5. Introduction
Birth of a Nation, Birth of an Airline
Before the foundation of Pakistan, Quaid e Azam
ordered M.A Ispahani to establish a new Airline for
the new country
Orient Airways Takes to the Skies
Founded on 23 October 1946
Obtained License in May 1947
Was based in Calcutta
6. Introduction
PIA’s First International Service
First international Flight was flown in 1956
Revenues were doubled due to international
flights
New Planes, New Directions, New
Management
Modern air crafts of its time were procured
New flight destinations were added
7. Introduction
Historic Firsts and Unbroken Records
Set record of fastest flight from London to
Karachi in just 6hours 15mins
First Asian Airline to Fly to China and Norway
The Pursuit of Excellence Through
Technology and Quality Control
First organization in Pakistan who started
using computers in 1967
8. Services Provided
Business Plus Seats
Business Plus Check in Counters
Priority based Services
In Flight Entertainment( Movies, Songs
Dramas, Games etc.)
Customized meals including (Break fast,
Lunch, Snacks, Dinner)
Special Hajj Flights
9. PIA Experience
PIA Cargo
PIA SpeedEX
PIA Training services
Customer Care
City Check In
Seat Reservation Via Internet and Mobile
Phone
14. Consolidated Statement of Financial Performance
Rs. 000
2012
REVENUE
ANALYSIS
Rs.000
2011
Vertical
Horizontal
127,476,192
117,602,938
100%
108.40%
Aircraft fuel
-62,965,435
-44,707,004
-49.39%
140.84%
Others
-58,692,933
-54,048,189
-46.04%
108.59%
GROSS PROFIT
5,817,824
18,847,745
4.56%
30.87%
Distribution costs
-6,830,850
-6,301,504
-5.36%
108.40%
-11,009,338
-9,979,295
-8.64%
110.32%
-652,950
-726,222
-0.51%
89.91%
-4,220,191
-2,091,706
-3.31%
201.76%
525,563
2,289,179
0.41%
22.96%
-22,187,766
-16,809,548
-17.41%
132.00%
(LOSS) / PROFIT FROM OPERATIONS
-16,369,942
2,038,197
-12.84%
-803.16%
Finance costs
-10,487,413
-9,622,520
-8.23%
108.99%
-790
-486
0.00%
162.55%
-26,858,145
-7,584,809
-21.07%
354.10%
934,790
-12,476,148
0.73%
-7.49%
-25,923,355
-20,060,957
-20.34%
129.22%
COST OF SERVICES
Administrative expenses
Other provisions and adjustments
Exchange loss - net
Other operating income
Share of loss from associated company
LOSS BEFORE TAXATION
Taxation
LOSS FOR THE YEAR
15. Vertical Analysis of
Statement of Financial Performance
The major problem is Cost of Services
due to:
High salaries
Overstaffing
Finance cost etc.
Low Gross Profit despite very good sales
revenues
16. Horizontal Analysis of SOCI
Cost of services increased by 48% in 2012
but surprisingly sales are increased only by
8%
Gross profit is decreased by 70% which
indicates clearly that even the increase in
sales did nothing due to the increase in the
cost of services.
Exchange loss has increased by 108% with
a value of more than Rs.4 Billion which has
significantly increased the operating cost in
the current year.
17. Horizontal Analysis of SOCI
Due to all problems and unfavorable business
performance the overall loss of the
organization has increased by 29% which is
extremely dangerous and in the future it may
end up the desolation of the organization.
18. Consolidated Statement of Financial Position
Rs.000
2012
Property, Plant And Equipment
Rs.000
2011
ANALYSIS
Vertical
Horizontal
81.20%
100.02%
1.65%
104.12%
82.85%
100.10%
146,214,419
146,188,607
2,973,990
2,856,379
149,188,409
149,044,986
Long-Term Investment
86,088
89,715
0.05%
95.96%
Receivable From Hotel
679,487
648,116
0.38%
104.84%
15,407
14,107
0.01%
109.22%
9,278,981
9,409,373
5.15%
98.61%
159,248,372
159,206,297
88.44%
100.03%
Stores and spares
3,895,832
3,873,673
2.16%
100.57%
Trade debts
8,936,690
8,788,214
4.96%
101.69%
329,433
456,714
0.18%
72.13%
Trade deposits and prepayments
1,305,268
1,596,800
0.72%
81.74%
Other receivables
2,423,473
1,438,007
1.35%
168.53%
594,749
1,306,037
0.33%
45.54%
93,680
96,577
0.05%
97.00%
3,239,943
5,575,572
1.80%
58.11%
20,819,068
23,131,594
11.56%
90.00%
180,067,440
182,337,891
100.00%
98.75%
Intangible
Long Term Loan Advances
Long Term Deposit
CURRENT ASSETS
Short-term loans and advances
Short-term investments
Taxation – net
Cash and bank balances
Total Assets
19. Consolidated Statement of Financial Position
Rs.000
2012
Rs.000
2011
ANALYSIS
Vertical
Horizontal
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share capital
28,779,674
25,774,948
15.98%
111.66%
-107,420,680
-82,306,920
-59.66%
130.51%
-78,641,006
-56,531,972
-43.67%
139.11%
1,081,405
1,224,376
0.60%
88.32%
-77,559,601
-55,307,596
-43.07%
140.23%
22,854,589
21,059,425
12.69%
108.52%
Long-term financing
44,633,808
29,454,413
24.79%
151.54%
Term finance and sukuk certificate
10,925,653
17,457,280
6.07%
62.59%
Liabilities against assets on finance lease
47,351,568
53,757,595
26.30%
88.08%
444,817
384,293
0.25%
115.75%
Deferred taxation
15,189,571
15,381,025
8.44%
98.76%
Deferred liabilities
9,228,697
6,408,140
5.13%
144.02%
127,778,945
122,842,746
70.96%
104.02%
46,336,731
34,392,732
25.73%
134.73%
Accrued interest
4,727,025
3,096,164
2.63%
152.67%
Provision for taxation
1,072,935
1,640,243
0.60%
65.41%
Short-term borrowings
25,801,027
22,685,884
14.33%
113.73%
11,317,288
21,176,940
6.29%
53.44%
8,664,107
2,135,040
4.81%
405.81%
Reserves
Attributable to the Holding company's share
Non-controlling interest
TOTAL EQUITY
SURPLUS ON REVALUATION OF PROPERTY,
NON-CURRENT LIABILITIES
Long-term deposits
CURRENT LIABILITIES
Trade and other payables
Current maturities of:
Long-term financing
Term finance and sukuk certificates
Advance rent
Liabilities against assets subject to finance lease
4,392
0.00%
8,616,313
5.04%
105.27%
106,993,507
TOTAL EQUITY AND LIABILITIES
9,070,002
93,743,316
59.42%
114.13%
180,067,440
182,337,891
100.00%
98.75%
20. Vertical Analysis of SOFP
Normal and favorable Asset side
Liability side is in a very bad shape
Alarming fact is the Current Liabilities as
they comprise of 60% of the total liabilities
and equities.
21. Horizontal Analysis of SOFP
Cash and bank balances has been
decreased significantly
Short term investments have also been
decreased by 55%
Negative balance of the reserves has been
increased by 50%
Long term financing of the organization has
also been increased by 50%
Current Liabilities have also been increased
by Rs. 13 Billion.
22. Ratio Analysis of PIA
Ratios
2012
2011
Current Ratio
1.49
1.70
Quick Ratio
1.45
1.66
Gross Profit Ratio
4.56%
16.03%
Operating Profit Margin
(13)%
2%
(20.34)%
(17.06)%
Return on Capital Employed
(32.60)%
3.2%
Return on Assets
(9.09)%
1.12%
0.71
0.64
Earning per share
(9.42)
(8.1)
Price/Earning Ratio
(0.37)
(0.44)
Capital Gearing Ratio
401%
430%
Debt Ratio
130%
119%
Interest Cover
(1.56)
0.21
Net Profit Ratio
Asset Turnover
23. Liquidity Ratios Analysis
Current ratio
1.49
1.70
Unfavorable, it doesn’t even fulfill the
criteria
Unable to payoff its current liabilities
Bad impact on the creditors
Quick ratio
1.45
1.66
normal
24. Profitability Ratios Analysis
G.P margin
4.56%
16.03%
Indication of very poor performance of the organization
Decreasing every year
Just because of cost of services
Net loss margin
(20.34%)
(17.04%)
•Extremely poor performance of the organization
•Due to Cost of Services, operating expenses and Finance cost
25. Profitability Ratios Analysis
Return on Capital Employed: (32.60%)
3.20%
•Extremely Unfavorable
•PIA is not utilizing its Assets to generate Revenues properly
•Just because of Cost of Services
Return on Assets:
•Extremely Unfavorable
•Assets are not being utilized
•Due to heavy costs
(9.09%)
1.12%
26. Financial Risk Ratios
Analysis
Capital gearing Ratio:
401%
430%
•Highly Unfavorable
•Debts are 4 times to Equities
•Highly financial Risks
Debt Ratio:
130%
•Highly Unfavorable
•risks in terms of its Debt-Load
•Major part is the Current Liabilities
119%
27. Financial Risk Ratios
Analysis
Interest Cover:
(1.56)
•Unable to meet Interest expense obligations
•Questionable this year
•Due to heavy operating losses
0.21
28. Recommendations and
Financial Strategy:
Overstaffing at PIA due to Political pressures
Reduce staff to avoid heavy salaries
Utilization of Assets properly
Must increase G.P to avoid losses
Finance Costs
29. Recommendations and
Financial Strategy:
Should privatize supporting staff duties to
lower down the cost
Operate flights on time
Needs exemplary leadership
Qualified and merit based staff and
Technically strong administration
30. Conclusion
Flag carrier of Pakistan
One of the largest and oldest airline of the
region
Glorious past and it has helped many leading
airlines of the world
Its performance has suffered dramatically due
to many factors like, political pressure,
nepotism, corruption, over employment and
many other factors
31. Conclusion
The Airline is going in continuous loss since
2004
These mentioned steps are some points
which may help PIA to regain its lost glory
and to become profitable once again. But for
this the whole organization has to be
redesigned and its organizational needed to
be changed and unfortunately it is not
possible under the current regime and
system, hence in the near future there are no
chances of improvement in the organization.
