Continued financial bleeding at the Pakistan International Airlines is likely to make it only that much more difficult for the government to find a suitable, strategic buyer for it.

According to its financial report card for the nine months ended September 30, the national carrier racked up an after-tax loss of around Rs32 billion. This compares with a loss of Rs33 billion that it had reported for the entire calendar year 2012.

The airline’s revenues, in particular, took a 12.6 per cent hit to reach Rs71.7 billion in 9MCY13, from Rs82 billion in the corresponding period last year. Revenue from passengers dropped 13.7 per cent YoY to Rs63.6 billion, while that from cargo dipped by a marginal 2.3 per cent to Rs4.7 billion.

PIA’s management has blamed ‘reduced available capacity’ for its lower revenues. A recent newspaper report had said the airline had only 30 planes, many of which were grounded for repairs.

According to PIA’s latest financial statement, its available seat kilometres (ASK) declined to 13 billion this year, from 14.7 billion last year. ASK is a measure of an airline’s carrying capacity that can be used to generate revenue.

But negligence has also been blamed for the lower revenues. PIA’s employees have accused it of operating high-fuel consuming Boeing 777s — which are designed to be used on long distance flights — on short routes, like those between Karachi, Lahore and Islamabad.

Meanwhile, revenues also took a hit as the Saudi government imposed a quota restriction on Hajj travelers from the country. The airline carries the bulk of pilgrims to and from the country every year during every Hajj season.

Regardless, PIA’s mounting losses come while international jet fuel prices have stabilised; something even the company acknowledged in its third quarter report. Its fuel cost declined by 9.5 per cent to Rs40.8 billion, from Rs45.1 billion during the period under review. Its total cost of services dropped 6.7 per cent to Rs76.7 billion.

Even then, the airline’s gross profit clocked in at a negative Rs4.92 billion in 9MCY13 — a massive 3,500 per cent lower than the negative gross profit of Rs139.4 million in 9MCY12.

And a roughly nine per cent depreciation of the rupee against the dollar during the period compounded the airline’s problems, and led it to post a net exchange rate loss of Rs6.1 billion for the period, up 31 per cent from Rs4.65 billion last year.

The rupee’s depreciation also reflected into higher finance costs for the airline, which rose to Rs9.32 billion, from 8.42 billion. In other words, PIA’s finance costs were almost 1.9 times its gross profit.

Its administrative expenses also rose 9.5 per cent to Rs6.3 billion. ‘Other provisions and adjustments’ registered a big increase of 337 per cent to clock in at Rs1.85 billion by end-September 2013.

And almost one-third of the airline’s non-fuel expenses — or around Rs12.6 billion — was staff-related. These expenses also accounted for roughly 20 per cent of the airline’s total passenger revenue for the period.

Salaries, wages and allowances alone grew by nine per cent YoY to Rs8.33 billion in 9MCY13, while retirement benefits ballooned to Rs1.3 billion, from Rs730 million. The airline spent nearly Rs198 million on printing and stationary.

The current liabilities of the national carrier, up 15 per cent YoY to over Rs192 billion by end-September 2013, are six times its current assets of Rs32 billion, and 1.4 times its total assets of Rs136.7 billion.

Major increases in trade and other payables (46.5 per cent), accrued interest (66 per cent) and short-term borrowings (4.7 per cent) contributed to the higher current liabilities.

Meanwhile, PIA’s non-current liabilities clocked in at Rs75.6 billion by end-September 2013, up around six per cent from the end of last year. Long-term financing rose 71.4 per cent YoY to Rs24 billion.

PIA said in its financial statements that the Economic Coordination Committee (ECC) of the Cabinet has approved, among others, new loans/guarantees for its repayment of previous loans amounting to Rs11.1 billion that are due this year, and the rollover/extension of the government’s guarantees to the tune of Rs51.16 billion.

The government has also set aside Rs16 billion ‘as equity for the corporation,’ and of this, the ECC has approved disbursement of Rs7 billion for making overdue payments to vendors and Rs5.7 billion as partial payment of Exim Bank loan installments, said the airline.

Meanwhile, the government has announced that it intends to split the airline into two companies — PIA1 and PIA2 — and then saddle state-owned PIA2 with all the unviable components of the national carrier (including its ageing equipment and non-flight operations) by the end of this year.

The government would service guaranteed past loans of PIA2; put in force a voluntary ‘handshake’ plan for the excess workforce, and hopefully liquidate it by end-June 2014.

PIA-1 would retain the airline business and would continue contracting aircraft leases and rationalise its routes in order to increase its efficiency. It would keep some liabilities and streamline its workforce. The government hopes to sell off a 26 per cent stake in PIA-1 to strategic investors by June 2014.