2019-20.

An official of PIA on the condition of anonymity told Business Recorder that the operational losses of PIA have been estimated at around Rs 6 billion and revenue losses between Rs 11 to 12 billion per month.

PIA’s revenue losses have also escalated due to social distancing on all flights, inherited legacy of loans, and rising debt-servicing.

The official maintained that the real losses of PIA would come out after financial audit of PIA accounts for year 2020. These were only estimates, he added. “The management of the PIA is not authorized to make public pre-audited financial losses as per rules and regulations of Security and Exchange Commission of Pakistan (SECP),” he added.

Aviation experts said that operational and revenue losses of PIA will increase significantly by end of year 2020 due to ban on flights to EU, UK, USA and also suspension of Hajj and Umra flights by Saudi Government due to Covid-19- a major source of revenue of the airline. The revenue of PIA surged to Rs147.5 billion in 2019 which was Rs103.5 billion in 2018, a growth of 43 percent in 2019, while operating losses declined by a massive 76 percent, compared to 2018.

On July 1, the European Air Safety Agency (EASA) issued a six-month ban on all PIA flights to Europe. The United Kingdom and the USA followed suit imposing a ban on all PIA flights. Many international airlines worldwide have grounded Pakistani pilots. The current ban comes in the aftermath of an inquiry report regarding the crash of PIA flight 8303, operated by Airbus A320. In June, Aviation Minister Ghulam Sarwar stated that 260 of 860 Pakistani pilots, including 141 PIA pilots, never sat for the exams and that their licenses were fake.

PIA operated regular flights to various destinations in the UK and Europe before the ban was placed. The week before the ban the national airline operated 23 flights to the UK, including ten flights to London, nine to Manchester, and four to Birmingham, whereas six flights went to different destinations in Europe.

To compensate for the losses on international flights operations, PIA reduced its fares by Rs 6,928 for one-way domestic flights. The management has further increased flights to domestic destinations. PIA will run two flights between Islamabad and Karachi, as well as a daily flight between Lahore and Karachi. However, the May 22 crash of PIA flight PK-8303 badly affected domestic revenue. PIA has suffered an accumulated loss of Rs 425 billion since 2008. In 2019, PIA authorities asked the Federal government to write off its loan for which PIA has to pay Rs 3 billion interest each year.

Instead, the government of Pakistan came up with an ambitious revival plan, according to which PIA was to procure 45 new air carriers and expand its travel destinations to generate more revenue for the struggling airline.

Each year, a sum of Rs 24 billion was spent on payment of salaries to its 14,500 employees. The federal government had committed to International Monetary Fund (IMF) under the $6 billion Extended Fund Facility to complete an audit report of the financially troubled PIA by the end of December 2019-a target missed by the government.

Sources maintain that employee-related costs form the biggest share in PIA’s expenses. Global website Airfleets Net reports only 32 active aircraft for PIA, translating into an employee to aircraft ratio of 481, which is almost three times higher than Air India (165) and almost four times more than Turkish Airlines (116). Emirates, with a fleet of 270 aircraft, has employee-plane ratio of 119 to one. For Turkish Airlines, another important regional carrier with 304 planes, it is far lower - at 116 employees per plane. PIA’s average fleet age is 13 years almost double that of Emirates, Qatar and Etihad airlines. With poor maintenance added to the mix the predicament of PIA’s old worn-out aircraft is a source of concern.