Air Transport World

Growing pains: Pakistan International. (Company Profile)

KARACHI--Pakistan International Airlines' record of profitability--there was a loss in only one of its 41 years of existence--continues despite a series of government measures that threaten its financial health. In the fiscal year ended last June 30, the net profit was equivalent to $4.5 million, down from the 1992-93 figure of $25.6 million. In order to improve future profitability, Air Vice Marshal Farooq Umar, the managing director, is restructuring the management and establishing profit centers. Retrenchment measures already have reduced expenditures from $784 million in 1992-93 to $740 million in 1993-94, while operating income rose from $22.9 million to $29.9 million.

PIA's main financial problem is the rise in losses on domestic routes, notwithstanding continually rising traffic on those services. "The more we carry, the more we lose," Umar says, commenting on the effect of deregulation of Pakistan's domestic market and the low government-imposed fares, the lowest of which is equivalent to 6 [cts.] per kilometer, far lower than the 13 [cts.] each of neighboring india and Bangladesh.

PIA runs deficits on all but six of the 36 domestic routes and on those that used to be profitable or break-even, competition from private carriers is changing the situation for the worse. These carriers, charging lower fares than those of PIA, are flying only the trunk routes, where profitability is possible, and defying the government edict that they should perform 10% of their operations on the money-losing "social" services that PIA is required to fly but was able to subsidize out of international profits. …

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