Financial analysis of pakistan international airlines

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Financial analysis of pakistan international airlines

  1. 1. Financial Analysis of Pakistan International Airlines
  2. 2. Presented to: Prof. Ayesha Anwar Presented by: SAAD QAMMAR(111124) M.FAHAD(121103)
  3. 3. Topics of Presentation        Introduction Services Provides PIA Experience Financial Reports Analysis of Financial Reports Recommendations Conclusion
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. PIA Experience  PIA Cargo  PIA SpeedEX  PIA Training services  Customer Care  City Check In  Seat Reservation Via Internet and Mobile Phone
  9. 9. FINANCIAL REPORTS
  10. 10. Consolidated Statement of Financial Position Rs.000 Property, Plant And Equipment 2012 Rs.000 2011 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 Receivable From Hotel 679,487 648,116 15,407 14,107 9,278,981 9,409,373 159,248,372 159,206,297 Stores and spares 3,895,832 3,873,673 Trade debts 8,936,690 8,788,214 329,433 456,714 Trade deposits and prepayments 1,305,268 1,596,800 Other receivables 2,423,473 1,438,007 594,749 1,306,037 93,680 96,577 3,239,943 5,575,572 20,819,068 23,131,594 180,067,440 182,337,891 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
  11. 11. Consolidated Statement of Financial Position Rs.000 2012 Rs.000 2011 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Share capital 28,779,674 25,774,948 -107,420,680 -82,306,920 -78,641,006 -56,531,972 1,081,405 1,224,376 -77,559,601 -55,307,596 22,854,589 21,059,425 Long-term financing 44,633,808 29,454,413 Term finance and sukuk certificate 10,925,653 17,457,280 Liabilities against assets on finance lease 47,351,568 53,757,595 444,817 384,293 Deferred taxation 15,189,571 15,381,025 Deferred liabilities 9,228,697 6,408,140 127,778,945 122,842,746 46,336,731 34,392,732 Accrued interest 4,727,025 3,096,164 Provision for taxation 1,072,935 1,640,243 Short-term borrowings 25,801,027 22,685,884 11,317,288 21,176,940 8,664,107 2,135,040 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 8,616,313 106,993,507 TOTAL EQUITY AND LIABILITIES 9,070,002 93,743,316 180,067,440 182,337,891
  12. 12. Analysis of Financial Reports
  13. 13. 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
  14. 14. 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
  15. 15. 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.
  16. 16. 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.
  17. 17. 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
  18. 18. 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%
  19. 19. 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.
  20. 20. 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.
  21. 21. 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
  22. 22. 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
  23. 23. 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
  24. 24. 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%
  25. 25. 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%
  26. 26. Financial Risk Ratios Analysis Interest Cover: (1.56) •Unable to meet Interest expense obligations •Questionable this year •Due to heavy operating losses 0.21
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. 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.

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