Financial bloodbath: PIA hemorrhages Rs97b in losses across 2022

LAHORE: Pakistan International Airlines (PIA) disclosed their annual earnings report for the year ending 2022 to the Pakistan Stock Exchange (PSX) on May 19. The firm concluded the year with a consolidated loss of Rs 97.23 billion and an unconsolidated loss of Rs 88 billion for year-on-year (YoY) increases of 82% and 76%, respectively.

Consolidated earnings for 2022 

The consolidated earnings report for PIA encompasses earnings from its subsidiary PIA Investments Limited (PIAIL) and its associate company Minhal Incorporated (Minhal), Sharjah. PIAIL, in turn, possesses Roosevelt Hotel Holding Company N.V. (RHC), RHC Operating LLC, Minhal France Sa.r.l., Minhal France B.V., PIA Hotels Limited, PIA Aviation Limited (PAL), Avant Hotels (Private) Limited, and Minhal France S.A. (MFSA) as subsidiaries.

Revenue surged by 103% YoY from Rs 88 billion to Rs 178.5 billion, while the cost of services grew by 86% YoY from Rs 96.5 billion to Rs 179.3 billion. PIA demonstrated operational improvements as the cost of services as a percentage of revenue fell from 109.61% to 100.42%. Gross losses plummeted by a massive 91% YoY from Rs 8.46 billion to Rs 755.8 million. The operational efficiency is reflected in PIA’s gross loss margin (GLM) improving YoY from -10% to -0.42%.

Distribution costs rose by 28% YoY from Rs 5.352 billion to Rs 6.83 billion, administrative expenses increased by 29% YoY from Rs 8.9 billion to Rs 11.477 billion, whilst other income fell by 32% YoY from Rs 6.89 billion to Rs 4.68 billion. Operating losses, however, decreased by 17% YoY from Rs 18.42 billion to Rs 15.33 billion, while the operating loss margin (OLM) improved YoY from -21% to -9%.

PIA’s interest expense surged by 81% YoY from Rs 28.5 billion to Rs 51.7 billion. Earnings before taxation came in at a loss of Rs 100.58 billion, a massive 85% YoY increase from last year’s Rs 54.35 billion. PIA’s tax rebate increased by 287% YoY from Rs 867 million to Rs 3.35 billion, while the effective tax rate increased (ETR) from 2% to 3%. Net consolidated losses for the year clocked in at Rs 97.23 billion against last year’s Rs 53.48 billion, representing an 82% YoY increase. The net loss margin (NLM), however, improved YoY from -61% to -54%.

Unconsolidated earnings for 2022

The unconsolidated earnings report for PIA encompasses just the earnings of the airline itself. 

PIA’s revenue increased by a substantial 100% YoY from Rs 86.18 billion to Rs 172 billion, while the cost of services rose by 86% YoY from Rs 94.6 billion to Rs 176.17 billion. Similar to its consolidated earnings, PIA demonstrated relative operational efficiency in its unconsolidated earnings as well, with gross losses decreasing from Rs 8.46 billion to Rs 4.13 billion. Costs as a percentage of revenue improved from 109% to 102%, which is reflected in PIA’s GLM improving from -10% to -2.4%.

Distribution costs increased by 20% YoY from Rs 5.1 billion to Rs 6.14 billion, administrative expenses rose by 12% YoY from Rs 5.67 billion to Rs 6.35 billion, while other income decreased by 4% YoY from Rs 6.548 billion to Rs 6.275 billion. Despite the increases in expenditure and reduction in other income, operating losses decreased by 25% YoY from Rs 15 billion to Rs 11.3 billion. This is reflected in PIA’s OLM improving from -17% to -7%.

Interest expense increased by a significant 82% YoY from Rs 27.39 billion to Rs 49.9 billion, with earnings before taxation coming in at a loss of Rs 86.5 billion. This represented a 74% YoY increase in its loss before taxation compared to the previous year’s loss of Rs 49.7 billion. The tax rebate surged by 342% YoY from Rs 337.7 million to Rs 1.49 billion. ETR increased from -1% to -2%

Final earnings for the year came in at a loss of Rs 88 billion against the previous year’s Rs 50.1 billion, a substantial 58% YoY increase. 

What do these numbers mean?

Mustafa Mustansir, Director of Research and Business Development at Taurus Securities, reports: “The company has exhibited a marked improvement in its performance.” He adds: “The gross loss margin has decreased and the revenue has doubled impressively.” However, he cautions: “The issue remains with the net income. These losses impose a significant burden on the state.”

Mustansir also warns of escalating finance costs: “They have nearly doubled as a result of increased interest rates.” He anticipates: “We may observe an even larger figure in 2023 due to the delay in repricing loans.”