Pakistan national flag carrier returns to profit after 21 years

Pakistan International Airlines (PIA) has emerged from the financial turbulence and is all set to record its first ever net profit in over two decades, Khaleej Times has learnt.

In a copy of the financial books, attained by Khaleej Times, it seems that the national flag carrier of Pakistan is about to announce a solid net profit for 2024 compared to Rs104.5 billion loss in the corresponding period as it successfully implemented operational and balance sheet restructuring, followed by maintaining high level financial discipline. With the airline resuming its flagship European operation after a lifting of four-year ban, PIA has diligently worked towards regaining operational viability and reputation at the same time. It has also significantly improved its on-time performance, optimised route profitability and enhanced customer service.

Remarkable recovery

Financial results of the airline has now been audited and is awaiting its board of directors' approval before being officially announced, expected to be in the mid of this month. The audited copy reviewed by the Khaleej Times sees the operational profitability converging into net profitability with an impressive 12 per cent operating margin. It has drastically reduced its financial cost from Rs79.42 billion in financial year 2023 to Rs10.06 billion last year, thanks to the balance sheet restructuring drive undertaken by the government as a result of the privatisation process initiated last year.

The airline, often considered a "white elephant" and a prime candidate for privatisation by the Government of Pakistan due to its persistent losses, has demonstrated a remarkable recovery. Characterised by financial instability, mismanagement, frequent leadership changes, and repeated government bailouts, PIA brand name itself became a ridicule of incompetence. There was a near-consensus among policymakers to divest the struggling entity. An attempt was made on this account in 2024, however, due to fragility of the economy itself, it deterred serious investors coming and bidding for once a national icon for Pakistan and eventually the whole process collapsed in November 2024. A second attempt is being made by concerned quarters in Pakistan, but this time through a process of negotiated bidding and targeting the top four to five large business entities in the country.  

30% workforce reduction 

Meanwhile, PIA's management led by its chief executive Air Vice Marshal (AVM) Amir Hayat, had been striving for operational profitability for the past three years, implementing tactical and operational reforms that included a nearly 30 per cent reduction in workforce, cost rationalisation, closure of unprofitable routes, and improved fleet utilisation. However, the substantial financial costs associated with servicing accumulated losses since 2003 consistently eroded any operational gains. 

With the commencement of the privatisation process in May 2024, PIA was restructured into two entities: PIACL, the core flight operations company, and PIAHCL, a holding company or special purpose vehicle, to absorb the majority of PIA's non-operational liabilities and hold its valuable assets to offset those liabilities. Approximately Rs660 billion (roughly $2.3 billion) in liabilities were transferred from PIACL's balance sheet to the holding company, with the government allocating budgetary provisions to settle these liabilities over the next decade. Proceeds from the eventual sale of PIA is intended to contribute to this debt reduction.

Resultantly a cleaner company has emerged and with tight financial discipline, PIA seems to be all set regain control of its financial woes by returning to profitability. 

2024 a pivotal year

AVM Hayat, while speaking to Khaleej Times, termed 2024 as a pivotal year for PIA, marked by operational restructuring and financial discipline.

“After 21 years, we have posted a net profit followed by plans for keeping the same trends in coming years as well. We significantly improved on-time performance, optimised route profitability, and enhanced customer service,” AVM Hayat told Khaleej Times during an interview recently.

“Key initiatives included cost-cutting measures, fleet optimisation, and digital transformation to enhance efficiency. For 2025, our turnaround plan is focused on three core pillars i.e., Operational Excellence, Financial Stability and Enhancing Customer Experience & Flight Safety.” 

The airline’s CEO said PIA’s path to profitability involves a multi-faceted strategy, from ensuring cost discipline to enhancing revenue streams. “It also involves route optimisation, fleet modernisation, strategic partnerships and alliances and focusing on alternative revenue streams as cargo and ancillary channels.” 

Go for strong partnerships

Saj Ahmad, chief analyst at London-based StrategicAero Research, said PIA’s operational profit is the first time since almost 2003 that it has been able to showcase — but its foray back into international markets is still a risky proposition.

“The only way out is a strong partnership. Even a major airplane order today will not be realised until 2030 or beyond due to the bulging orderbooks at Airbus and Boeing thanks to better run airlines that have funds to buy new jets,” Ahmad told Khaleej Times. 

“PIA is in for a very long wait and there’s no guarantee that this operational profit will happen again – the airline requires a complete top-down overhaul and it’s difficult to see that happening without some quite drastic choices that the airline has to make, starting with culling jobs as well as loss making routes,” he said.

Air Vice Marshal Amir Hayat, chief executive of Pakistan International Airlines