Pakistan International Airlines's (PIA) liabilities exceed its current assets to the tune of 123 billion rupees ($1.3 billion), the airline's first half financial report shows, prompting a warning from its independent auditors.
"These conditions indicate the existence of a material uncertainty which may cast doubt on the corporation's ability to continue as a going concern," A F Ferguson & Company, chartered accountants, says in the report.
PIA incurred a net loss of 18 billion rupees after tax in the first half, resulting in an accumulated loss of 137 billion rupees as of 30 June 2012. In the same period last year, PIA lost 10.7 billion rupees.
After taking into account current assets, its total net debt now stands at 123 billion rupees as compared with 88.2 billion rupees at the end of 2011.
Majority shareholder the Pakistani government committed to supporting the flag carrier in September 2008, since which time it has provided 9.29 billion rupees towards reimbursing financial charges and Islamic bonds, as well as 8 billion rupees towards working capital requirements.
PIA's subsequent recovery business plan - which makes provisions for recapitalisation and loan restructuring - was approved by the finance ministry in 2011, but it has yet to be approved by the cabinet.
During the first half of 2012, PIA also signed for the early purchase of six Airbus A310s which had been subject to annual lease rates of $5.03 million per aircraft.
PIA operates a fleet of 35 aircraft, according to Flightglobal's Ascend Online database. The fleet comprises 11 A310s, six ATR 42s, five Boeing 737s, four 747s and nine 777s. Five other aircraft are being held in storage.