PIA will have to link oil prices with fuel surcharge as oil prices are beyond the control of the airline and are adding to the financial burden on the airline’s expenditures. Fuel costs constitute 42 percent of the total operating cost of PIA.
The annual basket of crude oil price increased to $77.45 per barrel in 2010 from $61.06 per barrel in 2009 showing an increase of almost 27 percent, he said.
PIA took this decision at its annual general meeting. PIA’s 54th Annual General Meeting was held at a local hotel. PIA Managing Director Nadeem Khan Yousufzai in his first address to shareholders at the AGM meeting said that 2010 had proved to be a challenging year.
He also noted that while the global economy is gradually moving out of recession, the aviation industry has still not been able to fully recover from the crisis that engulfed it in the wake of the oil price hike. He said that given recent events in the Middle East, oil prices have again started to climb which is affecting the aviation industry’s ability to claw back into profitability. PIA is affected by oil prices coupled with the phenomena of inflation in the country. He went on to say that PIA does not receive any subsidy from the government on oil purchase.
It was also noted that PIA is going to begin expansion and is in the process of acquiring additional aircraft while discussions are underway with PIA board of directors and the government of Pakistan.
AGM President and PIA Board Member Husain Lawai informed the shareholders that during the year 2010 the airline achieved highest revenue in excess of Rs 107.532 billion as compared to Rs 95.564 billion in 2009, with a revenue growth of 12.52 percent.
The airline also registered an increase in seat factor from 70 percent in 2009 to 74 percent in 2010 and achieved an operating profit of Rs 720 million. With the world GDP forecast set to rise by 3.1 percent during 2011, it is expected that demand for air travel (both passenger and cargo segments) would increase by 5.6 percent and 6.1 percent, respectively in 2011. He said that the airline achieved an operating profit of Rs 720 million but the overall financial position of the airline was adversely affected by the rise in fuel prices; from Rs 149.39 per US gallon in 2009 to Rs 194.57 per US gallon in 2010. Operating expenses other than fuel decreased by 3.88 percent over last year. This was due to the decrease in exchange loss by Rs 4,409 million over last year due to the stable exchange rate in 2010 as compared to the devaluation of 6.71 percent of Pakistani rupee against the dollar in 2009, he added.
The airline has also implemented web ticketing for the convenience of the passengers; this he said will also result in savings for the airline. He said PIA is now focusing on revenue increase, network expansion and savings.
In his concluding remarks, PIA Managing Director Nadeem Khan Yousufzai said PIA has already submitted its business plan to the government. Based on the financial projections contained in the business plan, the airline is expected to start earning profits provided the Business Plan is approved and significant financial support is provided to the corporation, PIA MD concluded.
During the AGM, Malik Nazir Ahmed was declared reelected as board member whereas Yousuf Waqar was declared elected as board member by the shareholders other than the federal government.
