Details

Case

Educator Copy

Pakistan International Airlines

Hina A. Uqaili, Muhammad Farhan Akhtar, Muhammad Junaid Ashraf


INDUSTRY : Aviation

AREA : Finance

ORGANIZATION : Pakistan International Airline (PIA)

LENGTH : 10

LUMS No : 02-627-2012-1

PUBLICATION YEAR : 2012

DESCRIPTION

KEYWORDS:

Pakistan International Airlines,PIA,Aviation,Transport,Logistics,Travel Company,Profits,Loss,Problems,Financial Situation


DESCRIPTION:

Pakistan International Airlines (PIA), the national flag carrier airline of Pakistan, registered record revenues of Rs 107 billion in its financial year ending December 2010. Although its operating revenue steadily increased from 2000 to 2010, figures for its operating profits and net income (before tax) have deteriorated. This case study exercise aims to explore the problems behind the worsening financial situation of PIA through an analysis of cost structure and operational performance.


LEARNING OBJECTIVES:

1) To determine the reasons for the huge financial losses being suffered by a public sector company. 2) To provide a practical example of a cost management activity by classifying costs into fixed and variable costs and calculating contribution margin and break-even points. 3) To conduct a "what-if" analysis by projecting the financials of PIA at the operational activity levels of other airlines. 4) To understand the limitations of a contribution margin analysis and to carry out an alternative cost analysis. (Optional)


SUBJECTS COVERED:

Finance, Aviation