Accounting Contributions to PIA (Pakistan International Airlines)

Finance Department : Pakistan International Airlines 124-Feb-15

Finance Department : Pakistan International Airlines

Introduction

• PIA was the first corporation to get computer in 1982 provided by Zia ul Haq

• PIA is the flag carrier of Pakistan

• government owns 85 percent of its shares.

• PIA's route network stretches to Asia, the Middle East, Africa, Europe, and North America.

• It connects 35 cities within Pakistan. Six million people flew the airline in 2000, when passenger traffic accounted for 85 percent of revenues.

• Engineering and charter services accounted for nine percent. PIA also conducts some contract work for aerospace manufacturers.

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Functions

• PIA developed its own booking and reservations systems

• and accounting software

• It still uses the same fotware which has been updated by internal IT department

• COSSAP

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• PIA has 35 international offices and about 42 local

• e.g. Newyork, toronto, london, dubai, jeddah, hongkong, delhi, kualalumpur

• e.g. peshawer,pindi, isb, saidusharif, karachi, lahore, mukltan, faisalabad

• finance collects information form all these stations, this takes time

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• all stations have been installed with COSSAP

• sales from offices, agents is recorded locally at the stations.

• expenses and liabilities are also recorded there

• at month end all stations send their data which is collated in the head office

• other than stations there are various entry points at head office also

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• e.g. Engineering FInance to record maintenace and engineering expenses

• Procurement and logistics: to record purchases in bulk items, food, stationary uniforms etc...

• Headoffice payments:: Manages payments of head office. Electricy phone some stationary items, etc.

• Cargo finance: records cargo sales

• Revenue: Passenger ticket sale, Cargo sale, Excess Baggage sale, Charter flights, Engineering Services

• Most of the revenue is from passenger sales i.e. ticket sale 90%

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Finance Department : Pakistan International Airlines 7

Managing Director

Chief Financial Officer

GM Revenue Accounting

GM Budget GM Fuel GM General Accounting

GM Funds Management

FINANCE - Roles and Responsibilities

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• Revenue Accounting Division comprises of following sections:

– Passenger Revenue

– Credit Control

– Interline / Cargo Revenue

– Stations Control

– Station Automation

Revenue Accounting Division

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Finance Department : Pakistan International Airlines 02/04/2012 9

GM Revenue Accounting

DGM Pax Revenue

Manager (Pax Revenue)

Manager Interline &

Cargo

Manager Stations Control

Manager Stations

Automation


Cargo Revenue

– Monitoring of Sales, Receivables, Bank Guarantee Coverage and CASSreporting

– Matching of Lift and Sales Airway Bills

– Billing and recovery from Pakistan Post

Interline Revenue

– Billing of Pax, Cargo and Miscellaneous Interline invoices

– Verification of incoming Pax and Cargo Interline Billing

– Coordination with relevant departments for Miscellaneous Interline billing e.g.GDS and other systems being used by PIA

– Monitoring of all receipts and payments through IATA Clearing House

Station Automation

– Coordinating with IT department for the development & Testing of COSSAP IVthat will replace the previous version developed in-house during 1988 which isalmost on the verge of collapse

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WORK OVERVIEW – CARGO, INTERLINE REVENUE & STATION AUTOMATION

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Cost savings & Revenue Assurance:

• Third party acquired solution-Aries meant for lift data processing got replaced by inhouse developed lift solution resultantly cost savings of GBP. 31,500/- on annual basiswere achieved

• Data migration from PK based servers to Sabre Airline solutions resulted in cost savingsof PKR. 11 Million approximately (Hardware cost Rs.7 Million, Oracle license Fee Rs.4Million)

• Development of in house BSP Fare Audit system & random auditing job resulted in cashrecovery of PKR. 35 Million approximately on account of short collections observed inrelation to published fares

Revenue Accounting - Achievements

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Efforts for Effective & Efficient Internal Controls

• MIS of financial exposure against bank guarantees has been made monthly feature.

• Standard operating procedures on refunds, ASR, EBT, Advances reporting, discrepancyadvices, Travel authorization certificates has been formulated, got duly vetted by theManagement & are in place on entire network presently

• Credit control section has been rejuvenated. MIS has been formalized and CCCMs arebeing effectively held & centralized monitored for strict compliance of credit policy

• Agent Ledger had not been prepared since 1995. Exercise for the compilation ofrelevant data for the last 10 years has been accomplished which has been submitted tothe Auditors for their verification

Revenue Accounting - Achievements

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1. Compilation of Annual Budget• Developing Sector-wise rates for various direct operating cost (DOC)

elements• Compilation of annual revenue budget and DOC elements budget based on

Marketing plan• Providing assistance in the preparation of shop-wise budgets• Analyzing & consolidating shop-wise budgets into an overall corporate

budget• Assisting higher management in the budget review and approval process• Preparing month-wise budget from the duly approved corporate budget

2. Monitor/evaluate and provide monthly reports showing the actualresults vis-à-vis the budget

Budget & Costing - Overview

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Budget & Costing - Overview

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3. Preparing route-wise/aircraft-wise analysis for management to aidin route management decisions

4. Evaluation/review of projects/feasibilities and assist managementin its decision making process

5. Maintenance of statistical data and submission of reports tovarious agencies/organizations like CAA, IATA

6. Allocation of budget for capital expenditures exceeding PKR10,000

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Fuel Division - Overview

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• Assist in tendering process and selection of jet fuel supplier for domestic andforeign locations

• Management of fuel supply contracts and relationship management

• Management of fuel data and verification of fuel bills for payments

• Assist Fuel hedging committee in risk management through hedging.

• Verification of invoices for aeronautical charges like Overflying, Landing andParking for payment processing

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Funds Management - Organogram

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General Manager

DGM - Funds Management

()

Manager –I ()

Asst. Manager

Manager –II ()

DGM -Insurance ()

Manager ()

Asst. ManagerAsst. Manager

()


Funds Management Division

Funds Management & Treasury Section

Insurance Section

- Opening / operation of PIA bank accounts globally

- Arrangements for short term & long term working capital loans

- Arrangements for fleet financing-Arrangements for bank guarantees & L/C lines- Cash flow statements- Working capital and fleet loan repayments - Control on FX payments from Head Office- Supervision of bank reconciliations-Exchange rates/interest rates checking- Daily MIS report

Insurance covers for:- PIA Fleet- Assets / Properties

- Buildings / Installations- Vehicles- IT Equipments- Marine / Transit- Stores & Spares

- Group Life- Loss of license of cockpit crew - Cash , Cash in transit, etc- Insurance claims & settlement

Funds Management Division – Functions

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Funds Management - Achievements

• Arranged new loans:

– PKR 30.54 billion during 2011

– PKR 25.06 billion during 2012

• Arranged USD 100 million Islamic syndicated financing facility that won Airfinance Journal’s “Best Asian Deal award”

• Savings of USD 1.3 million (9%) on 2012 Insurance agreement

• Revamping of the Treasury. Global Cash Management being implemented withCitibank

• Monitoring of exchange rates / Interest rates through Citi Fx Pulse terminal

• New software for pension fund under preparation

• RBS loan assigned to Citi resulting in USD 150K earning

• Arranged USD 35 million financing facility from Standard Chartered Bank

• Savings of PKR 4.78 million through interest rate checking during 2011.

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General Accounting: • Preparation of year end and interim financial statements and monthly closing• Maintenance of fixed assets register• Custodians of the general ledgers, accounting schedules and other financial data• Coordination with the external auditors in relation to the audit & review of year end• Selection and implementation of appropriate Accounting Policies under IFRS and

Companies Ordinance, 1984 and PIAC Act, 1956• Suggest improvements in financial polices and procedures for efficiency and financial

controls

Disbursement:• Perform post audit of all payments made at stations• Monthly Reporting of observations to stations and follow up on responses• Initiate recoveries and suggest remedial measures in case of contravention of policies

and procedures• Accounting for Liabilities, Provisions and Advances• Custodians of Disbursement Report and all original invoices of all stations• Accumulation of data from stations regarding WHT and GST deducted

• Filing of Sales Tax Return monthly

General Accounting - Overview

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Head Office Payment:

• Make payments to contractors, Government Organizations and other out sideparties and provide assistance in financial matters to the respectiveDepartments

• Custodians of Disbursement and all original Supporting documents of thedepartment

Flight Operation (Finance):

• Disbursement of Fuel Bills, Landing, Overflying and subscription charges atDomestic and International stations

• Maintain record of relevant contracts and payments of bills, as per contractualobligations

Taxation:• Preparation of tax declarations for all countries where PIA is required to files

and settle any subsequent tax audit• Maintenance of tax records and correspondence with FBR and other authorities


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Payroll:• Preparation of monthly payroll at Head Office Level• Final settlement• TA/DA control and its follow-up for finalization• Ensure that deductions at source for provident fund, individual income taxes,

etc. are accurate and properly accounted for


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Procurement and Logistics (Finance):

• Monitor timely payment of invoices/claims

• Ensure that all agreements with suppliers are valid and duly approved by concernedcompetent authority

• Monitor the process of L/C and clear all payments through station/bank transfer onaccount of foreign Purchase Orders against approval and agreements


• Reduction in Financial reporting time from 20th to 15th of every month

• Deloitte’s report on stores is being implemented

• Integration of POSS and General Ledger for Commercial Purchases andInventory.

• Played a pivotal role in process of issuance of computerized PurchaseOrders through POSS.

• Reconciled major portion of differences between POSS and PAMMIS.

• Preparing a utility on POSS for avoidance of duplicate payments andPO/Invoice matching.

Accounting Division - Achievements

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Thank You

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Economy & Finance

Accounting Contributions to PIA (Pakistan International Airlines)