Risk Management

Ongoing Concern: Risk Management at Pakistan International Airlines1 Ch. Ahmed Mukhtar, Chairman Pakistan International Airline Corporation (PIAC) was reading the final version of the PIAC audited annual report. He immediately called the Managing Director, PIAC to arrange a meeting to discuss the auditor’s report. The particular part of auditors’ opinion that caught his attention was the following: “We draw attention to note 1.2 to the unconsolidated financial statements, which states that the Corporation incurred a loss of Rs. 26,767.207 million during the year ended December 31, 2011, resulting in accumulated loss of Rs. 119,016.727 million as of December 31, 2011, and as of that date, the Corporation’s current liabilities exceeded its current assets by Rs. 88,221.403 million. These conditions indicate the existence of a material uncertainty which may cast doubt about the Corporation’s ability to continue as a going concern. Our opinion is not qualified in respect of this matter.” The agenda of the meeting was quite clear i.e., how to keep PIA solvent. PIAC Brief History2: In 1946 Quaid-e-Azam Muhammad Ali Jinnah realized the need for an airline network for the forming country and ask for the help of an industrialist Mirza Ahmad Ispahani to develop a flag carrier for the nation. Meanwhile, an airline called “Orient Airways”', registered in Calcutta, was formed on 23 October 1946. In May 1947 the airline was granted a license to fly. This was the first post-war airline flight by a South Asian registered airline company. Two months after this service began, Pakistan was formed. Orient Airways began relief flights to the new nation and, soon after, it moved its operations to Karachi, where it began flights to Dhaka on June 7, 1954. On 11 March 1955, Orient Airways merged with the government's proposed airline, becoming Pakistan International Airlines Corporation3 (PIAC). During the same year the airline opened its first international service, from Karachi. PIAC is...