Pakistan International Airlines' (PIA) key financial ratios show deteriorating trends from 2004 to 2005 compared to Finnair. PIA's current, quick, and interest coverage ratios declined over this period indicating worsening short-term financial health and ability to meet debt obligations. In contrast, Finnair's ratios improved, with higher current, quick, and interest coverage ratios, demonstrating stronger short-term financial position. While some of PIA's ratios like debt-to-equity improved slightly, overall the comparison reveals PIA was in a weaker financial position than its competitor Finnair from 2004 to 2005.

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2. “One machine can do the work of fifty ordinary men. No machine can do
the work of one extraordinary man”.
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3. Pakistan International Airlines is Pakistan’s national and international AIRLINE
. Eventually, on March 11 of 1955, Orient Airways merged with the
Government's proposed airline, becoming Pakistan International Airways. In
March of 1960, PIA became the first Asian airline to enter the jet age when
Boeing 707 service was introduced. In 1978, the airline bought their first 747
aircraft, which have since become a staple of the airline's fleet. In 1996, the
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airline leased Tupolev Tu-154 planes, and re-opened services to Beirut
International Airport in Beirut, Lebanon.

4. Pakistan International Airlines (also known as PIA), is Pakistan’s
national and international AIRLINE . Its IATA call code is PK. In Pakistan its
initials are sometimes jocularly said to stand for "prayers in air".
History:
PIA
can trace its beginnings to the days when Pakistan still wasn't a nation. In
1946, Muhammed Ali Jinnah, also known as founder of Pakistan, realized the
need of an airline network for the forming country. He called upon the help of
an experienced industrialist, Mr. M.A. Ispahani.
On October 23 of 1946, Orient Airways was set up, registered in Calcutta. In
February of 1947, three DC-3 airplanes were bought from a company in Texas,
and in May of that year, the airline was granted a license to fly. Services were
started in June, from Calcutta to Akyab and Rangoon. This was the first post
war airline flight by an Indian registered airline company.
Two months after this service began, Pakistan as a nation was formed. Orient
Airways began relief flights to the new nation, and soon after, it moved
operations to Karachi, where it began the important route from Karachi to
Dacca. In addition, their initial domestic route in Pakistan was established, from
Karachi to Lahore to Peshawar, and from Karachi to Quetta to Lahore.
Due to increasing passenger demand, the airline increased its fleet before the
end of the 1940s, and this caused financial trouble to the airline. The
government of Pakistan, realizing the operation was failing economically, asked
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5. the airline to merge into a new, national airline that the government was
planning on creating. Eventually, on March 11 of 1955, Orient Airways merged
with the Government's proposed airline, becoming Pakistan International
Airways.
History Overview:
• The first airline from an Asian land country and the first airline from a
Muslim country to fly the Super Constellation
• The first Asian airline to operate a jet aircraft.
• The first Asian airline to be granted maintenance approval by the US
Federal Aviation Administration (FAA) and the Air Registration Board,
predecessor of the British Civil Aviation Authority (CAA).
• The first non-communist airline to fly to the People's Republic of China,
and to operate a service between Asia and Europe via Moscow
• The first airline in Asia to induct the new technology Boeing 737-300
aircraft.
• An IBM 1401, the first computer in Pakistan, was installed in PIA.
• The first airline to introduce a second route to People's Republic of China
over the mighty Karakoram mountains.
• The first airline in the world to operate scheduled helicopter services
• The first airline to show in-flight movies on international routes.
• PIA set up Pakistan's first planetarium at Karachi.
• The first airline in South Asia to introduce auto-ticketing facility.
• First Asian airline to start flights to Oslo, the beautiful capital city of
Norway.
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6. Boeing 747-300 6
Boeing 747-200 4
Boeing 777-24ER 3
Airbus A-300-B4 6
Airbus A-310 12
Boeing 737-300 7
Fokker F-27-200/400 8
Twin Otter 2
Total Aircrafts PK Airways Contains = 48
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7. MISSION
Considering its mission statement to be a world class airline with a
distinctive Pakistani character, that is customer driven and caring
employer, Pakistan International Airlines is committed to providing top
quality service and endeavors to achieve total customer satisfaction.
Therefore we, at Customer Relations Division,look forward to receiving
from our customers their comments and suggestions regarding any
aspect of Pakistan International Airline Services.
It is our belief that comments and suggestions made by our valued
customers are of a vital information source, which enable us to
evaluate the services and to take appropriate measures for
improvement. Ultimately, this will lead us to achieve our mission.
We hope that Pakistan International Airlines will always acquire your
confidence every now and then.
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9. “. . . Man is still the most extraordinary computer of all.”
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10. Various ratios are used by managers and
investors to analyze and forecast the
profitability and efficiency of a company.
Listed in this section are the ratios used for
the financial analysis of Pakistan
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International Airlines.

11. Ratio Analysis
Financial Statement Analysis uses a primary tool a ratio which relates two figures applicable to
different categories.
Without ratios, financial statements would be largely uninformative to all but the very skilled. With
ratios, financial statements can be interpreted and usefully applied to satisfy the needs of the reader.
In order to assess the performance of a business, it is necessary to analyse and interptret the business
final accounts. Analysis involves a detailed review of the information provided in the final accounts.
The results of this analysis are interpreted to assess the performance of the business. This may
include a comparison with previous years, a comparison with targets or budgets, or even a
comparison with other similar businesses.
For comparison to be meaningful, it is used to express results in terms of accounting ratios. The
wording accounting ratios is used to describe all the calculations involved in interpreting accounts,
even though some of the calculations are expressed in terms of percentages & time periods
Users of Ratios: There are vast numbers of parties who are interesting in analyzing financial
statements, including share holders, lenders, customers, suppliers, employees, government agencies
and competitors.
Ratio Analysis is a first step in assessing an entity. It removes some of the mystique surrounding
the financial statements and makes it easier to pinpoint items which it would be interesting to
investigate further.
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12. Short Term Liquidity Ratios for Pakistan International Airlines.
Objective
To measure the solvency, or the ability, of Pakistan International Airlines to
meet its short-term financial obligations and to assess the liquidity, or the
ability, of PIA to convert current assets to cash to reduce current liabilities.
The Ratios
The most widely used financial ratios for establishing the short-term liquidity of
a company are highlighted in the below chart.
The short-term liquidity ratios are used in the evaluation of short-term liquidity
to convert current assets into cash in order to reduce the financial obligations of
the company as they become due. These ratios are particularly significant to
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13. the creditors and potential lenders of a company because they determine the
ability of that company to meet current payments of a debt.
Quick Comparison
Financial Ratio 2005 2004
Current Ratio 2.657 2.038
Quick Ratio 1.415 1.781
Financial Ratio 2005 2004
Current Ratio 1.932 1.817
Quick Ratio 0.893 0.865
Analysis
As shown in the above comparative table, Pakistan International Airlines short-
term liquidity has various over the past decades and has consistently remained
below a 2:1 ratio, which could be perceived as less than optimal. The quick
ratio also has remained under 1:1, which is considered to be the benchmark
value for this ratio. However, relative to the Finn air airlines, Finn air airlines
has maintained a higher current ratio and PIA’s quick ratio has remained Lower
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14. than its competitors. These trends indicate PIA has been in a poor position than
its competition to meet its short-term financial obligations.
Financial Leverage Ratios for Pakistan International Airlines.
Objective
To apply ratio analysis to assess the debt levels of Pakistan International
Airlines.
The Ratios
The most commonly used ratios by financial analysts for determining the long-
term solvency of an entity are shown in the following table:
Financial Ratio Numerator Denominator
Debt-to-Equity Total Debts Equity
Debt-to-Total Assets Total Debt Total Assets
These ratios are used for solvency evaluation. The main focus of these ratios is
the entity’s ability to repay long-term creditors. Both creditors and shareholders
are equally interested in these ratios. Typically, these ratios should be as low as
possible. These ratios indicate the entity’s ability to withstand relatively sour
business conditions without suffering net losses or insolvency. Although, these
ratios should not be taken at face value since they are dependent on many
factors, these ratios are most useful for making apple-to-apple comparisons in
the industry.
Quick Comparison
2005 2004
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15. Financial Ratio
Debt to Equity 1.992 1.792
Debt to total Assets 0.435 0.308
Financial Ratio 2005 2004
Debt to Equity 1.205 1.556
Debt to total Assets 0.515 0.608
Analysis
As evident from the above table there is a decreasing trend in all of the above
ratios from December 2004 to September 2005. This shows the Decreasing
Trend of PIA and this shows the poor ability of the entity to meet its long-term
obligations unsuccessfully with being in danger of encountering net losses or
insolvency. In short this above table shows that the PIA is totally dependent on
the debts.
Profitability Ratios for Pakistan International Airlines.
Objective
To determine the profitability of Southwest Airlines using various financial
ratios.
The Ratios
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16. Profitability ratios are used in an effort to evaluate management’s ability to
monitor and control expenses and to earn a profit on resources committed to
the business. The ratios assess Southwest Airlines’ strengths and weaknesses,
operating results and growth potential. These ratios are used to measure how
efficiently the assets are being used to generate net income and sales. The
higher the ratio, the more effectively a company is using their assets. The
ratios also allow comparison of the profitability of Southwest Airlines to that of
similar airlines within the industry.
Listed in the table below are the primary ratios used to determine profitability
Ratio.
Financial Ratio Numerator Denominator
Gross Profit Gross Profit Net sales
Net Profit Ratio Net profit Net sales
Operating Profit Ratio EBIT Net sales
Quick Comparison
Financial Ratio Sep.2005 Dec.2004
Gross Profit 64.92 % 62.53 %
Net Profit Ratio 43.67 41.45%
Operating Profit Ratio 49.86 % 47.55 %
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17. Financial Ratio Sep.2005 Dec.2004
Gross Profit 99.2 % 56.%
Net Profit Ratio 2.558 % 0.290 %
Operating Profit Ratio 3.87 % 0.65 %
Analysis
Gross profit and gross profit percentage are used to assess whether the profits
will cover operating expenses. The gross profit rate has remained unstable in
the periods. Pakistan International Airlines has a relatively Low gross profit rate
this year, primarily because of High operating costs. High operating costs is one
of the main threats for this firm, “By keeping costs High, we can’t keep our
fares low. This, in turn, gives customers to fly with other Airlines.”
Activity Ratios for Pakistan International Airlines.
Objective
Activity ratio are used to determine how quickly various accounts are converted
into sales or cash.
The Ratios
Financial Ratio Numerator Denominator
Receivable turnover Credit sales Receivables
Payable turnover Credit Purchases Payables
Inventory Turnover Cost of Goods Sold Average Inventory
Over all the Liquidity ratios generally do not give an adequate picture of a
company’s real liquidity, due to differences in the kinds of current assets and
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18. liabilities the company holds. Thus, it is necessary to evaluate the activity or
liquidity of specific current accounts.
Quick Comparison
Financial Ratio 2005 2004
Receivable turnover 10.27 times 9.88 times
Payable turnover 3.53 2.08
Inventory Turnover 58.93 56.54
Financial Ratio 2005 2004
Receivable turnover 6.29 times 7.64 times
Payable Turnover 0.225 0.278
Inventory Turnover 43.28 46.95
Analysis
Pakistan International Airlines contains a nominal Debtors turnover change
from previous year. PIA can turn its accounts into sales 9.88 times but if we
compare it with Finn Air then we will find that Finn Air can turn its debtors into
sales faster than PIA.
The total asset turnover of PIA increases and it is a positive response as assets
are utilizing more significantly by the organization. If we compare with the Finn
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19. Air then they are also utilizing their assets. Both company’s use to assets are
comparatively good.
Interest Coverage Ratios for Pakistan International Airlines
Objective
The interest coverage ratio reflects the number of times interest expense is
covered by earnings or cash flows.
The Ratios
Listed in the table below are the primary ratio used to determine Interest
Coverage Ratio.
Financial Ratio Numerator Denominator
Interest coverage Ratio EBIT Interest charges
The ratio reveals the magnitude of the decline in Income that a firm can
tolerate and still be able to meet its interest payments.
Quick Comparison
Financial Ratio Sep.2005 Dec.2004
Interest coverage Ratio 0.617 1.051
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20. Financial Ratio Sep.2005 Dec.2004
Interest coverage Ratio 24.85 5.4
Analysis
The decline in interest coverage from 2004 to 2005 is a negative indicator for
Pakistan International Airlines. This drop in the ratio in the second year would
be of concern to creditors, but if we compare it with Finn Air then we will find
that Finn Air has increase in Interest Coverage Ratio from 2004 to 2005 is a
positive indicate.
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21. Summary of Financial Ratio
Ratio Formula
Dec. 2004 Sep.2005 Evaluation Trend Dec. 2004 Sep.2005 Evaluation Trend
NWC Current assets – Current Liabilities 0.0092 (0.093) Deteriorated 0.006 0.012 Improved
Current Current Assets / Current Liabilities 1.038 0.657 Deteriorated 1.017 1.032 Improved
Quick Cash + Cash Equivalent 0.415 0.781 Improved 0.465 0.493 Improved
+Receivables / Current Liabilities
Debt equity Total Liabilities / Shareholder Equity 3.946 3.792 Improved 1.556 1.605
Debt T.A. Total Debt / Total Assets 3.308 4.817 Deteriorated 0.608 0.615
Total Total Debt / Total Capitalization 1.039 1.054 Deteriorated 0.437 0.445
Capitalization
Debt Ratio Total Liabilities / Total Assets 0.789 0.773 Improved 0.609 0.616
Gross Profit Gross Profit / Net Sales 15% 08% Deteriorated 100.096 % 99.2 %
Net Profit Net Profit / Net Sales 02 % (6.7 %) Deteriorated 0.290 % 2.558 %
O. Expense Operating Expense / Net Sales 102.6 % 97.9 % 102.6 % 97.9 %
O. Profit EBIT / Net Sales 04 % 03 % 0.65 % 3.87 %
Debtors T.O. Credit Sales / Receivables 10.27Time 9.88 Time 2.01 Time 1.80 Time
T. Asset T.O Net Sales / Total Assets 2.08 3.53 0.278 0.285
NWC T.O. Sales / Net Working Capital 56.54 6.80 8.80 19.30
Interest Operating Income / Interest Charges 1.051 0.617 5.40 24.85
Coverage
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24. Horizontal analysis is used to
evaluate the trend in the
accounts over the years
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25. “The real danger is not that computers will begin to think like men, but
that men will begin to think like computers”.
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26. Stages of Group Development
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27. There are five stages for group development
• Forming stage
• Storming stage
• Norming stage
• Performing stage
• Adjourning stage
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Stages of Group Development
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29. “The scientific theory I like best is that the rings
of Saturn are composed entirely of lost airline
luggage”.
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30. External conditions are imposed on a work group.
There are external conditions which influence the
performance of the groups in Pakistan International
Airlines.
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31. Toward Explaining Work-Group Behavior.
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33. In PIA group’s performance are predicted by
assessing the knowledge, skills, and abilities of its
individual members.
Group Member Resources
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35. All groups have norms “acceptable standards of
behavior that are shared by the group’s members.”
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36. Norms tell members what they ought and ought not to
do under certain circumstances
Group Structure
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39. Group Processes
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