The report cautioned that this accounting gain should not be mistaken for actual operational profitability.
The findings were published in the biannual report on federal state-owned enterprises (SOEs), which once again highlighted persistent inefficiencies within PIA, even after the airline was relieved of its legacy debts and liabilities.
The Central Monitoring Unit (CMU) of the Finance Ministry released the report on Friday, offering detailed insights into the financial position of PIA Corporation Limited (PIACL) following its restructuring.
As part of the overhaul, Rs660 billion in debt was removed from the company’s balance sheet.
“Despite the restructuring, PIACL Core still posted a pre-tax loss of Rs4.6 billion for the full year, including Rs2.3 billion in losses during the first half,” the ministry stated.
Three months ago, every high-up from Defence Minister Khawaja Asif to Prime Minister Shehbaz Sharif showed satisfaction with PIA’s profit of Rs26 billion without knowing that it was a mere “accounting profit”.
The finance ministry’s report stated that a one-off deferred tax asset (DTA) recognition of approximately Rs30 billion was booked as part of the restructuring. While this resulted in an “accounting profit”, it is important to recognise that this is a non-cash adjustment, stated the ministry while correcting the record.
The report stated “excluding the DTA, the airline’s net loss before tax stands at Rs4.58 billion for 12 months,” ending December.
This DTA reflects the company’s expectation of future taxable profits, which is itself a vote of confidence in the potential recovery path, but it should not be misinterpreted as a sign of operational profitability, said the ministry. “The CMU has, therefore, highlighted this so that future valuations consider these items”.
Accounting rules permit the DTA recognition where sufficient future taxable profits are probable, enabling to offset the accumulated tax losses.
“The deferred tax asset of Rs30 billion represents a future tax shield and should not be considered part of core profitability,” said CMU Director General Majid Soofi.
But the CMU has plainly said that “the profit figures are essentially impacted by deferred tax reversals, impacting the effective tax rate and earnings quality”.
The report stated that a significant outcome of the restructuring was the dramatic reduction in long-term financing liabilities, from over Rs295 billion to just Rs13 billion, including lease obligations.
Consequently, the finance cost plunged from Rs79 billion to Rs10 billion.
The cost of services remains elevated and total operational costs reached Rs106.6 billion.
“To mitigate these pressures, PIACL must aggressively pursue fleet modernisation, enter fuel hedging contracts and renegotiate existing supply agreements,” the CMU recommended.
It added that Rs8.3 billion in administrative cost and another Rs8.2 billion in distribution cost were high.
PIACL also incurred exchange losses of Rs2.3 billion, reflecting unhedged exposure to foreign currencies that is a structural vulnerability for any international airline.
The finance ministry said that following delisting from the Pakistan Stock Exchange and full government ownership of PIA via Holding Company, PIACL “is now free from short-term market pressures”.
But it said that a performance-based human resources model must be introduced, along with international productivity benchmarks and merit-based promotions.
The ministry stated that PIA and Pakistan Telecommunication Company Limited (PTCL) also posed major risks.
PIA’s heavy debt despite debt being carved out increases insolvency risks, requiring urgent restructuring and potential strategic partnerships. “Rapid privatisation should be ensured,” it said.
After the failure of the first attempt, for the second attempt to privatise PIA, the Privatisation Commission has pre-qualified four parties and three of them are cement makers.
The finance ministry said that PIA and PTCL face market pressures and operational inefficiencies.
Debt restructuring, operational improvements and reduced leverage through asset sales are key measures to regain financial health and reduce their dependence on the government, it recommended.
PIA is among the entities that face undue interference.
It has also been placed among the entities that have low compliance with the SOEs Act, falling even below 60% threshold.
To address these challenges, strategic mandates of SOEs must be clearly recalibrated and aligned with national economic goals and fiscal discipline.
Long-term business plans that incorporate measurable stakeholder-aligned objectives must be institutionalised, particularly for high loss-making entities like power distribution companies, Railways, and PIA, stated the report.
It added that the restructuring of PIACL marks a turning point in the airline’s decades-long struggle with debt and inefficiency.
Through the successful implementation of the Scheme of Arrangement (SOA), the airline has shed legacy debt and non-core assets, emerging as a streamlined, aviation-focused entity.
This strategic realignment allows the company to shift from financial firefighting to operational revitalisation.
The government has parked Rs660 billion worth of PIA debt in a new holding company along with non-core real estate assets, which substantially cleaned up the balance sheet.
With this separation, PIACL now operates as a focused airline business, while PIA Holding Company takes on the responsibility of settling historical obligations through budgetary support and asset monetisation.
This structure enables clearer financial reporting and makes future privatisation or partnerships more feasible.
Post-restructuring, PIACL’s total assets are recorded at Rs187 billion after accounting adjustments.
The company’s current liabilities have declined from Rs482 billion to Rs142 billion and non-current liabilities from Rs366 billion to Rs41 billion.
These carve-outs have eliminated the suffocating debt overhang and improved solvency metrics, offering much-needed breathing space for strategic decision-making, according to the report.
