PIA Annual Report 2006-P1

PAKISTAN INTERNATIONAL AIRLINES CORPORATION
ATTENDANCE OF DIRECTORS AT BOARD MEETING

During the Financial Year 2006, nine meetings of the Board of Directors were held and the number of Meetings attended by each
Director is given hereunder:
S. No. Name of Board Member Meetings Held Meetings Attended

1 Mr. Tariq Kirmani 9 9
Chairman & CEO
2 Mr. Kamal Afsar 9 5
3 Mr. Mueen Afzal *** 3 3
4 Syed Mohammad Fazal Agha ** 8 6
5 Mr. Nawid Ahsan ** 8 4
Secretary General Finance
6 Maj. Gen Mir Haider Ali Khan **** 2 2
Additional Secretary Defence
7 Air Marshal (Retd) Pervez Akhtar Nawaz * 5 2
8 Maj. Gen (Retd) Muhammad Ashraf Chaudhry ** 6 6
9 Dr. Sughra Junejo * 5 2
10 Mr. Shahzad M. Husain*** 3 3
11 Mr. M. Hidayatulla Khan Khaishgi** 8 6
12 Mr. Javed Saifullah Khan** 8 6
13 Mr. S. Ali Raza 9 6
14 Mr. Farooq Rehmatullah *** 3 2
* Relinquished Board Membership after expiry of term on 7th August 2006.

** Relinquished as a Board Member after expiry of term on 7th August 2006 and re-nominated on 14th October 2006.
*** Nominated as Board Member on 14th October 2006
**** Succeeded Major General (Retd) Muhammad Ashraf Chaudhry on 18th November 2006
ATTENDANCE OF DIRECTORS AT AUDIT COMMITTEE MEETINGS

During the financial year 2006, Six (6) Meetings of the Audit Committee were held and the number of Meetings attended by each
Director is given hereunder:
S. No. Name of Board Member Meetings Held Meetings Attended

1. Mr. Asad Ali Khan* 3 3
2. Maj. Gen. (Retd) Muhammad Ashraf Chaudhry**
Additional Secretary, Ministry of Defence 4 4
3. Mr. Javed Saifullah Khan* 3 3
4. Mr. Kamal Afsar 6 5
5. Mr. S. Ali Raza 6 2
6. Mr. Mueen Afzal 1 0
7. Mr. Shahzad Husain 1 1
8. Maj. Gen. Mir Haider Ali,
Additional Secretary, Ministry of Defence 1 1
* Both Mr. Asad Ali Khan Mr. Javed Saifullah Khan completed their term as Members of the Audit Committee on 7th August
2006 and were subsequently replaced by Mr. Mueen Afzal and Mr. Shahzad Husain.
** Maj. Gen. (Retd) Muhammad Ashraf Chaudhry relinquished his Directorship on his retirement as Additional Secretary,
Ministry of Defence and was replaced by Maj. Gen. Mir Haider Ali.
34 Annual Report 2006

Ford Rhodes Sidat Hyder & Co. Anjum Asim Shahid Rahman
Chartered Accountants Chartered Accountants
6th Floor, Progressive Plaza 1st Floor, Modern Motors House
Beaumont Road Beaumont Road
Karachi Karachi
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE

WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance (the Statement) with the best practices contained in the Code of
Corporate Governance (the Code) prepared by the Board of Directors of Pakistan International Airlines Corporation
to comply with the Listing Regulations No. 37 (Chapter XI), No. 43 (Chapter XIII) and No. 36 (Chapter XI) of the
Karachi, Lahore and Islamabad Stock Exchanges respectively where the Corporation is listed.
The responsibility for compliance with the Code is that of the Board of Directors of the Corporation. Our responsibility
is to review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status
of the Corporation’s compliance with the provisions of the Code and report if it does not. A review is limited primarily
to inquiries of the Corporation personnel and review of various documents prepared by the Corporation to comply with
the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any
special review of the internal control system to enable us to express an opinion as to whether the Board’s statement
on internal control covers all controls and the effectiveness of such internal controls.
Based on our review, nothing has come to our attention which causes us to believe that the Statement does not
appropriately reflect the Corporation’s compliance, in all material respects, with the best practices contained in the
Code, as applicable to the Corporation for the year ended December 31, 2006.
Karachi: March 29, 2007

STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
The compliance with the best practices of Code of Corporate Governance provides comfort to the Board and the
Corporation functionaries for all / any function(s) performed by it / them. Therefore, the Corporation during the year
ended 31st December, 2006 being a listed Corporation on all three Stock Exchanges in Pakistan has complied with
the Code set out in their Listing Regulations, in the following manner:
1. According to Pakistan International Airlines Corporation Act, 1956 the Board of Directors consists of Chairman
and ten Directors. Chairman and eight Directors are nominated by the Federal Government and two Directors
are elected by the shareholders other than the Federal Government. Presently all the Directors are non-
executive except for the Chairman who is the Chief Executive of the Corporation and his terms and conditions
are determined by the Government of Pakistan (GoP).
2. None of the Directors is serving on the Boards of more than ten listed companies, inclusive of the Corporation.
3. All the Directors are registered tax payers and none of them has defaulted in payment of any loan to a banking
company, a DFI or an NBFI or being a member of a Stock Exchange, has been declared as defaulter by that
Stock Exchange.
4. No casual vacancy occurred in the Board during the year ended 31st December 2006.
5. The Corporation has developed a ‘Statement of Ethics and Business Practices’ and the statement has been
signed by directors and employees of the Corporation and is in the process of obtaining signatures by remaining
employees of the Corporation.
6. The Board has developed a Vision, Mission and Values Statements, overall corporate strategy and significant
policies of the Corporation. A complete record of particulars of significant policies along with the dates on which
these were approved or amended is available with relevant departments.
7. The Corporation will file a Secretarial Compliance Certificate and the requirement(s) of filing of annual return
will be met within the permissible period after the Annual General Meeting of the shareholders.
8. The nominated / elected directors in addition to declaration of fidelity and secrecy as required under Section 19
of PIAC Act, 1956 have given their consent to act as Directors and are aware of their duties and powers under
PIAC Act, 1956; PIAC Rules & Regulations, 1958; and Listing Regulations of the Stock Exchanges.
9. The Corporation files periodic financial statements (quarterly, half yearly and annual) to Securities & Exchange
Commission of Pakistan (SECP) as required by the Companies Ordinance, 1984 and Listing Regulations and
all material transactions are reported accordingly through these statements and circulation through print &
electronic media. The Corporation intends to establish appropriate controls to communicate all material
transactions to SECP and Stock Exchanges.
10. The Board exercised all powers and took decisions in the general direction and the administration of the
Corporation and its affairs inclusive of material transactions in accordance with the PIAC Act, 1956 and PIAC
Rules and Regulations, 1958.
11. The Meetings of the Board held during the Financial Year ended 31st December, 2006 were presided over by
the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along
with the agenda and working papers were circulated; the minutes of the meetings were appropriately recorded
and signed by the Chairman.
12. The Directors are aware of their responsibilities and an orientation course was arranged in the past and will
be arranged, in future if so required.
36 Pakistan International Airlines Corporation

STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
13. The Board had approved the appointments, duties, remunerations, and terms and conditions of employment of
Chief Financial Officer, Corporate Secretary and head of Internal Audit as determined by the CEO.
14. The Directors’ report for financial year 2006 has been prepared in compliance with the requirements of the Code
and fully describes the salient matters required to be disclosed.
15. The financial statements of the Corporation were presented to the Board by the CEO and the CFO duly
endorsed under their respective signatures.
16. The information regarding the extent of shareholdings of Chairman / Chief Executive Officer, Directors and
SVPs and their interest in the shares of the Corporation have been included in the pattern of shareholding as
on December 31, 2006. The Corporation will continue seeking a declaration for any subsequent changes in the
shareholdings of these categories.
17. The Corporation has complied with all the Corporate and Financial reporting requirements of the Code.
18. The Board has constituted an Audit Committee comprising five non-executive directors including the Chairman
of the Committee.
19. The meetings of the Audit Committee were held to review quarterly, half-yearland annual financial statements
of the Corporation prior to its approval by the Board, as per requirement of the Code. The terms of reference
of the Committee have been formed and advised to the Committee for compliance.
20 The Corporation has an Internal Audit Division which carries out on a continuing basis audit of various Head
Office / stations functions.
21. The statutory auditors of the Corporation have confirmed that they have been given a satisfactory rating under
the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), and that they
or any of the partners of the firm, their spouses and minor children do not hold shares of the Corporation and
that the firm and all its partners are in compliance with International Federation of Accountants (IFAC)
Guidelines with code of ethics as adopted by ICAP.
22. The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC
guidelines in this regard.
We confirm that all other material principles contained in the Code have been complied with.
For and on behalf of the Board
Tariq Kirmani
Chairman

PATTERN OF SHAREHOLDING AS AT DECEMBER 31, 2006
SHAREHOLDING TOTAL SHARES TOTAL SHARES

NO. OF
FROM TO ORDINARY 'A' CLASS ORDINARY 'B' CLASS
SHAREHOLDERS
SHARES OF RS.10/- EACH SHARES OF RS.5/- EACH
12284 1 100 269,405 13,100

32652 101 500 9,466,397 9,635
5328 501 1000 4,613,172 2,242
5374 1001 5000 12,925,580 12,507
848 5001 10000 6,415,602 0
231 10001 15000 2,906,521 0
157 15001 20000 2,857,884 0
104 20001 25000 2,502,354 0
43 25001 30000 1,224,765 0
30 30001 35000 1,003,355 0
30 35001 40000 1,169,006 0
23 40001 45000 990,907 0
44 45001 50000 2,170,768 0
10 50001 55000 532,845 0
13 55001 60000 764,772 0
4 60001 65000 253,500 0
12 65001 70000 823,957 0
6 70001 75000 438,473 0
11 75001 80000 861,021 0
4 80001 85000 331,811 0
2 85001 90000 179,668 0
5 90001 95000 471,887 0
21 95001 100000 2,089,500 0
5 100001 105000 517,882 0
4 105001 110000 431,000 0
1 110001 115000 112,500 0
3 115001 120000 350,100 0
4 120001 125000 491,791 0
2 125001 130000 259,500 0
3 130001 135000 394,500 0
2 135001 140000 279,000 0
3 145001 150000 450,000 0
1 150001 155000 150,010 0
1 160001 165000 165,000 0
1 165001 170000 167,500 0
2 170001 175000 344,321 0
1 175001 180000 178,761 0
1 180001 185000 181,000 0
2 185001 190000 372,500 0
1 190001 195000 192,000 0
5 195001 200000 1,000,000 0
2 200001 205000 405,500 0
1 205001 210000 206,000 0
1 210001 215000 210,600 0
1 220001 225000 225,000 0
1 230001 235000 232,500 0
2 235001 240000 475,500 0
2 245001 250000 500,000 0
1 275001 280000 276,500 0
1 285001 290000 290,000 0
2 295001 300000 600,000 0
1 305001 310000 308,000 0
1 325001 330000 329,500 0
1 370001 375000 372,500 0
1 385001 390000 388,500 0
1 395001 400000 400,000 0
1 420001 425000 425,000 0
1 490001 495000 495,000 0
4 495001 500000 1,996,500 0
1 530001 535000 531,000 0
1 540001 545000 544,200 0
1 560001 565000 563,000 0
1 565001 570000 567,504 0
1 585001 590000 590,000 0
1 605001 610000 608,000 0
1 630001 635000 630,067 0
1 660001 665000 661,500 0
1 750001 755000 750,500 0
1 760001 765000 765,000 0
1 765001 770000 770,000 0
1 895001 900000 900,000 0

PATTERN OF SHAREHOLDING AS AT DECEMBER 31, 2006
SHAREHOLDING TOTAL SHARES TOTAL SHARES

NO. OF
FROM TO ORDINARY 'A' CLASS ORDINARY 'B' CLASS
SHAREHOLDERS
SHARES OF RS.10/- EACH SHARES OF RS.5/- EACH
1 905001 910000 907,500 0

1 995001 1000000 996,500 0
1 1045001 1050000 1,049,000 0
1 1225001 1230000 1,228,500 0
1 1245001 1250000 1,250,000 0
1 1275001 1280000 1,277,857 0
1 1340001 1345000 1,341,500 0
1 1365001 1370000 1,370,000 0
1 1490001 1495000 1,494,200 0
1 1520001 1525000 1,523,500 0
1 1595001 1600000 1,600,000 0
1 1730001 1735000 1,735,000 0
1 2220001 2225000 2,220,500 0
1 2260001 2265000 2,264,370 0
1 2495001 2500000 2,497,778 0
1 2820001 2825000 2,823,700 0
1 2930001 2935000 2,930,036 0
1 3240001 3245000 3,241,466 0
1 3325001 3330000 3,325,691 0
1 3555001 3560000 3,556,000 0
1 4025001 4030000 4,029,000 0
1 4830001 4835000 4,833,704 0
1 5495001 5500000 5,500,000 0
1 9550001 9555000 9,551,500 0
1 11620001 11625000 11,622,500 0
1 15745001 15750000 15,750,000 0
1 16875001 16880000 16,876,347 0
1 26035001 26040000 26,039,500 0
1 1736450001 1736460000 1,736,459,538 1,462,515
57,344 1,946,613,073 1,499,999
CATEGORIES OF SHAREHOLDERS AS ON DECEMBER 31, 2006

Number of Shares Held
Shareholders Category Number of Ordinary ‘A’ Ordinary ‘B’ Percentage
Shareholder Class Shares of Class Shares of
Rs.10/- Each Rs.5/- Each
Associated Companies, undertakings related parties --- --- --- ---
NIT and ICP
National Investment Trust 1 76,000 --- ---
NBP Trustee Department 1 4,833,704 --- 00.25
Investment Corporation of Pakistan 1 10,325 100 ---
Directors, CEO and their spouse and minor children
Syed Ali Raza, Member PIA Board 1 1,100 --- ---
Mr. Kamal Afsar, Member PIA Board 1 136 --- ---
Executives 21 2,846 --- ---
Public Sector Companies and Corporations --- --- ---
Banks, Development Finance Institutions,
Non- Banking Finance Institutions,
Insurance Companies, Modarabas and Mutual Funds 91 64,129,323 2,633 03.29
Shareholders holding 10% or more voting interest
(Secretary-Ministry of Defence, Govt. of Pakistan) 1 1,736,459,538 1,462,515 89.21
Individuals 56,936 97,189,067 33,536 04.99
Others 290 43,911,034 1,215 02.26
TOTAL 57,344 1,946,613,073 1,499,999 100.00
The above two statements include 8,481 Shareholders holding 179,967,584 ‘A’ Class Ordinary Shares and 2,412 ‘B’ Class
Ordinary Shares through the Central Depository Company of Pakistan Limited (CDC).

SIX-YEAR SUMMARY
2006 2005 2004 2003 2002 2001
OPERATION
Route Kilometers 446,570 343,525 354,664 290,129 257,858 265,643

Revenue Kilometers Flown (000) 88,302 82,550 80,087 68,851 61,921 70,958
Revenue Hours Flown 141,479 134,039 130,977 115,017 105,553 121,860
Available Tonne Kilometers (000) 3,369,288 3,102,805 2,973,437 2,475,904 2,242,157 2,540,547
Available Seat Kilometers (000) 22,092,475 20,816,469 20,353,863 17,259,080 15,775,960 17,755,558
TRAFFIC
Revenue Passengers Carried (000) 5,732 5,499 5,120 4,556 4,166 4,877
Revenue Passengers Kilometers (000) 15,124,413 14,506,683 13,519,847 12,009,419 10,779,496 11,652,295
Passenger Load Factor (%) 68.5 69.7 66.4 69.6 68.3 65.6
Revenue Freight Tonne Kilometers (000) 427,006 410,991 402,359 350,713 346,944 371,304
Kgs. of Excess Baggage & Cargo (000) 121,174 124,852 118,151 102,180 100,717 111,526
Kgs. of Mail (000) 1,410 1,433 1,649 1,771 1,586 1,914
Revenue Tonne Kilometers (000) 1,801,026 1,729,220 1,634,825 1,447,906 1,330,803 1,438,303
Revenue Load Factor (%) 53.5 55.7 55.0 58.5 59.3 56.6
Avg. Pax Stage Distance (Statute Kilometers) 2,639 2,638 2,641 2,636 2,587 2,389
FINANCIAL
Operating Revenue (Rs. in million) 70,587.15 64,074.47 57,788.08 47,951.82 43,673.97 43,608.37
Operating Expenses (Rs. in million) 79,164.37 67,075.58 55,872.08 42,574.23 38,097.11 43,242.16
Operating Profit/(loss) (Rs. in million) (8,577.22) (3,001.11) 1,916.00 5,377.59 5,576.86 366.21
Profit/(loss) after tax (Rs. in million) (12,763.42) (4,411.66) 2,306.60 1,298.65 1,873.32 (2,205.53)
Fixed Assets (Rs. in million) 79,062.44 51,376.33 49,604.39 29,724.14 23,782.66 23,636.95
Current Assets (Rs. in million) 18,353.43 12,756.55 19,716.29 20,470.00 14,696.31 11,343.08
Current Liabilities (Rs. in million) 41,025.29 21,237.10 18,990.09 23,197.88 30,905.08 28,483.77
Long-Term Debts (Rs. in million) 62,650.89 38,099.18 42,517.85 22,033.73 8,921.13 760.99
Net Worth (Rs. in million) (788.03) 10,446.30 13,441.19 6,673.50 569.99 (4,843.94)
Jet Fuel Prices (Rs. per US Gallon) 123.55 102.05 71.68 51.86 45.27 51.88
Cost per A. T. K. (Rs.) 23.49 21.62 18.79 17.19 16.99 17.02
RATIOS
Earnings per share (Rs.) (6.80) (2.55) 1.76 1.57 4.10 (5.91)
Net assets per share (Rs.) 35.08 29.85 45.59 40.27 25.89 29.73
Debt equity ratio NA 4.15 3.52 4.72 20.83 NA
Current ratio 0.45 0.60 1.04 0.97 0.48 0.40
SHARE PRICES (Rs. 10 Share)
High 16.30 14.65 26.70 23.30 12.75 7.50

Low 7.05 6.50 9.90 7.30 2.95 2.45
Closing 7.05 12.30 13.70 20.55 11.70 2.85
PERSONNEL
Average No. of Empolyees 18,282 19,263 19,634 18,570 16,689 17,170

Revenue per Employee (Rs.) 3,861,019 3,326,298 2,943,266 2,582,220 2,616,932 2,539,800
A. T. K. per Employee 184,295 161,076 151,443 133,328 134,349 147,964

FINANCIAL STATEMENTS
6th Floor, Progressive Plaza 1st Floor, Modern Motors House
Beaumont Road Beaumont Road
Karachi Karachi
AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Pakistan International Airlines Corporation (the Corporation) as at
December 31, 2006 and the related profit and loss account, cash flow statement and statement of changes in equity
together with the notes forming part thereof, for the year then ended and we state that we have obtained all the
information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our
audit.
It is the responsibility of the Corporation’s management to establish and maintain a system of internal control, and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirements of the Pakistan International Airlines Corporation Act, 1956 and the Companies Ordinance, 1984. Our
responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require
that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the above said statements. An audit also includes assessing the accounting policies and significant
estimates made by management, as well as, evaluating the overall presentation of the above said statements. We
believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:
a) in our opinion, proper books of account have been kept by the Corporation as required by the Pakistan
International Airlines Corporation Act, 1956 and the Companies Ordinance, 1984;
b) in our opinion:
i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity
with the Pakistan International Airlines Corporation Act, 1956 and the Companies Ordinance, 1984, and are in
agreement with the books of account and are further in accordance with accounting policies consistently
applied;
ii) the expenditure incurred during the year was for the purpose of the Corporation’s business; and
iii) the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Corporation;
c) in our opinion and to the best of our information and according to the explanations given to us, the balance
sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes
forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the
information required by the Pakistan International Airlines Corporation Act, 1956 and the Companies Ordinance,
1984, in the manner so required and respectively give a true and fair view of the state of the Corporation’s
affairs as at December 31, 2006 and of the loss, its cash flows and changes in equity for the year then ended;
and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

AUDITORS’ REPORT TO THE MEMBERS
Without qualifying our opinion, we draw attention to the following issues:
i) note 27.1 (a) to the financial statements, explaining the difference between the amount due as per the
Corporation’s records and amounts claimed by Civil Aviation Authority for which a reconciliation and settlement
exercise is in progress through Ministry of Defence.
ii) note 1.2 to the financial statements, which states that the Corporation during the year has incurred a net loss
of Rs. 12,763 million which as at balance sheet date resulted in accumulated losses of Rs. 24,563 million,
translating negative equity of Rs. 788 million. Further, as of that date the current liabilities exceed the current
assets by Rs. 22,672 million and its long term debt to equity ratio further deteriorated during the year. The
mitigating factors relating to the above situation have been discussed in the said note. Accordingly these
financial statements have therefore been prepared on a going concern basis.
Karachi: March 29, 2007

BALANCE SHEET AS AT DECEMBER 31, 2006
Note 2006 2005 2006

(Rupees in thousand) (US$ in thousand)
ASSETS
NON - CURRENT ASSETS
Fixed assets
Property, plant and equipment 3 78,964,162 51,263,914 1,297,259
Intangibles 4 98,275 112,421 1,615
79,062,437 51,376,335 1,298,874

Long term investments 5 4,528,198 310,015 74,391
Long term advances and other receivable 6 1,684,000 6,635,933 27,666
Long term deposits and prepayments 7 3,263,699 1,804,977 53,618
Total non - current assets 88,538,334 60,127,260 1,454,549
CURRENT ASSETS
Stores and spares 9 3,371,040 2,790,137 55,381

Trade debts 10 6,129,673 5,222,534 100,701
Advances 11 592,068 513,917 9,727
Trade deposits and prepayments 12 1,229,333 581,175 20,196
Accrued interest 51,010 39,708 838
Other receivables 13 865,255 481,449 14,215
Short term investments 14 421,394 377,545 6,923
Taxation - net 233,738 149,087 3,840
Cash and bank balances 15 5,459,924 2,614,691 89,698
Total current assets 18,353,435 12,770,243 301,519
Total assets 106,891,769 72,897,503 1,756,068
The annexed notes 1 to 45 form an integral part of these financial statements.
Tariq Kirmani Kamal Afsar

Chairman / CEO Director

Note 2006 2005 2006

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES
Share capital 16 19,473,631 17,980,659 319,922

Reserves 17 4,280,712 4,280,712 70,326
Unrealized gain / (loss) on
remeasurement of investments - net 21,013 (15,107) 345
Accumulated losses (24,563,386) (11,799,966) (403,538)
Total equity (788,030) 10,446,298 (12,945)

Surplus on revaluation of fixed assets - net 3.1.1 926,318 - 15,218
138,288 10,446,298 2,273
NON - CURRENT LIABILITIES
Long term financing 18 6,900,478 1,621,099 113,364

Term finance certificates 19 13,246,970 14,003,940 217,627
Liabilities against assets subject to finance lease 20 42,503,444 21,706,064 698,266
Long term murabaha 21 - 768,075 -
Long term deposits 22 261,711 290,236 4,300
Deferred liabilities 23 2,815,588 2,824,690 46,256
Total non - current liabilities 65,728,191 41,214,104 1,079,813
CURRENT LIABILITIES
Trade and other payables 24 16,617,024 14,983,921 272,992

Accrued interest / mark-up / profit 25 812,278 607,769 13,344
Short term borrowings 26 15,543,446 362,075 255,355
Current portion of:
Long term financing 2,599,916 1,621,103 42,713
Term finance certificates 756,970 756,970 12,436
Liabilities against assets subject to finance lease 3,914,491 2,067,363 64,309
Long term murabaha 781,165 837,900 12,833
8,052,542 5,283,336 132,291
Total current liabilities 41,025,290 21,237,101 673,982
CONTINGENCIES AND COMMITMENTS 27
106,891,769 72,897,503 1,756,068


PAKISTAN INTERNATOINAL AIRLINES CORPORATION
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2006
Note 2006 2005 2006

Turnover - net 28 70,587,146 64,074,470 1,159,638

Cost of services
Aircraft fuel 33,370,101 26,462,721 548,219
Others 29 36,512,116 32,478,115 599,838
69,882,217 58,940,836 1,148,057
Gross profit 704,929 5,133,634 11,581
Distribution costs 30 4,395,061 3,809,169 72,204

Administrative expenses 31 4,887,088 4,325,576 80,287
9,282,149 8,134,745 152,491
Loss from operations 8,577,220 3,001,111 140,910
Finance costs 32 4,768,436 2,787,399 78,338

Other provisions and adjustments - net 33 798,573 (33,605) 13,119
5,567,009 2,753,794 91,457

Other operating income 34 929,072 1,241,669 15,263
Loss before tax 13,215,157 4,513,236 217,104
Taxation 35 (451,737) (101,579) (7,421)
Loss for the year 12,763,420 4,411,657 209,683
(Rupees) (US$)
Loss per share 36

'A' class ordinary shares 6.80 2.55 0.11
'B' class ordinary shares 3.40 1.28 0.06


CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2006
Note 2006 2005 2006

Cash flows from operating activities

Cash (used in) / generated from operations 37 (5,670,789) 1,717,794 (93,162)
Profit on bank deposits received 201,938 189,354 3,318
Deferred custom duty paid (71,101) (323,350) (1,168)
Finance costs paid (4,563,927) (2,720,200) (74,978)
Taxes paid (131,700) (272,760) (2,164)
Dividend paid - (5,255) -
Staff retirement benefits paid (694,860) (332,320) (11,415)
Compensated absences paid (91,915) (80,000) (1,510)
Payments made for construction of University Road (85,000) - (1,396)
Long term deposits - net (1,487,247) (88,042) (24,433)
Net cash used in operating activities (12,594,601) (1,914,779) (206,908)
Cash flows from investing activities

Fixed capital expenditure (4,011,100) (5,895,913) (65,899)
Proceeds from sale of fixed assets 267,158 790,685 4,389
Investments - net (3,938,488) 59,499 (64,703)
Received from associated undertaking 4,573,385 902,896 75,134
Long term advances and other receivable 277,000 (49,000) 4,551
Net cash used in investing activities (2,832,045) (4,191,833) (46,528)
Cash flows from financing activities

Proceeds from issue of share capital 1,492,972 1,450,733 24,527
Proceeds / (repayment) of long term financing 6,258,192 (810,567) 102,812
Redemption of term finance certificates (756,970) (378,635) (12,436)
Repayment of obligations under finance lease (3,078,876) (1,911,468) (50,581)
Repayment of long term murabaha (824,810) (829,733) (13,550)
Net cash generated from / (used in) financing activities 3,090,508 (2,479,670) 50,772
Decrease in cash and cash equivalents (12,336,138) (8,586,282) (202,664)
Cash and cash equivalents at the beginning of the year 2,252,616 10,838,898 37,007
Cash and cash equivalents at the end of the year (10,083,522) 2,252,616 (165,657)
CASH AND CASH EQUIVALENTS

Cash and bank balances 15 5,459,924 2,614,691 89,698
Short term borrowings 26 (15,543,446) (362,075) (255,355)
(10,083,522) 2,252,616 (165,657)


STATEMENT OF CHANGES IN EQUIT Y FOR THE YEAR ENDED DECEMBER 31, 2006
Share Capital Revenue Unrealized Accumulated Total

capital reserves reserves gain / (loss) on losses equity
re-measurement
of investments
(Rupees in thousand)
Balance as at
December 31, 2004 16,529,926 2,501,038 1,779,674 18,863 (7,388,309) 13,441,192
Issue of share capital

'A' class ordinary shares 1,450,733 - - - - 1,450,733
Unrealized loss on
re-measurement of
investments - - - (52,261) - (52,261)
Tax effect on unrealized

loss on re-measurement
of investments - - - 18,291 - 18,291
Loss for the year - - - - (4,411,657) (4,411,657)
Balance as at
December 31, 2005 17,980,659 2,501,038 1,779,674 (15,107) (11,799,966) 10,446,298
Issue of share capital

'A' class ordinary shares 1,492,972 - - - - 1,492,972
Unrealized gain on
re-measurement of
investments - - - 36,120 - 36,120
Loss for the year - - - - (12,763,420) (12,763,420)
Balance as at
December 31, 2006 19,473,631 2,501,038 1,779,674 21,013 (24,563,386) (788,030)


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2006
1 STATUS AND ACTIVITY
1.1 Pakistan International Airlines Corporation (the Corporation) was incorporated in Pakistan on April 18, 1956
under the Pakistan International Airlines Corporation Act, 1956 (PIAC Act) and its shares are quoted on all Stock
Exchanges of Pakistan. The registered office is situated at Karachi Airport. Principal activity of the Corporation
is to provide air transport services. Other activities of the Corporation include provision of engineering and other
allied services.
1.2 During the year the Corporation has incurred a net loss of Rs.12,763 million, resulting in accumulated losses of
Rs.24,563 million as of the balance sheet date. Further, as of that date the current liabilities of the Corporation
exceeded its current assets by Rs. 22,672 million. The management has initiated corrective measures to
improve operating results of the Corporation. Further, the Ministry of Finance has extended its support by
approving a financial restructuring package which is currently in the process of implementation.
The Government of Pakistan (GoP) as a majority shareholder has committed to ensure the going concern status
of the Corporation at all times. Also, historically support of the GoP is available to the Corporation as GoP has
already issued guarantees to secure certain long term finance and Term Finance Certificates (TFCs) of the
Corporation. The GoP had agreed to provide equity contribution to the Corporation equivalent to accumulated
loss of the Corporation as at December 31, 2000, to cover interest / profit payments on long term finances and
TFCs. As part of the financial package, an amount of Rs.6,923 million (2005: Rs.5,430 million) has been
provided to the Corporation up to December 31, 2006 against which 692,306,294 (2005: 543,009,081) ‘A’ class
ordinary shares of Rs.10 each were issued to GoP up to that date. Hence, the Corporation expects continued
financial support of GoP in future as well. In view of the above, the Corporation has prepared these financial
statements on a going concern basis.
In addition, GoP had approved a fleet replacement plan as a result of which the Corporation entered into an
agreement for purchase of eight new Boeing 777 aircraft. GoP had provided funding of US$ 150 million
(Rs.8,816 million) in the form of equity and guarantees for acquisition of the said aircraft up to December 31,
2006.
Subsequent to the balance sheet date, the Corporation has been advised by the European Union (EU) that
some of its aircraft are temporarily restrained from flying to various countries in Europe. The Corporation has
initiated steps to address the issues raised by the EU. Meanwhile, the Corporation has readjusted its flight
schedule and rationalized the route network to ensure schedule integrity and maintain market share in the
region.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
These financial statements are the separate financial statements of the Corporation and have been prepared in
accordance with the requirements of the PIAC Act, relevant provisions of the Companies Ordinance, 1984 and
approved accounting standards as applicable in Pakistan. Approved accounting standards comprise such
International Accounting Standards (IAS) as notified under the provisions of the Companies Ordinance, 1984.
Where the requirements of the PIAC Act, the Companies Ordinance, 1984 or directives issued by the Securities
and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the
requirements of the PIAC Act, the Companies Ordinance, 1984 or the requirements of the said directives take
precedence.
These financial statements have been prepared on accrual basis of accounting except for cash flow statement.
2.2 Accounting convention
These financial statements have been prepared under the historical cost convention except the following:

PAKISTAN INTERNATOINAL AIRLINES CORPORATION
Corporation’s aircraft fleet is stated at revalued amounts less accumulated depreciation and impairment, if
any, as referred to in notes 3.1.1 and 3.1.2;
Available for sale investments are stated at fair values in accordance with requirements of IAS - 39
“Financial Instruments: Recognition and Measurement” as referred to in notes 5.4.1 and 14; and
Employee benefits are stated at present value as referred to in notes 6.2 and 23.2.
2.3 Critical accounting estimates and judgements
The preparation of financial statements in conformity with approved accounting standards requires the use of
certain critical accounting estimates. It also requires the management to exercise its judgement in the process
of applying the Corporation’s accounting policies. The Corporation makes estimates and assumptions
concerning the future. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements are as follows:
Provision for taxes and deferred taxation

Provision for slow moving stores and spares
Estimates made for revaluation / impairment of property, plant and equipment
Assumption and estimations in determining the residual values and useful lives of property, plant and
equipment
Provision for employee benefits
Unearned and earned revenue
Provision for frequent flyer programme
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectation of future events that are believed to be reasonable under the circumstances.
2.4 Standards, interpretation and amendments to published approved accounting standards that are not yet
effective
IAS – 1 “Presentation of Financial Statements” effective from January 01, 2007

- Capital Disclosures
Adoption of the above amendment may only impact the extent of disclosures presented in the financial
statements.
In addition to above, a new series of standards called “International Financial Reporting Standards (IFRSs)”
have been introduced and seven IFRSs have been issued by the International Accounting Standard Board. Out
of these, following four IFRSs have been adopted by the Institute of Chartered Accountants of Pakistan (ICAP)
and have been approved by SECP, which are effective from January 01, 2007:
(i) IFRS-2 “Share-Based Payments”

(ii) IFRS-3 “Business Combinations”
(iii) IFRS-5 “Non Current Assets Held for Disposal and Discontinued Operations”
(iv) IFRS-6 “Exploration for and Evaluation of Mineral Resources”
The Corporation expects that the adoption of these pronouncements mentioned above will have no significant
impact on the Corporation’s financial statements in the period of initial application.

2.5 Property, plant and equipment
2.5.1 Operating fixed assets and depreciation
Owned
Leasehold land is stated at cost. Aircraft fleet is stated at revalued amounts less accumulated depreciation and
impairment, if any. Other fixed assets are stated at cost less accumulated depreciation and impairment, if any.
Depreciation is calculated on straight-line method to write-off the cost or revalued amount of assets, less their
residual values, over their expected useful lives. Remaining useful lives of significant assets and their residual
values are reviewed periodically and changes in estimates arising from such review is accounted for in current
and future years. The rates of depreciation are stated in note 3.1.
For assets other than aircraft fleet, full year’s depreciation is charged on additions during first six months
whereas six months’ depreciation is charged on additions during the second half of the year, and no depreciation
is charged in the year of disposal. Proportionate depreciation on aircraft fleet is charged from the date of
acquisition till the date of disposal.
Repairs and maintenance costs are charged to income as and when incurred. Major renewals and
improvements are capitalized.
Gains and losses on disposal of fixed assets are dealt through profit and loss account.
Leased
The assets under finance lease are recorded at an amount equal to fair value of the leased assets at inception
of the lease or, if lower, at the present value of minimum lease payments. In calculating the present value of the
minimum lease payments, the discount factor is the interest rate implicit in the lease or incremental borrowing
rate of the Corporation, where appropriate.
Financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of
charge on outstanding liability.
Depreciation is charged to income applying the straight-line method on a basis similar to owned assets.
The fair value of aircraft signifies cost less manufacturers’ credits, if any.
2.5.2 Capital work-in-progress
These are stated at cost less impairment, if any. The assets are transferred to operating fixed assets when they
are available for use.
2.5.3 Surplus on revaluation of fixed assets
The surplus arising on revaluation of fixed assets is credited to the “Surplus on Revaluation of Fixed Assets
account” and it is shown in the balance sheet after share capital and reserves in accordance with the
requirements of section 235 of the Companies Ordinance, 1984. A revaluation deficit is recognized in profit or
loss, except that a deficit directly offsetting a previous surplus on the same asset in which case the deficit is
taken to surplus on revaluation of fixed assets account. An annual transfer from the surplus on revaluation of
fixed assets account to retained earnings is made for the difference between depreciation based on the revalued
carrying amount of the assets and the depreciation based on the assets' original cost. Additionally, accumulated
depreciation as at the revaluation date is eliminated against the gross carrying amount of the assets and the net
amount is restated to revalued amount of the assets. Upon disposal, any revaluation reserve relating to the
particular assets being sold is transferred to retained earnings.

2.6 Impairment
The carrying amount of the Corporation’s assets is reviewed at each balance sheet date to determine whether
there is any objective evidence that an asset or group of assets may be impaired. If any such evidence exists,
the asset or group of assets’ recoverable amount is estimated. An impairment loss is recognized whenever the
carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in profit and
loss account immediately.
2.7 Intangibles
Costs that are directly associated with identifiable software products controlled by the Corporation and have
probable economic benefit beyond one year are recognized as intangible assets.
Intangible assets are stated at cost less accumulated amortization and impairment, if any. Intangible assets with
finite lives are amortized on a straight line basis over their estimated useful lives as specified in note 4.
2.8 Investments
Subsidiaries, Associates and Joint Venture

Investments in subsidiaries, associates and joint venture are initially recognized at cost. At subsequent reporting
dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying
amounts of investments are adjusted accordingly. Impairment losses are recognized as expense. Where
impairment losses subsequently reverse, the carrying amounts of the investments are increased to the revised
recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is
recognized in the profit and loss account.
Available for sale

All of the Corporation’s investments other than fixed maturity investments and investments in subsidiaries,
associates and joint venture are classified as available for sale as the Corporation has no intention for the
purpose of generating a profit from short term fluctuations in prices or dealer’s margin. All investments classified
as available for sale are initially recognized at cost inclusive of transaction costs and are subsequently marked
to market using period end bid prices from stock exchange quotations and quotations from brokers and in case
of unquoted investments, at cost, less impairment. Any resultant gain / loss is recognized directly in equity until
the investment is de-recognized. Any impairment loss including that had been recognized directly in equity is
removed from equity and recognized in profit and loss account for the year.
Held to maturity
Financial assets with fixed or determinable payments and fixed maturity for which the Corporation has ability to
hold them till maturity are classified as held to maturity investments. These instruments are initially recognized
in the balance sheet at cost and subsequently measured at amortized cost using effective interest rate method.
All financial assets categorized under held to maturity are subject to annual review for impairment.
2.9 Stores and spares
Capital spares
Rotable and repairable stores are treated as operating fixed assets and are depreciated based on the average
useful remaining life of the related aircraft. The average rate is stated in note 3.1.
Other stores and spares

These are valued at lower of cost and net realizable value except goods-in-transit, which are valued at cost.
Cost is determined as follows:
Fuel and medical inventories first-in-first-out basis

Other stores and spares moving average cost
Net realizable value signifies the estimated selling price in the ordinary course of business less cost of
completion and cost necessary to be incurred in order to make the sale.

2.10 Trade debts and other receivables
Trade debts are recognized and carried at original invoice / ticket amount less provision for doubtful debts.
Provision is made against the debts considered doubtful, as per the Corporation’s policy. Known bad debts are
written-off, if any.
2.11 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of cash flow statement,
cash and cash equivalents comprise cash in hand, balances with banks and short term placements readily
convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash and cash
equivalents also include bank overdrafts / short term borrowings that are repayable on demand and form an
integral part of the Corporation’s cash management.
2.12 Trade and other payables
Trade and other payables are stated at their cost, which is fair value of consideration received.
2.13 Interest / mark-up bearing loans and borrowings
All loans and borrowings are initially recognized at the fair value of the consideration received less directly
attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost
using the effective interest method.
Gains and losses are recognized in profit and loss account when the liabilities are derecognized as well as
through the amortization process.
2.14 Financial instruments
Financial assets and financial liabilities are recognized at the time when the Corporation becomes a party to the
contractual provisions of the instrument and assets and liabilities are stated at fair value and amortized cost
respectively. Financial assets are de-recognized at the time when the Corporation loses control of the
contractual rights that comprise the financial assets. Financial liabilities are de-recognized at the time when they
are extinguished, that is, when the obligation specified in the contract is discharged, cancelled, or expired. Any
gains or losses on de-recognition of the financial assets and financial liabilities are taken to the profit and loss
account immediately.
2.15 Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet if the
Corporation has a legally enforceable right to set off the recognized amounts and intends either to settle on a
net basis, or to realize the asset and settle the liability simultaneously.
2.16 Equity instruments
Equity instruments issued by the Corporation are stated at their face value.
2.17 Taxation
Current taxation
Provision for current taxation is based on taxable income at current rates of taxation after taking into account
tax credits and rebates available, if any, or one half percent of turnover, whichever is higher.

Deferred taxation
Deferred tax is provided using the liability method, providing for all temporary differences between the carrying
amounts of the assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of
the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. A deferred tax
asset is recognized only to the extent that it is probable that future taxable profits will be available and the credits
can be utilized. Deferred tax assets are reduced to the extent that is no longer probable that the related tax
benefits will be realized.
2.18 Revenue recognition
Passenger and cargo revenue

Passenger and cargo sales are recognized as revenue when the transportation is provided. The value of
unutilized tickets and airway bills is shown as an advance against transportation. However, in view of the
limitation of the Corporation’s revenue accounting system, the value of unutilized tickets and airway bills is not
provided by the system and is determined by the management on the basis of estimated number of days delay
between the date of sale of tickets / air waybills and the date of actual travel / lift.
Engineering and other services

Revenue of engineering and other services is recognized when services are rendered and invoices raised.
Interest / mark-up and dividend income

The Corporation recognizes interest income / mark-up on short term bank deposits and interest bearing
advances on time proportion basis.
Interest on held to maturity investments are recognized using the effective interest method.
Dividend income is recognized, when the right to receive dividend is established.
2.19 Borrowing costs
The Corporation recognizes the borrowing costs as an expense in the period in which these costs are incurred.
2.20 Provision for obligations
A provision is recognized in the balance sheet when:
the Corporation has a legal or constructive obligation as a result of a past event,

it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and
a reliable estimate can be made of the amount of obligation.
2.21 Foreign currency translation
Monetary assets and liabilities at the year end are translated at the rate as on balance sheet date based on the
preceding month’s average rate of exchange.
Foreign currency transactions are translated into local currency at the last week of the preceding month’s
average rate of exchange. All gains / losses on monetary items are dealt with in the profit and loss account.
2.22 Employee benefits
Provident Fund
The Corporation operates a defined contribution provident fund scheme for all its permanent employees. Equal
monthly contributions are made to the Fund by the Corporation and the employees in accordance with the
Fund’s Rules.

Pension Funds
The Corporation operates a funded defined benefit pension scheme for all its permanent employees. Pension
scheme is a final salary pension scheme and is invested through three funds for both cockpit and non-cockpit
employees namely PALPA, FENA and Employees’ Pension Funds. Contributions are made to the scheme on
the basis of actuarial valuation that is carried out every year. Actuarial gains and losses are recognized
immediately.
Post retirement medical benefits

The Corporation operates an unfunded defined benefit medical scheme and provides medical allowances and
free hospitalization benefits to all its retired employees and their spouse in accordance with their service
regulations. The post retirement medical benefit is accounted for on the basis of actuarial valuation that is
carried out every year. Actuarial gains and losses are recognized immediately.
Actuarial valuation of pension funds and post retirement medical benefit scheme was carried out at December
31, 2006. The valuation has been carried out using projected unit credit method and the following significant
financial assumptions have been used:
2006 2005
Discount rate 11.0 % p.a. 10.8% p.a.

Expected long term rate of increase in salary level 8.9% p.a. 8.7% p.a.
Expected rate of increase in pension cost 2.8% p.a. 2.6% p.a.
Expected rate of medical cost trend 5.7% p.a. 5.5% p.a.
Expected rate of return on plan assets 11.0% p.a. 10.8% p.a.
Compensated absences
The Corporation accounts for all accumulated compensated absences when the employees render service that
increases their entitlement to future compensated absences based on actuarial valuation.
Actuarial valuation of liability for compensated absences has been carried out at December 31, 2006. The
valuation has been carried out using projected unit credit method and the following assumptions have been
used:
2006 2005
Discount rate 11.0 % p.a. 10.8% p.a.

Expected long term rate of increase in salary level 8.9% p.a. 8.7% p.a.
Utilization of leaves As leave prior to retirement
2.23 Frequent flyer programme
The airline operates an Award Plus frequent flyer programme. The incremental cost of providing travel in
exchange for redemption of miles earned by members is accrued in the financial statements as an operating
cost and a future liability after allowing for miles which are not expected to be redeemed.
2.24 Transfer pricing and related parties
Related parties include the Corporation’s subsidiaries, associates, joint ventures, directors and the companies
under common directorship, key management personnel and employee benefit funds. GoP despite being the
major shareholder is not treated as a related party. Transactions between the Corporation and its related parties
are carried out on arm’s length basis at prices determined under “Comparable Uncontrolled Price Method”. The
related party transactions are disclosed in note 41.

3. PROPERTY, PLANT AND EQUIPMENT

2006 2005
Operating fixed assets (note 3.1) 72,326,396 41,024,467

Capital work-in-progress (note 3.2) 6,637,766 10,239,447
78,964,162 51,263,914
3.1 Operating fixed assets
COST / REVALUED AMOUNT DEPRECIATION Net book Annual
January 1, Additions/ Transfers/ December 31, January 1, For the year/ Transfers / December 31, value at depreciation
2006 (disposals) Adjustment 2006 2006 (on disposals) Adjustment / 2006 December, rate
Revaluation* 31, 2006
(Rupees in thousand) %
Owned
Leasehold land 67,824 - - 66,821 - - - - 66,821 -

(1,003) -
Buildings on leasehold land 909,766 120,459 - 1,030,225 304,666 34,609 - 339,275 690,950 2.5
Workshops and hangars 802,264 17,398 - 819,662 682,455 12,442 - 694,897 124,765 5
Renovation and improvements 448,374 38,306 - 485,094 382,991 31,101 - 412,506 72,588 20
(1,586) - (1,586)
Aircraft fleet (note 3.1.1, 3.1.2 & 3.1.3) 24,445,800 2,215,722 908,437 27,362335 14,394,271 843,505 908,437 14,173,656 13,188,679 3.85 - 4.55
(207,624) (207,624) (1,764,933)*
Operating ground equipment,

catering, communication and
meteorological equipment 512,744 22,251 - 507,263 359,759 24,533 - 356,780 150,483 10
(27,732) - (27,512)
Engineering equipment and tools 989,059 54,098 - 1,043,157 835,669 34,049 - 869,718 173,439 10 - 20
Traffic equipment 1,594,216 137,271 - 1,703,811 1,127,937 63,737 - 1,166,790 537,021 10 - 20

(27,676) - (24,884)
Furniture, fixture and fitting 605,919 54,073 - 655,196 516,424 20,434 - 532,070 123,126 10
(4,796) - (4,788)
Motor transport 201,493 21,642 - 207,732 165,510 11,635 - 164,735 42,997 25

(15,403) - (12,410)
Office equipment 76,372 2,040 - 77,382 64,007 3,443 - 66,441 10,941 15

(1,030) - (1,009)
Computer and office automation 1,159,456 140,544 - 1,284,158 873,029 108,455 - 965,693 318,465 10 - 20
(15,842) - (15,791)
Precision engineering equipment 820,031 55 - 809,297 783,041 23,415 - 795,687 13,610 10

(10,789) - (10,769)
Printing press equipment 15,039 - - 15,039 11,942 688 - 12,630 2,409 20
Reservation equipment 12,619 - - 12,619 12,618 - - 12,618 1 10
Other equipment 378,512 70,915 - 438,734 357,921 12,091 - 359,324 79,410 10

(10,693) - (10,688)
Capital spares 6,127,065 1,454,744 (706,892) 6,834,108 2,844,925 333,523 (644,555) 2,493,084 4,341,024 3.85 - 4.55
(40,809) - (40,809)
39,166,553 4,349,518 201,545 43,352,633 23,717,165 1,557,660 263,882 23,415,904 19,936,729

(364,983) (357,870) (1,764,933)*
Leased
Aircraft fleet (note 3.1.1, 3.1.2 & 3.1.3) 30,254,454 29,048,562 - 59,303,016 4,794,370 1,865,265 - 6,999,464 52,303,552 4.55
- - 339,829*
Vehicles - MT 139,989 835 - 130,142 92,420 19,077 - 103,854 26,288 25

(10,682) - (7,643)
Vehicles - TGS 84,430 - - 84,430 17,004 7,599 - 24,603 59,827 10 - 20
30,478,873 29,049,397 - 59,517,588 4,903,794 1,891,941 - 7,127,921 52,389,667

(10,682) (7,643) 339,829* -
Total - 2006 69,645,426 33,398,915 201,545 102,870,221 28,620,959 3,449,601 263,882 30,543,825 72,326,396
(375,665) (365,513) (1,425,104)*

Operating fixed assets
COST / REVALUED AMOUNT DEPRECIATION Net book Annual

January 1, Additions/ Transfers/ December 31, January 1, For the year/ Transfers / December 31, value at depreciation
2005 (disposals) Adjustment 2005 2005 (on disposals) Adjustment / 2005 December, rate
Revaluation* 31, 2005
(Rupees in thousand) %
Owned
Leasehold land 67,828 - - 67,824 - - - - 67,824 -

(4) - - -
Buildings on leasehold land 769,498 140,268 - 909,766 280,904 23,762 - 304,666 605,100 2.5
Workshops and hangars 799,290 2,974 - 802,264 667,529 14,926 - 682,455 119,809 5
Renovation and improvements 402,103 46,271 - 448,374 349,558 33,433 - 382,991 65,383 20
- - - -
Aircraft fleet 29,952,223 71,220 - 24,445,800 19,993,150 1,578,337 (1,728,870) * 14,394,271 10,051,529 3.85 - 4.55
(5,577,643) - (5,448,346) -
Operating ground equipment,

catering, communication and
meteorological equipment 426,769 98,900 - 512,744 350,225 22,459 - 359,759 152,985 10
(12,925) - (12,925) -
Engineering equipment and tools 956,961 32,227 - 989,059 806,858 28,925 - 835,669 153,390 10 - 20
(129) - (114) -
Traffic equipment 1,430,318 170,229 - 1,594,216 1,153,800 72,496 - 1,127,937 466,279 10 - 20

(6,331) - (6,314) (92,045)
Furniture, fixture and fitting 585,233 23,097 - 605,919 500,472 18,027 - 516,424 89,495 10
(2,411) - (2,075) -
Motor transport 201,258 19,197 96,268 201,493 186,625 13,203 37,307 165,510 35,983 25
(115,230) - (55,300) (16,325)
Office equipment 73,044 3,508 - 76,372 60,742 3,445 - 64,007 12,365 15

(180) - (180) -
Computer and office automation 1,107,089 54,432 - 1,159,456 777,234 96,300 - 873,029 286,427 10 - 20
(505) (1,560) (505) -
Precision engineering equipment 815,671 4,360 - 820,031 759,575 23,466 - 783,041 36,990 10
Printing press equipment 11,599 3,440 - 15,039 11,598 344 - 11,942 3,097 20
Reservation equipment 12,619 - - 12,619 12,618 - - 12,618 1 10
Other equipment 402,711 3,842 - 378,512 381,819 4,134 - 357,921 20,591 10

(28,041) - (28,032) -
Capital spares 5,421,106 615,925 136,298 6,127,065 2,609,541 587,512 - 2,844,925 3,282,140 3.85 - 4.55
(46,264) - (46,264) (305,864)
43,435,320 1,289,890 232,566 39,166,553 28,902,248 2,520,769 37,307 23,717,165 15,449,388

(5,789,663) (1,560) (5,600,055) (414,234)
(1,728,870) *
Leased
Aircraft fleet 30,254,454 - - 30,254,454 1,309,445 1,619,147 - 4,794,370 25,460,084 4.55

- - - 1,865,778 *
Vehicles - MT 222,155 14,102 (96,268) 139,989 99,742 32,676 (37,307) 92,420 47,569 25
- - - (2,691)
Vehicles - TGS 84,430 - - 84,430 8,561 8,443 - 17,004 67,426 10 - 20
30,561,039 14,102 (96,268) 30,478,873 1,417,748 1,660,266 (37,307) 4,903,794 25,575,079

- - - (2,691)
1,865,778 *
Total - 2005 73,996,359 1,303,992 136,298 69,645,426 30,319,996 4,181,035 - 28,620,959 41,024,467
(5,789,663) (1,560) (5,600,055) (416,925)
136,908 *

3.1.1 During the year, aircraft fleet of the Corporation was valued by an independent valuer Airclaims Limited - UK on
the basis of professional assessment of current market values as of December 31, 2006. Current market value
represents the value that an aircraft could best achieve under today’s open market conditions and, therefore,
takes into account a thorough review of recent market activity and known transactions involving the subject
aircraft covering new sales, new orders, the limited open market and financial activity that has occurred to date.
It additionally considers the perceived demand for the type, its availability in the market and further takes
account of the expressed views of informed industry sources.
The appraisal has taken into account the age, specification, accrued hours and cycles of the aircraft and
produced a Current Market Half-life Values (CMHLV). Half life or mid-time assumes the airframe, engine, gears
and all major components are half way between major overhauls. CMHLV has then been adjusted to account
for the maintenance status of the aircraft in accordance with the information supplied. The determination of such
values involves a multiplicity of variables and some variation in perceived value must be expected. In this case,
the appraiser considers that a tolerance of +/- 5% may reasonably apply to the calculated market value.
As a result of valuation made by the appraiser, net surplus of Rs.1,425 million (2005: Rs.137 million net deficit)
on revaluation of aircraft fleet has arisen. Surplus on revaluation of fixed assets has been recorded at Rs.926
million net of deferred tax of Rs. 499 million. However, in connection with this analysis, the valuer did not
physically inspect any of the aircraft and has relied on the information provided by the Corporation.
Airclaims Limited - UK reviewed the useful lives of the aircraft and these have been estimated as follows:
BOEING AIRBUS
737-300 747-200 747-300 777-200 A310-300
Years
Airframes 30 25 25 25 25
Engines 35 30 25 35 30
Other component 30 25 25 25 25
3.1.2 Had there been no revaluation, the written down value of the revalued assets in the balance sheet would have
been as follows:
Cost Accumulated Book value

Depreciation
Aircraft fleet - 2006 78,912,495 16,265,774 62,646,721
- 2005 52,243,279 12,911,023 39,332,256
3.1.3 Depreciation charge for the year has been allocated as under:
2006 2005
Cost of services (note 29) 3,252,078 3,621,290

Distribution costs (note 30) 55,884 44,234
Administrative expenses (note 31) 141,639 98,586
3,449,601 3,764,110
3.1.4 Included in "operating fixed assets" are four Fokker aircraft and other fixed assets costing Rs.331.880 million
and Rs.8,700.507 million respectively, which are fully depreciated.

3.1.5 Following fixed assets were disposed off during the year:
Sale /
Accumulated Net Insurance
Description Sold to Method of disposal Cost depreciation book value proceeds
Leasehold land Mr. Manzoor Hussain Through auction 33 - 33 81,000
(Rawalpindi)
M/s. Ambala Sweet & Nimco Through auction 269 - 269 50,667
M/s. Ambala Sweet & Nimco Through auction 702 - 702 6,667
Aircraft fleet
DH-6(AP-BCG) M/s. F & M Aviation USA Through negotiation 16,695 16,695 - 39,385
DH-6(AP-BCH) M/s. F & M Aviation USA Through negotiation 16,695 16,695 - 39,385
F-27 (AP-BAL) National Insurance Insurance claim 56,925 56,925 12,122
Corporation
F-27 (AP-BDQ) National Insurance Insurance claim 117,309 117,309 - 12,148
Corporation
Motor vehicles
To employees
Honda Civic (GA-9905) Mr. Jawed Khan As per Corporation's policy 1,237 619 618 -
Honda Civic (GA-9906) Syed Farooq Hussain Shah As per Corporation's policy 1,238 619 619 -
Honda City (GA-4810) Mr. Jamil Rauf As per Corporation's policy 735 661 74 -
Honda City (GA-4742) Mr. Zafar Ahmed Khan As per Corporation's policy 735 661 74 -
Honda City (GA-8499) Mr. Nadir Ali Shah As per Corporation's policy 735 661 74 -
Honda City (GA-8506) Mr. Imran Maqsood As per Corporation's policy 735 662 73 -
Toyota Corolla (GA-9451) Mr. AVM Jawed Iqbal As per Corporation's policy 939 587 352 586
Honda City (GA-4816) Mr. Dawood Nasir Paul As per Corporation's policy 735 661 74 -
Honda City (GA-8762) Mr. Mureed Abbas Khan As per Corporation's policy 735 661 74 -
Honda City (GA-8505) Mr. Mahmood Manzoor As per Corporation's policy 735 662 73 -
Honda City (AJM-725) Mr. Talat A Malik As per Corporation's policy 835 104 731 803
Suzuki Margalla (GA-8899) Mrs. Farzana - W/O Asmatullah As per Corporation's policy 349 262 87 -
Toyota Corolla (GA-8752) Mr. Rasheed -ul-Hassan As per Corporation's policy 939 822 117 -
Toyota Corolla (AKT-460) Capt. Shahnawaz As per Corporation's policy 969 - 969 -
To others
Honda Civic (18-SRI-3702) Ms. TT Dealwis Through auction / negotiation 688 619 69 417
Toyota Camry (IR-JULA-186) Mr. Thong Through auction / negotiation 1,331 1,198 133 286
Nissan Sunny (BAAYAN-9618) Mr. Nirmal - K Quresh Through auction / negotiation 1,156 1,041 115 349
Mercedez - BENZ (PIA-9999) Mr. M. Ahmed Through auction / negotiation 3,084 2,776 308 185
Mazda 626 LX 899 (67373-AD) Ms. Nayyar Adeel Through auction / negotiation 590 531 59 110
Honda City (Sedan ) 2CH-7799 Mr. Siraj Ahmed Through auction / negotiation 810 729 81 177
Various * 19,596 17,274 2,322 395

Aggregate value of items where
WDV is less than Rs.50,000 Various 128,131 126,079 2,052 22,476
Total 2006 375,665 365,513 10,152 267,158
2005 5,789,663 5,600,055 189,608 790,685
* This includes various operating fixed assets, having WDV above Rs.50,000. In view of large number of items, the management considers it
impracticable to disclose the particulars of all items.
Sale of fixed assets is made through disposal committee in accordance with the prescribed procedures.
3.2 Capital work-in-progress

2006 2005
Buildings 23,696 27,244

Other equipment 404,249 86,653
Renovation and improvements 115,542 80,135
Non-refundable advance against
purchase of aircraft and related equipments 24,899,773 10,119,877
25,443,260 10,313,909
Less: transfer to operating fixed assets 18,775,030 68,038
charged off / adjustment 30,464 6,424
18,805,494 74,462
6,637,766 10,239,447

4. INTANGIBLES
2006 2005
Computer software
Cost (note 4.1) 199,601 182,741
Less: accumulated amortization (note 4.2) 101,326 70,320
98,275 112,421
4.1 Cost
Opening balance 182,741 111,228
Add: additions during the year 16,860 71,513
Closing balance 199,601 182,741
4.2 Accumulated amortization
Opening balance 70,320 36,974
Amortization for the year 31,006 33,346
Closing balance 101,326 70,320
Useful life 5 - 10 years 5 - 10 years
5. LONG TERM INVESTMENTS
Investments in related parties - at cost
Subsidiaries (note 5.1) 4,415,712 213,902
Associates (note 5.2) 396 396
Joint venture (note 5.3) 1 -
4,416,109 214,298
Other investments (note 5.4) 112,089 95,717
4,528,198 310,015
Break-up value
2006 2005
5.1 Subsidiaries - unquoted

PIA Investments Limited (PIAIL)
792,000 (2005: 400,000) shares of
AED 100 each (note 5.1.1) 8,384,398 2,247,553 2,245,155 99,000
Advance against shares pending allotment 2,170,557 114,902
Percentage of shareholding - 99% (2005: 50%) 4,415,712 213,902
Sky Rooms (Private) Limited
4,000,000 (2005: 4,000,000) shares
of Rs.10 each (63,941) (29,837) 40,000 40,000
Percentage of shareholding - 100% (2005: 100%)
Midway House (Private) Limited
(under winding-up)
2,960,000 (2005: 2,960,000) shares
of Rs.10 each (note 5.1.2) (134,565) (134,565) 28,520 28,520
Percentage of shareholding - 100% (2005: 100%)
68,520 68,520
Less: provision for diminution in
value of investments 68,520 68,520
- -
4,415,712 213,902

5.1.1 During the year, the Corporation has acquired 392,000 shares of PIAIL and advance against equity of the other
shareholder in PIAIL at a consideration of US$ 36 million and US$ 34 million (Rs.2,146 million and Rs.2,055
million) respectively, thereby increasing its holding in PIAIL from 50% to 99%. The status of investment has
changed from associate to that of a subsidiary.
5.1.2 Audited financial statements for the year ended December 31, 2006 are not available, accordingly break-up
value based on the audited financial statments for the year ended December 31, 2005 has been used.
5.1.3 All the subsidiaries are incorporated in Pakistan except PIAIL which is incorporated in Sharjah, United Arab
Emirates and registered in British Virgin Islands.
5.2 Associates - unquoted
Break-up value
2006 2005 2006 2005
(Rupees in thousand) (Rupees in thousand)
Minhal Incorporated - Sharjah

1,600 (2005: 1,600) shares of AED 100 each
Percentage of shareholding - 40%
(2005: 40%) 113,664 113,664 396 396
Audited financial statements for the year ended December 31, 2006 are not available accordingly break-up
value based of the audited financial statments for the year ended December 31, 2005 has been used.
5.3 Joint venture - unquoted

Abacus Distribution Systems Pakistan (Private) Limited
89,310 (2005: nil) shares of Rs.100 each
Percentage of shareholding - 20% (2005: nil) (1,203) - 1 -
During the year, the Corporation acquired 20% equity participation at a cost of Re.0.01 per share. As per the
Joint Venture Agreement, shareholding of the Corporation will increase to 75% during the period of 9 years. The
Abacus Distribution Systems Pakistan (Private) Limited is a joint venture between the Corporation and Abacus
International Pte Limited, Singapore.
5.4 Other investments

Available for sale (note 5.4.1) 68,358 31,493
Held to maturity (note 5.4.2) 43,731 64,224
112,089 95,717
5.4.1 Available for sale
Quoted
Pakistan Services Limited
172,913 (2005: 172,913) shares of Rs.10 each
having market value of Rs.393 (2005: Rs.180) each 67,989 31,124
Unquoted
Pakistan Tourism Development Corporation Limited
10,000 (2005: 10,000) shares of Rs. 10 each 100 100
Duty Free Shops (Private) Limited - Pakistan *
87,512 (2005: 87,512) shares of Rs.100 each 269 269
Percentage of shareholding - 11.31 % (2005: 26.95 %)
68,358 31,493
* During the year, the Corporation did not exercise option to acquire right shares issued by Duty Free Shops
(Private) Limited, due to which the Corporation's percentage of holding in the company has decreased.

2006 2005
5.4.2 Held to maturity

Promissory notes issued by the Nigerian Government 61,570 77,914
Less: current maturity (note 14) 17,839 13,690
43,731 64,224
This represents two promissory notes issued by Nigerian Government on May 8, 1988 amounting to US$ 1.32
million and US$ 2.94 million. These were issued in consideration of bank balance of the Corporation in Central
Bank of Nigeria which was seized by the Nigerian Government at the time of coup and civil war in Nigeria. These
notes and interest thereon are redeemable in fixed quarterly installments of US$ 58,676 and US$ 26,325
respectively during the period starting from April 5, 1990 to January 5, 2010.
6. LONG TERM ADVANCES AND OTHER RECEIVABLE

Long term advances (note 6.1) - 4,674,933
Other receivable - pension funds (note 6.2) 1,684,000 1,961,000
1,684,000 6,635,933
6.1 Long term advances - unsecured

Subsidiaries
PIA Investments Limited - considered good (note 5.1.1)
Advance for working capital requirements (note 6.1.1) - 936,760
Accumulated interest on
- advance for working capital requirements (note 6.1.1) - 2,890,637
- loan for renovation of Hotel (note 6.1.2) - 847,536
- 4,674,933
Considered doubtful
Sky Rooms (Private) Limited 37,042 37,042
Midway House (Private) Limited (under winding up) 82,476 82,476
119,518 119,518
Less: provision for doubtful advances 119,518 119,518
- -
- 4,674,933
6.1.1 During the year, the Corporation has received an amount of US$ 18 million (Rs.1,093 million) from PIAIL in full
settlement of advance for working capital requirements and also received US$ 51 million (Rs.3,092 million),
which has resulted in full settlement of accumulated interest on advance for working capital requirements.
6.1.2 During the year, the Corporation has received an amount of US$ 9.75 million (Rs.585 million) from PIAIL and
also adjusted US$ 4.8 million (Rs.287 million) against acquisition of additional shares of PIAIL, which has
resulted in full settlement of accumulated interest on long term loan for hotel renovation due from PIAIL.
6.1.3 Maximum aggregate amount due from the subsidiaries at any month end was Rs.4,173 million (2005: Rs.4,675
million).

2006 2005
6.2 Other receivable - pension funds

Asset recognized in the balance sheet
Present value of defined benefit obligation 9,466,000 8,930,000
Less: Fair value of plan assets 11,150,000 10,891,000
1,684,000 1,961,000
Expense recognized in profit and loss account
Current service cost 214,000 241,000
Interest cost 925,000 807,000
Settlement cost - 17,000
Expected return on plan assets (1,141,000) (993,000)
Actuarial loss / (gain) recognized - net 377,000 (23,000)
375,000 49,000
Movement in asset during the year
Balance at the beginning of the year 1,961,000 1,912,000
Charge for the year (375,000) (49,000)
Payments made during the year 98,000 98,000
Balance at the end of the year 1,684,000 1,961,000
Actual return on plan assets 890,000 827,000
Number of employees covered by the scheme as on December 31, 2006 was 12,116 (2005: 12,725).
The fair value of plan assets includes investments in the Corporation's shares amounting to Rs.4 million
(2005: Rs.7 million).
7. LONG TERM DEPOSITS AND PREPAYMENTS

Deposits
Aircraft fleet lease deposits 1,564,544 854,203
Engine maintenance 215,695 226,205
Rent 35,320 33,871
Utilities 9,697 10,419
Aircraft fuel 6,591 6,444
Guarantee deposit 3,222 2,923
Others 67,956 65,098
1,903,025 1,199,163
Prepayments
Exposure fee to support financing (note 7.1) 1,509,793 675,837
Less: current portion (note 12.1) 149,119 70,023
1,360,674 605,814
3,263,699 1,804,977
7.1 This represents the payment made by the Corporation to Ex-Im Bank in consideration of 12 years' guarantee
issued by Ex-Im Bank. Accordingly, this exposure fee is being amortized over the period of lease term i.e.12
years.

8. DEFERRED TAXATION
2006 2005
Deferred tax credits:

Accelerated tax depreciation 17,349,229 9,236,381
Surplus on revaluation of fixed assets 498,786 -
Unrealized gain on re-measurement of investments 12,642 -
17,860,657 9,236,381
Deferred tax debits:
Unrealized loss on re-measurement of investments - (18,291)
Unused tax losses (20,011,344) (7,356,877)
Provisions for liabilities and to write down other assets (2,134,853) (2,333,238)
(22,146,197) (9,708,406)
(4,285,540) (472,025)
Deferred tax asset has not been recognized in these finacial statments in accordance with the accounting policy
stated in note 2.17.
9. STORES AND SPARES

Stores 828,560 659,612
Spares 3,387,842 3,924,807
4,216,402 4,584,419
Less: provision for slow moving stores and
spares (note 9.1) 1,604,338 2,427,229
2,612,064 2,157,190
Inventory held for disposal (note 9.2) 2,266,825 1,253,852
Less: adjustment to write down
surplus inventory to net realizable value 1,935,827 1,012,936
330,998 240,916
Goods-in-transit 427,978 392,031
3,371,040 2,790,137
9.1 Movement in provision is as follows:

Balance at the beginning of the year 2,427,229 2,645,730
Transferred to inventory held for disposal (922,891) -
Provision made during the year (note 33) 100,000 (218,501)
The provision against slow moving stores and spares is being made in a manner whereby the book value of
stores and spares at the end of each year is charged to the profit and loss account. Such provision is made in
proportion to estimated average useful lives of the relevant category of the aircraft attained up to the balance
sheet date.
9.2 It includes inventory held with foreign third party for sale in the open market.

10. TRADE DEBTS

2006 2005
Considered good 6,129,673 5,222,534

Considered doubtful 455,000 407,888
Less: provision for doubtful debts (note 10.1) 455,000 407,888
- -
6,129,673 5,222,534
Balance at the beginning of the year 407,888 587,853
Written off during the year (198) (13,612)
Provision / (Reversal) made during the year (note 33) 47,310 (166,353)
Balance at the end of the year 455,000 407,888
10.2 Trade debts include debts due from Government agencies, other airlines and International Air Transport
Association's (IATA) approved agents. Certain portion of trade debts is secured by bank guarantees received
from agents but due to very large number of agents all over the world the amount of secured debts is not
determinable.
11. ADVANCES
Considered good
Subsidiaries
PIA Investments Limited (note 11.2) - 16,704
Sky Rooms (Private) Limited (note 11.2) 62,915 129,122
62,915 145,826
Others
Executives (note 11.3) 54,942 22,752
Employees 85,534 97,075
Suppliers 383,070 241,872
Others 5,607 6,392
529,153 368,091
Less: provision for doubtful advances (note 11.1) 28,985 25,048
- -
592,068 513,917
Provision made during the year (note 33) 3,937 4,271
11.2 Maximum aggregate amount due from the subsidiaries at any month end was Rs.165 million (2005:
Rs.146 million).
11.3 This represents due from executives in respect of advances for expenses and furniture etc. in accordance with
the terms of employment. The maximum aggregate amount of advances due from executives at the end of any
month during the year was Rs.54.94 million (2005: Rs.22.75 million).

12. TRADE DEPOSITS AND PREPAYMENTS

2006 2005
Trade deposits 280,954 37,640

Prepayments (note 12.1) 948,379 543,535
1,229,333 581,175
12.1 Prepayments
Current portion of long term prepayment (note 7) 149,119 70,023
Commission 425,367 348,495
Interest on leased aircraft 284,190 47,047
Insurance 78,824 66,602
Rent 6,043 10,652
Others 4,836 716
948,379 543,535
13. OTHER RECEIVABLES

Considered good
Insurance and other claims 283,899 154,063
Excise duty [note 27.1 (b)] 100,000 100,000
Sales tax receivable 121,521 190,983
Receivables against manufacturers' credits 166,312 -
Others 193,523 36,403
865,255 481,449
Less: provision for doubtful receivables 37,442 30,257
- -
865,255 481,449
14. SHORT TERM INVESTMENTS

Held to maturity
Current portion of long term investment (note 5.4.2) 17,839 13,690
Available for sale
Quoted
France Telecom, France (note 14.1)
232,791 shares (2005: 232,791) 390,556 351,073
having market value of 20.95 Euro (2005: 20.99 Euro) each
Unquoted
SITA INC N.V. (note 14.2) 19,220 19,220
325,491 shares (2005: 325,491 shares)
Less: provision for diminution in value of investment (note 14.3) 6,221 6,438
12,999 12,782
421,394 377,545
14.1 These shares are currently in the custody of Citibank N.A, London.
14.2 These shares are held by SITA INC. N.V. on behalf of the Corporation and are transferable subject to certain
specified conditions.

2006 2005

Reversal made during the year (217) (1,229)
15. CASH AND BANK BALANCES
With banks
In current accounts
Collection (note 15.1) 3,360,993 1,623,249
Overdrawn bank balances (684,597) (633,608)
2,676,396 989,641
In short term deposit accounts 2,682,287 1,516,805
5,358,683 2,506,446
In hand 4,467 8,035
In transit 96,774 100,210
5,459,924 2,614,691
15.1 Includes Rs.1.7 million (2005: Rs.1.3 million) held in the Corporation's bank account with a Libyan bank which
is not currently repatriable due to Foreign Government's restrictions.
16. SHARE CAPITAL
2006 2005 2006 2005

No. of shares (Rupees in thousand)
Authorized capital
Ordinary share capital
2,949,250,000 2,949,250,000 'A' class shares of Rs.10 each 29,492,500 29,492,500
1,500,000 1,500,000 'B' class shares of Rs.5 each 7,500 7,500
2,950,750,000 2,950,750,000 29,500,000 29,500,000
Preference share capital
50,000,000 50,000,000 Preference shares of Rs.10 each 500,000 500,000
3,000,750,000 3,000,750,000 30,000,000 30,000,000
Issued, subscribed and paid up
share capital
Ordinary share capital
'A' class shares of Rs.10 each
1,711,747,563 1,562,450,349 Issued for consideration in cash (note 16.1) 17,117,476 15,624,504
Issued for consideration other than cash
931,028 931,028 for acquisition of shares 9,310 9,310
233,934,482 233,934,482 Issued as bonus shares 2,339,345 2,339,345
1,946,613,073 1,797,315,859 19,466,131 17,973,159
'B' class shares of Rs.5 each
1,003,374 1,003,374 Issued for consideration in cash 5,017 5,017
Issued for consideration other than cash
2,625 2,625 for acquisition of shares 13 13
494,000 494,000 Issued as bonus shares 2,470 2,470
1,499,999 1,499,999 7,500 7,500
19,473,631 17,980,659

16.1 Under the terms of financial package as stated in note 1.2, an amount of Rs.1,493 million (2005: Rs.1,451
million) has been received from GoP as equity contribution. Accordingly, 149,297,214 ordinary shares of Rs.10
each (2005:145,073,203 ordinary shares of Rs.10 each) have been issued to GoP during the year.
16.2 At December 31, 2006 GoP held 1,736,459,539 and 1,462,515 'A' class ordinary shares and 'B' class ordinary
shares respectively (2005: 1,587,162,325 and 1,462,515 'A' class ordinary shares and 'B' class ordinary shares
respectively).
17. RESERVES
2006 2005
Capital reserves
Reserve for replacement of fixed assets (note 17.1) 1,966,779 1,966,779
Capital redemption reserve fund 250,000 250,000
Others 284,259 284,259
2,501,038 2,501,038
Revenue reserves 1,779,674 1,779,674
4,280,712 4,280,712
17.1 Up to June 1988, depreciation on fully depreciated aircraft was charged and credited to the reserve for
replacement of fixed assets and excess of sale proceeds over cost of fixed assets disposed off was also
credited to the aforesaid account. With effect from 1989 - 90, the Corporation changed this policy to comply with
the IASs and the excess proceeds over cost of relevant assets are credited to the profit and loss account.
18. LONG TERM FINANCING - secured
Limit Number of
Type of (Rupees in Repayment installments / Mark-up 2006 2005
Financier Note Facility million) Period mode % (Rupees in thousand)
From Banking Companies
United Bank Limited Syndicate 1,045 2004 - 2006 6 Six months - 348,327
Half-yearly T-Bills+2.5%
Habib Bank Limited Demand 2,135 2004 - 2006 6 Six months - 711,667
Finance Half-yearly T-Bills+2.5%
National Bank of Pakistan Demand 1,683 2004 - 2006 6 Six months - 561,110
Finance Half-yearly T-Bills+2.5%
United Bank Limited 18.1 Syndicate 1,650 2005 - 2009 12 Six months 1,621,098 1,621,098
& 18.2 Finance Half-yearly KIBOR+0.79%
Citibank / DVB Bank 18.3 Syndicate 6,603 2006 - 2008 note 18.4 One month 3,491,443 -
& 18.4 Finance LIBOR+0.77%
Habib Bank Limited 18.5 Demand 530 2006 - 2009 36 One month 456,389 -
Finance Monthly KIBOR+1.50%
Citibank, N.A. 18.6 Demand 4,985 2006 - 2016 20 5.28% 2,180,178 -

& 18.7 Finance Half-yearly
Habib Bank Limited 18.8 Demand 200 2006 - 2009 36 One month 194,444 -
Finance Monthly KIBOR+1.75%
ABN Amro Bank 18.9 Demand 3,538 2009 - 2013 19 Three months 1,556,842 -
Finance Quarterly LIBOR+1.60%
9,500,394 3,242,202
Less: current portion 2,599,916 1,621,103
6,900,478 1,621,099

18.1 Following are the participating banks:

United Bank Limited
National Bank of Pakistan
Habib Bank Limited
18.2 The finance is secured by way of hypothecation of capital spares and traffic equipment.
18.3 Following are the mandated lead arrangers:

Citigroup
DVB Bank AG (DVB)
18.4 The finance is secured by way of first charge in the assignment of the purchase contracts relating to three new
B 777 aircraft. Repayment is to be made at the time of delivery of each aircraft.
18.5 The finance is secured by way of hypothecation charge lien on receivables of Peshawar, Islamabad and
Rawalpindi booking offices and sinking fund account amounting to Rs.267 million.
18.6 Following are the lenders:

Citibank International Plc. - Paris
Citibank, N.A. - London
18.7 The Corporation entered into financing agreement of US$ 81.90 million for acquiring seven ATR aircraft and
initial spares package, out of which three aircraft have been delivered during the year and the remaining four
aircraft will be delivered in first half of year 2007. The finance is secured by way of mortgage over each aircraft.
18.8 The finance is secured by way of first charge hypothecation over all present and future receivables / book debts
from various travel agents and booking offices in respect of ticket sales from Peshawar, Islamabad and
Rawalpindi.
18.9 The Corporation has entered into an arrangement with the bank to finance 15% of the Corporation's share
towards cost of the aircraft to the Boeing Company in respect of B 777-300 aircraft. This finance is secured
against GoP guarantee.
18.10 All the aforementioned charges are un-registered.
19. TERM FINANCE CERTIFICATES
2006 2005
TFCs - secured (non participatory) 14,003,940 14,760,910

Less: current portion 756,970 756,970
13,246,970 14,003,940
During the year 2003 the Corporation, through private placement, issued 151,400 fully paid scrips of TFCs
having a denomination of Rs.100,000 each. The salient features of the TFCs are as follows:
Installment payable: Semi - annually in arrears

Repayment period: 2003-2011
Rate of profit: 50 basis points above the base rate* with a floor of 8% and a cap of 12.50% per
annum. Average rate prevailed during the year is 9.75% (2005: 8.5%) per annum.
*Base rate is the State Bank of Pakistan (SBP) discount rate prevailing at two
working days before the commencement of the period for which the profit rate is
being computed.

The issue of TFCs is secured by a guarantee given by the GoP. In order to protect the interest of the TFC
holders, United Bank Limited has been appointed as the Trustee under the trust deed. In case the Corporation
defaults on any of its obligations, the Trustee may enforce the Corporation’s obligations in accordance with the
terms of the trust deed. The proceeds of any such enforcements shall be distributed to the TFC holders at that
time on a pari passu basis in proportion to the amounts owed to them pursuant to the TFCs.
The TFCs have an embedded call option for early redemption exercisable by the Corporation at 24 and 48
months from the date of issue with a 60 days notice period. The TFCs will be redeemed at a premium, which
will be calculated at a flat rate on 0.25% of the outstanding amount at the time of the exercise of call option.
The above TFCs have been obtained as part of financial package of Rs.20 billion approved by GoP and are
secured against guarantees issued by GoP. An amount equal to mark up on TFCs is provided by GoP as its
equity contribution.
20. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
2006 2005
Present value of future rental obligations - aircraft fleet

A-310 (note 20.2) 5,665,539 5,782,248
B-777 (note 20.3 - 20.5) 40,658,496 17,852,601
46,324,035 23,634,849
Present value of future rental obligations - vehicles (note 20.6) 93,900 138,578
46,417,935 23,773,427
Less: current portion 3,914,491 2,067,363
42,503,444 21,706,064
20.1 The amount of future payments and the year in which they will become due are:
2006 2005
Minimum Present Minimum Present
lease Finance value of lease Finance value of
payment cost minimum payment cost minimum
lease lease
payments payments
Not later than one year 6,223,436 2,308,945 3,914,491 2,553,748 486,385 2,067,363
Later than one year and
not later than five years 24,420,386 7,120,824 17,299,562 10,552,925 1,485,890 9,067,035
Later than five years 29,028,598 3,824,716 25,203,882 13,077,091 438,062 12,639,029
59,672,420 13,254,485 46,417,935 26,183,764 2,410,337 23,773,427
20.2 In 2003, the Corporation entered into aircraft lease agreement with Airbus Leasing Inc. USA, to acquire six
A310-300 aircraft. The salient features of the lease are as follows:
2006 2005
Discount rate 5.2% 5.2%

Lease period 144 months 144 months
Security deposit (Rupees in thousand) 197,219 193,914

20.3 In 2004, the Corporation had arranged an Ex-Im Bank guaranteed financing of US$ 345 million to acquire three
Boeing 777-200 aircraft and spare engines, from Taxila Limited, a special purpose entity incorporated in
Cayman Islands. The guaranteed lender is Citibank N.A. Salient features of the lease are as follows:
2006 2005
Discount rate - two aircraft 4.65% 4.65%

Discount rate - one aircraft and spare engines Three month Three month
LIBOR LIBOR
Lease period - aircraft 144 months 144 months
Lease period - spare engines 96 months 96 months
Security deposit (Rupees in thousand) 577,315 567,641
20.4 During the year, the Corporation has arranged an Ex-Im Bank guaranteed financing of US$ 266 million to
acquire two Boeing B 777-200 LR aircraft and one propulsor from Taxila - 2 Limited, a special purpose entity
incorporated in Cayman Islands. The guaranteed lender is Citibank N.A. The salient features of the lease are
as follows:
Discount rate - aircraft and propulsor Three month -

LIBOR - 0.02%
Lease period - aircraft 144 months -
Lease period - propulsor 96 months -
Security deposit (Rupees in thousand) 466,009 -
20.5 During the year, the Corporation has arranged an Ex-Im Bank guaranteed financing of US$ 472 million to
acquire three Boeing B 777-300 ER aircraft from White Crescent Limited, a special purpose entity incorporated
in Amsterdam, Netherlands. The guaranteed lender is ABN Amro Bank. Salient features of the lease are as
under:
Discount rate - aircraft Three month -

LIBOR - 0.04%
Lease period - aircraft 144 months -
Lease period - engine 96 months -
Security deposit (Rupees in thousand) 319,568 -
20.6 The salient features of other lease arrangements are as follows:

Discount rate 7.71% - 13.32% 7.71% - 13.32%
Lease period 48 to 60 months 48 to 60 months
20.7 The ownership of all these assets will be transferred to the Corporation by the end of lease term.
21. LONG TERM MURABAHA - secured
Type and Facility 2006 2005

Financier purpose of amount Repayment Installment Markup
facility in million period period %
US Dollar (Rupees in thousand)
National Bank of Pakistan Syndicated 70 2002-2007 Monthly One month 781,165 1,605,975
Habib Bank Limited, Bahrain murabaha for LIBOR+ 2.70%
United Bank Limited, UAE purchase of
(facility agent) six B747-300
aircraft and
spares
Less: current portion 781,165 837,900

- 768,075

The facility is secured by way of first ranking charge over present and future receivables of the Corporation from
passenger and cargo sales agents in UAE and lien over United Bank Limited collection account which is
specified for the related receipts. The facility is also secured by first ranking pari passu charge by way of
hypothecation of stores and spares. The aforementioned charges are un-registered.
22. LONG TERM DEPOSITS
2006 2005
Deposits from agents 112,500 109,000

Retention money 149,211 181,236
261,711 290,236
23. DEFERRED LIABILITIES

Deferred custom duties 178,588 249,690
Obligation for compensated absences (note 23.1) 1,284,000 1,364,000
Post retirement medical benefits (note 23.2) 1,353,000 1,211,000
2,815,588 2,824,690
23.1 Obligation for compensated absences

Liability recognized in the balance sheet
Balance at beginning of the year 1,364,000 1,461,000
Charge for the year 11,915 (17,000)
1,375,915 1,444,000
Less: payments made during the year (91,915) (80,000)
Balance at end of the year 1,284,000 1,364,000
23.2 Post retirement medical benefits

Liability recognized in the balance sheet
Present value of defined benefit obligation 1,353,000 1,211,000
Movement in liability during the year

Balance at the beginning of the year 1,211,000 925,000
Charge for the year 218,000 343,000
Less: payments made during the year (76,000) (57,000)
Expense recognized in profit and loss account

Current service cost 22,000 20,000
Interest cost 127,000 85,000
Settlement cost - 18,000
Net actuarial loss recognized 69,000 220,000
218,000 343,000
Number of employees covered by the scheme as at December 31, 2006 was 12,116 (2005: 12,725).

24. TRADE AND OTHER PAYABLES

2006 2005
Trade creditors
Goods 2,809,858 2,305,947
Services 2,170,524 1,459,791
Airport related charges 626,551 629,747
5,606,933 4,395,485
Accrued liabilities 2,125,058 2,031,198
Advance against transportation (unearned revenue)
Normal 5,290,835 4,686,980
Hajj 1,222,732 1,476,107
6,513,567 6,163,087
Advance from customers 268,192 390,521
Payable to employees' provident fund 136,796 91,052
Unclaimed dividend - Preference shares 3,297 3,297
Collection on behalf of others 827,416 785,719
Custom and central excise duty 578,826 777,045
Capital value tax 51,855 47,225
Stamp duties 5 8,841
Income tax deducted at source 43,681 34,532
Provision for frequent flyer programme (note 24.1) 61,664 -
Provision for construction of University Road, Karachi (note 24.2) 215,000 100,000
Short term deposit 166,044 137,229
Liabilities acquired from subsidiaries - net (note 24.3) 18,690 18,690
16,617,024 14,983,921
24.1 Provision for frequent flyer programme

Balance at the beginning of the year - -
Charge for the year 61,664 -
61,664 -
Benefits utilized during the year - -
Balance at the end of the year 61,664 -
24.2 Provision for construction of University Road, Karachi

Balance at the beginning of the year 100,000 -
Charge for the year 200,000 100,000
300,000 100,000
Payments made during the year (85,000) -
24.3 The subsidiaries of Corporation, PIA Holdings (Private) Limited, PIA Shaver Poultry Breeding Farms (Private)
Limited and PIA Hotels Limited, had applied under the 'Easy Exit Scheme' announced by the SECP for voluntary
winding up. Assets and liabilities of these subsidiaries were taken over by the Corporation.
25. ACCRUED INTEREST / MARK-UP / PROFIT

On long term financing 48,361 56,024
On term finance certificates 484,767 511,255
On murabaha 3,493 5,979
On short term borrowings 275,657 34,511
812,278 607,769

26. SHORT TERM BORROWINGS - secured

2006 2005
Short term loans (note 26.1) 10,580,640 362,075

Running finance under mark-up arrangements (note 26.2) 4,962,806 -
15,543,446 362,075
26.1 Short term loans - secured

Repayment 2006 2005
Financier Security period Markup

United Bank Limited - Dubai First pari passu charge 1 Year One month - 362,075
over present and future LIBOR+2.00%
current assets
Citibank - Karachi * GoP Guarantee 3 months One month 2,000,000 -
KIBOR+0.25%
United Bank Limited - Dubai UAE Receivables 1 Year One month 58,840 -
LIBOR+2.00%
National Bank of Pakistan - Bahrain -
GoP Guarantee 1 Year One month 4,260,900
Habib Bank Limited - Export Processing Zone LIBOR+0.60%
Standard Chartered Bank - Dubai GoP Guarantee 1 Year One month 3,043,500 -
LIBOR+0.50%
Standard Chartered Bank - Dubai * GoP Guarantee 3 months Three months 1,217,400 -
LIBOR+1.325%
10,580,640 362,075
* The Corporation intents to restructure these facilities as long term loans.
26.2 Running finance under mark-up arrangements - secured

United Bank Limited - Karachi First pari passu 1 Year One month 365,372 -
hypothecation charge KIBOR+1.50%
over stock & trade debts
National Bank of Pakistan - Karachi First pari passu 1 Year One month 50,000 -
hypothecation charge KIBOR+1.25%
over stock & trade debts
Habib Allied International Bank Limited Receivables in Europe 1 Year One month 547,830 -
- London LIBOR+2.25%
Habib Bank Limited - Karachi Lien over US$ 20 6 months One month 1,000,000 -
million deposited with KIBOR+0.50%
Habib Allied International
Bank Limited - London
Standard Chartered Bank - Karachi GoP Guarantee 6 months Six months 2,999,604 -
KIBOR+0.75%
4,962,806 -
The facilities for short term running finances from banks amounted to Rs.6,380 million (2005: nil). The re-
purchase prices are repayable on various dates, during the year.
The rate of mark-up ranges between 5.50% and 11.50% (2005: nil) per annum, payable monthly, quarterly or
semi-annually.
Facilities amounting to Rs.1,417 million (2005: nil) remained un-utilized as of the balance sheet date.

27. CONTINGENCIES AND COMMITMENTS
27.1 Contingencies
a) Civil Aviation Authority (CAA), Pakistan has claimed additional amounts aggregating to Rs.4,135 million (2005:
Rs.3,819 million) in respect of rent and allied charges, landing and housing charges, aviation security and bay
charges, interest / surcharge etc. The matter has been referred to Ministry of Defence through which a
reconciliation and settlement exercise is currently in progress. The management considers that no additional
liability of material amount is likely to arise as a result of such exercise. Accordingly, no provision in this respect
has been made in these financial statements.
b) The Collector Central Excise had raised demand of Rs.1,046 million (2005: Rs.1,126 million) in respect of duties
levied on tickets provided by the Corporation to its staff either free of charge or at concessional rates, repair /
replacement of re-imported aircraft engines, non-availability of invoices, import related to miscellaneous
consignments, printed material sent at its various stations abroad for utilization, late / short payment of sales tax
and central excise duty and excess baggage tickets. On protest by the Collector Central Excise, the Corporation
has already paid an amount of Rs.100 million (note 13) which is considered fully recoverable by the
management. The Corporation has filed appeals with the Customs, Central Excise & Sales Tax Tribunal which
are pending adjudication. Management is confident that the decision would be made in Corporation's favour.
Consequently, no provision has been made in these financial statements.
c) The Corporation is contesting litigations relating to suits filed against it on dispute over throughput charges
aggregating to Rs.125 million (2005: Rs.125 million) against which it has filed appeals with the Honourable High
Court of Sindh, Karachi and District Court which are pending. The management is of the view that ultimate
outcome would be in favour of the Corporation. Accordingly, no provision in this respect has been made in these
financial statements.
d) The Corporation is contesting several litigations mainly relating to suits filed against it for unlawful termination
of contracts, breach of contractual rights and obligations, non-performance of servicing stipulations due to
negligence or otherwise. The Corporation's management is of the view that these cases have no sound legal
footing and it does not expect these contingencies to materialize. Accordingly no provision has been made in
these financial statements against these claims amounting to Rs.2,549 million (2005: Rs.1,392 million).
e) Various ex-employees of the Corporation have lodged claims against the Corporation for their dues specifically
relating to their re-instatements. However, the liability that may arise in these cases cannot be determined and
consequently, no provision has been made in these financial statements.
f) Contingencies relating to income tax matters are referred in note 35.1.
g) Contingencies in respect of the tax matters relating to the Corporation’s subsidiaries, PIA Holdings (Private)
Limited and PIA Shaver Poultry Breeding Farms (Private) Limited amounted to Rs.11.2 million (2005: Rs.11.2
million).
27.2 Commitments
a) Commitments for purchase of aircraft amounted to Rs.23,842 million (2005: Rs.60,613 million).
b) Commitments for capital expenditure amounted to Rs.10.6 million (2005: Rs.1.1 million).
c) Outstanding letters of credit amounted to Rs.141 million (2005: Rs.127 million).
d) Outstanding letters of guarantee amounted to Rs.141 million (2005: Rs.145 million).
e) Rentals under operating lease commitments amounted to Rs.962.7 million (2005: Rs.758.89 million).

28. TURNOVER - net

2006 2005
Passenger 60,901,468 55,019,895

Cargo 5,741,014 4,914,588
Excess baggage 808,259 833,173
Charter 388,272 664,064
Engineering services 1,043,635 845,515
Handling and related services 634,143 635,034
Mail 305,552 302,785
Others 764,803 859,416
70,587,146 64,074,470
29. COST OF SERVICES - others
Salaries, wages and allowances 5,788,545 5,352,545
Welfare and social security costs 64,735 46,229
Retirement benefits 331,545 299,569
Compensated absences 7,149 (8,030)
Mandatory retirement (note 31.4) 30,988 234,624
Legal and professional charges 10,378 9,105
Stores and spares consumed 2,193,063 2,409,663
Maintenance and overhaul 6,377,874 4,821,345
Flight equipment rental 3,431,059 2,530,872
Landing and handling 8,343,403 7,249,119
Passenger services 2,838,218 2,270,619
Crew layover 2,011,703 1,730,719
Staff training 87,157 80,784
Utilities 4,067 3,015
Communication 63,311 60,001
Insurance 1,039,338 1,240,655
Rent, rates and taxes 302,783 315,225
Printing and stationery 108,964 98,686
Amortization 2,568 3,061
Depreciation (note 3.1.3) 3,252,078 3,621,290
Others 223,190 109,019
36,512,116 32,478,115
30. DISTRIBUTION COSTS
Distribution and advertising expenses 1,737,797 1,309,953
Repairs and maintenance 51,586 41,299
Insurance 12,279 13,543
Utilities 25,737 23,037
Depreciation (note 3.1.3) 55,884 44,234
Others 81,174 89,747
4,395,061 3,809,169

31. ADMINISTRATIVE EXPENSES

2006 2005

Repairs and maintenance 224,954 142,112
Insurance 16,067 58,326
Utilities 380,110 350,661
Auditors' remuneration (note 31.1 & 31.2) 12,415 8,204
Depreciation (note 3.1.3) 141,639 98,586
Donations (note 31.3) 3,825 14,954
Others 307,291 183,190
4,887,088 4,325,576
31.1 Auditors' remuneration

Audit fee 6,726 5,850
Fee for review of interim financial statements 2,016 1,754
Consolidation 1,000 -
Other certification 2,000 300
Out of pocket expenses 673 300
12,415 8,204
31.2 Auditors' remuneration is equally shared by the two firms of auditors.
31.3 Directors including Chairman / CEO and their spouse do not have any interest in the donee.
31.4 The Corporation implemented a mandatory retirement scheme for certain category of employees. These
employees are entitled to all the benefits as per Corporation's rules.
32. FINANCE COSTS

Mark-up on long term financing 472,914 312,918
Profit on term finance certificates 1,357,869 1,284,118
Interest on liabilities against assets subject to finance lease 1,942,027 947,187
Mark-up on long term murabaha 117,067 121,662
Mark-up on short-term borrowings 780,058 3,199
Interest to pension / provident funds - 659
Arrangement, agency and commitment fee 56,341 80,163
Bank charges, guarantee commission and other related charges 42,160 37,493
4,768,436 2,787,399

33. OTHER PROVISIONS AND ADJUSTMENTS - net

2006 2005
Provision / (reversal) for slow moving stores and spares (note 9.1) 100,000 (218,501)
Provision / (reversal) of provision for doubtful debts (note 10.1) 47,310 (166,353)
Deficit on revaluation of aircraft fleet - net - 136,908
Provision for the construction of University Road, Karachi 200,000 100,000
Provision for doubtful advances (note 11.1) 3,937 4,271
Exchange loss - net 504,300 110,070
Reversal of liabilities no longer payable (56,974) -
798,573 (33,605)
34. OTHER OPERATING INCOME

Income from financial assets
Profit on bank deposits 213,240 182,554
Interest income on advance to pension and provident funds 13,568 10,445
Income from subsidiary
Interest income on advances 185,876 292,915
Income from investment
Interest income on held to maturity investment 3,708 6,288
Gain on disposal of short term investments - 1,946
Income from assets other than financial assets
Gain on disposal of fixed assets 257,006 601,077
Insurance claims 255,674 146,444
929,072 1,241,669
35. TAXATION
Current (note 35.1) 352,936 320,372
Prior (305,887) -
Deferred (note 8) (498,786) (421,951)
(451,737) (101,579)
35.1 Current
In view of available tax losses for the year, provision for minimum taxation has been made at 0.5% of turnover
under section 113 of the Income Tax Ordinance, 2001. No numeric tax rate reconciliation is given as the
Corporation is liable for turnover tax.
Returns for the tax years 2003 to 2006 have been deemed to be finalised under the provisions of the Income
Tax Ordinance, 2001.
The minimum tax liability under section 80D of the repealed Ordinance has been levied by the department up
to the assessment years 2002-03 after adding 10% of net turnover on estimated basis. The Corporation had
filed appeals against the above orders for the assessment years 1991-92, 1992-93 and 1997-1998 to 2002-
2003. CIT (Appeal) has deleted this enhancement vide Orders No. 4 to 8 dated October 10, 2006 for assesment
years 1991-92, 1992-93 and 1997-98 to 1999-2000, while appeals for remaining assessment years are pending
for adjudication. The Corporation had made a representation to Secretary - Ministry of Law, GoP and also
applied to the Central Board of Revenue to constitute a committee under Section 134A of the Income Tax
Ordinance, 2001 for the resolution of above hardship and dispute.

36. LOSS PER SHARE
2006 2005
Loss for the year (Rupees in thousand) 12,763,420 4,411,657
Weighted average number of ordinary shares outstanding 1,877,566,277 1,730,658,315

Loss per share
‘A’ class ordinary share (Rupees) 6.80 2.55
‘B’ class ordinary share (Rupees) 3.40 1.28
36.1 Loss per share have no dilution effect.
37. CASH (USED IN) / GENERATED FROM OPERATIONS

2006 2005
Loss before tax (13,215,157) (4,513,236)
Adjustments for:
Depreciation 3,449,601 3,764,110
Deficit on revaluation of aircraft fleet - 136,908
Gain on disposal of fixed assets (257,006) (601,077)
Provision / (reversal) for slow moving stores and spares 100,000 (218,501)
Provision / (reversal) for doubtful debts 47,112 (166,353)
Provision for doubtful advances and other receivable 11,122 4,271
Provision for the construction of University Road, Karachi 200,000 100,000
Provision for employees' benefits 848,775 601,319
Finance cost 4,768,436 2,787,399
Interest income on advances to an associated company (185,876) (292,915)
Profit on bank deposits (213,240) (182,554)
Interest income on advance to pension and provident funds (13,568) (10,445)
Interest income on held to maturity investment (3,708) (6,288)
Reversal of liabilities no longer payable (56,974) -
(4,489,477) 1,435,984
Working capital changes

(Increase) in stores and spares (680,906) (155,346)
(Increase) in trade debts (954,250) (1,058,423)
(Increase) / decrease in advances (82,087) 161,583
(Increase) in trade deposits and prepayments (648,156) (31,721)
(Increase) / decrease in other receivables (390,991) 130,998
Increase in trade and other payables 1,575,078 1,234,719
(1,181,312) 281,810
Cash (used in) / generated from operations (5,670,789) 1,717,794

38. REMUNERATION OF CHAIRMAN / CEO AND EXECUTIVES

Chairman / CEO Executives
2006 2005 2006 2005
Managerial remuneration 7,896 4,615 937,256 86,624

Corporation's contribution to provident fund 396 223 35,686 4,608
Other perquisites 282 219 390,855 70,419
8,574 5,057 1,363,797 161,651
Number 1 1 641 104
Directors other than Chairman / CEO are non-executive directors. Aggregate amount charged in the financial
statements for fee to directors was Rs.0.18 million (2005: Rs.0.21 million). Chairman / CEO, SVPs and certain
executives are also provided with the Corporation maintained cars and facilities as per the Corporation's rules.
39. GEOGRAPHICAL SEGMENTS
2006 2005
Revenue analysis
USA / Canada 7,712,345 6,755,682
Europe 15,424,690 14,543,885
Middle East / Africa 11,017,636 10,191,566
Asia (excluding Pakistan) 3,305,291 3,153,225
Pakistan 33,127,184 29,430,112
70,587,146 64,074,470
The analysis of turnover by origin is derived by allocating revenue to the area in which the sale was made.
Analysis of net assets
The major revenue earning assets comprise the aircraft fleet, all of which are registered in Pakistan. Since the
fleet of the Corporation is employed flexibly across its worldwide route network, there is no suitable basis of
allocating such assets and related liabilities to geographical segments.

40. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

40.1 Financial assets and liabilities
2006
Interest / mark-up bearing Non-Interest / mark-up bearing
Maturity Maturity Maturity Maturity Maturity Maturity
Up to one One year to Five years Sub Total Up to one One year to Five years Sub Total Total
year five years and above year five years and above
Financial Assets
Investments 17,839 43,731 - 61,570 403,555 - 68,358 471,913 533,483
Advances and other receivables - 1,684,000 - 1,684,000 1,235,802 - - 1,235,802 2,919,802
Deposits - - 1,362,212 1,362,212 50,574 771,192 821,766 2,183,978
Trade debts - - - - 6,129,673 - - 6,129,673 6,129,673
Accrued interest - - - - 51,010 - - 51,010 51,010
Cash and bank balances 2,682,287 - - 2,682,287 2,777,637 - - 2,777,637 5,459,924
2,700,126 1,727,731 1,362,212 5,790,069 10,648,251 771,192 68,358 11,487,801 17,277,870
Financial Liabilities
Long term financing 2,599,916 5,190,869 1,709,608 9,500,393 - - - - 9,500,393
Term finance certificates 756,970 13,246,970 - 14,003,940 - - - - 14,003,940
Liabilities against assets
subject to finance lease 3,914,491 17,299,562 25,203,882 46,417,935 - - - - 46,417,935
Murabaha 781,165 - - 781,165 - - - - 781,165
Deposits - - - - - 261,711 - 261,711 261,711
Deferred liabilities - - - - - 2,637,000 - 2,637,000 2,637,000
Trade and other payables - - - - 8,461,581 - - 8,461,581 8,461,581
Accrued interest / markup/profit 812,278 - - 812,278 - - - - 812,278
Borrowings 15,543,446 - - 15,543,446 - - - - 15,543,446
24,408,266 35,737,401 26,913,490 87,059,157 8,461,581 2,898,711 - 11,360,292 98,419,449
Net financial (liabilities) / assets (21,708,140) (34,009,670) (25,551,278) (81,269,088) 2,186,670 (2,127,519) 68,358 127,509 (81,141,579)
2005
Interest / mark-up bearing Non-Interest / mark-up bearing
Maturity Maturity Maturity Maturity Maturity Maturity
Up to one One year to Five years Sub Total Up to one One year to Five years Sub Total Total
year five years and above year five years and above
Financial Assets
Investments 16,657 61,257 - 77,914 363,855 - 31,224 395,079 472,993
Advances and other receivables - 6,635,933 - 6,635,933 336,272 - - 336,272 6,972,205
Deposits - - - - 37,640 - 867,545 905,185 905,185
Trade debts - - - - 5,222,534 - - 5,222,534 5,222,534
Accrued interest - - - - 39,708 - - 39,708 39,708
Cash and bank balances 1,516,805 - - 1,516,805 1,097,886 - - 1,097,886 2,614,691
1,533,462 6,697,190 - 8,230,652 7,097,895 - 898,769 7,996,664 16,227,316
Financial Liabilities
Long term financing 1,621,103 1,621,099 - 3,242,202 - - - - 3,242,202
Term finance certificates 756,970 11,859,192 2,144,748 14,760,910 - - - - 14,760,910
Liabilities against assets
subject to finance lease 2,067,363 9,067,035 12,639,029 23,773,427 - - - - 23,773,427
Murabaha 837,900 768,075 - 1,605,975 - - - - 1,605,975
Deposits - - - - - 290,236 - 290,236 290,236
Deferred liabilities - 2,575,000 - 2,575,000 - - - - 2,575,000
Trade and other payables - - - - 6,776,951 - - 6,776,951 6,776,951
Accrued interest / markup / profit - - - - 607,769 - - 607,769 607,769
Borrowings 362,075 - - 362,075 - - - - 362,075
5,645,411 25,890,401 14,783,777 46,319,589 7,384,720 290,236 - 7,674,956 53,994,545
Net financial (liabilities) / assets (4,111,949) (19,193,211) (14,783,777) (38,088,937) (286,825) (290,236) 898,769 321,708 (37,767,229)
Effective interest rates (a) Percentage Effective interest rates (b) Percentage
Investments 5.20 Long term financing 5.28 - 11.33
Advances 2.78 -11.00 Term finance certificates 9.75 - 10.00
Deposits 4.00 - 5.00 Murabaha 7.06 - 8.02
Cash and bank balances 3.00 - 4.00 Liabilities against assets subject to finance lease 5.25 - 11.00
Markup / interest accrued on loans 5.28 - 11.33

40.2 Risk management
a) Concentration of credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the
other party to incur a financial loss. All financial assets except cash in hand are subject to credit risk. The
Corporation minimizes the credit risk by diversifying business with (IATA) approved agents and by obtaining
bank guarantees from other agents.
b) Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange
rates. Foreign currency risk arises on receivable and payable transactions at foreign stations and on foreign
currency loans. The Corporation manages its currency risk by effectively utilizing its foreign currency receipts to
satisfy its foreign currency obligations.
c) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest
rates. The Corporation is exposed to interest rate risk in respect of borrowings and bank balances.
d) Liquidity risk
Liquidity risk, also referred to as funding risk, is the risk that an enterprise will encounter difficulty in raising funds
to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a
financial asset quickly at close to its fair value. The Corporation manages its liquidity risk by maintaining
sufficient cash and cash equivalents and through support of GoP to meet its liabilities when due, through a
financial package, whereby GoP has issued guarantees to secure long-term finances and TFCs. Further, GoP
has agreed to provide equity contribution as mentioned in note 1.2.
e) Fuel price risk
Fuel price risk is the risk attributable to fluctuation in the international oil prices arising from external factors.
The Corporation plans to manage this issue to the extent possible by taking certain measures including hedging
of fuel prices.
40.3 Fair value of financial instruments
The carrying values of all financial assets and liabilities reflected in the financial statements approximate to their
fair value except for investment held to maturity which is carried at amortized cost.

41. TRANSACTIONS WITH RELATED PARTY
The transactions with related parties, other than those relating to issuance of tickets at concessional rates to
employees and directors according to terms of employment / regulations and those not mentioned elsewhere in
these financial statements are as follows:
2006 2005
PIA Investments Limited

Recovery of advances 5,055,045 921,690
Recovery of interest on advances 185,876 292,915
Sky Rooms (Private) Limited

Catering services 31,497 43,434
Retirement funds
Contribution 689,590 323,036
Interest on advances 24,013 10,445
The Corporation's sales of transportation services to subsidiaries and associates are not determinable.
42. RELATED PARTY RELATIONSHIP
2006 2005
The Corporation has related party relationships with the following undertakings:
- Sky Rooms (Private) Limited Subsidiary Subsidiary

- Midway House (Private) Limited (under winding-up) Subsidiary Subsidiary
- PIA Investments Limited (PIAIL) Subsidiary Associate
- Abacus Distribution Systems Pakistan (Pvt) Ltd. Joint Venture -
- Minhal Incorporated - Sharjah Associate Associate
- Duty Free Shops (Private) Limited - Associate
43. CORRESPONDING FIGURES
Prior year's figures have been reclassified for better presentation.
Reclassification Reclassification
Statement Components from to 2005
Balance sheet Held to maturity Long term Short term 13,690

investment investments investments

44. AUTHORIZATION OF FINANCIAL STATEMENTS
These financial statements were authorized for issue in the Board of Directors meeting held on March 29, 2007.
45. GENERAL
45.1 The information as to the available capacity and utilization thereof during the year has been disclosed in the
statistics on six year summary page no. 40.
45.2 The US$ amounts in balance sheet, profit and loss account and cash flow statement have been translated into
US$ at the rate of Rs.60.87 = US$1 solely for convenience purposes.
45.3 Number of the Corporation's employees as at December 31, 2006 were 18,282 (2005: 18,647).
45.4 Figures have been rounded off to the nearest thousand rupee.


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PAKISTAN INTERNATIONAL AIRLINES CORPORATION

ATTENDANCE OF DIRECTORS AT BOARD MEETING

S. No. Name of Board Member Meetings Held Meetings Attended

* Relinquished Board Membership after expiry of term on 7th August 2006.

ATTENDANCE OF DIRECTORS AT AUDIT COMMITTEE MEETINGS

S. No. Name of Board Member Meetings Held Meetings Attended

34 Annual Report 2006

REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE

Karachi: March 29, 2007

35 Annual Report 2006

36 Pakistan International Airlines Corporation

For and on behalf of the Board

37 Annual Report 2006

SHAREHOLDING TOTAL SHARES TOTAL SHARES

12284 1 100 269,405 13,100

38 Pakistan International Airlines Corporation

SHAREHOLDING TOTAL SHARES TOTAL SHARES

1 905001 910000 907,500 0

CATEGORIES OF SHAREHOLDERS AS ON DECEMBER 31, 2006

TOTAL 57,344 1,946,613,073 1,499,999 100.00

39 Annual Report 2006

2006 2005 2004 2003 2002 2001

Route Kilometers 446,570 343,525 354,664 290,129 257,858 265,643

SHARE PRICES (Rs. 10 Share)

High 16.30 14.65 26.70 23.30 12.75 7.50

Average No. of Empolyees 18,282 19,263 19,634 18,570 16,689 17,170

40 Pakistan International Airlines Corporation

AUDITORS’ REPORT TO THE MEMBERS

42 Pakistan International Airlines Corporation

Without qualifying our opinion, we draw attention to the following issues:

Karachi: March 29, 2007

43 Annual Report 2006

Note 2006 2005 2006

NON - CURRENT ASSETS

79,062,437 51,376,335 1,298,874

Total non - current assets 88,538,334 60,127,260 1,454,549

Stores and spares 9 3,371,040 2,790,137 55,381

Total current assets 18,353,435 12,770,243 301,519

Total assets 106,891,769 72,897,503 1,756,068

The annexed notes 1 to 45 form an integral part of these financial statements.

Tariq Kirmani Kamal Afsar

44 Pakistan International Airlines Corporation

Note 2006 2005 2006

EQUITY AND LIABILITIES

Share capital 16 19,473,631 17,980,659 319,922

Total equity (788,030) 10,446,298 (12,945)

138,288 10,446,298 2,273

NON - CURRENT LIABILITIES

Long term financing 18 6,900,478 1,621,099 113,364

Total non - current liabilities 65,728,191 41,214,104 1,079,813

Trade and other payables 24 16,617,024 14,983,921 272,992

8,052,542 5,283,336 132,291

Total current liabilities 41,025,290 21,237,101 673,982

CONTINGENCIES AND COMMITMENTS 27

106,891,769 72,897,503 1,756,068

The annexed notes 1 to 45 form an integral part of these financial statements.

Tariq Kirmani Kamal Afsar

45 Annual Report 2006

Note 2006 2005 2006

Turnover - net 28 70,587,146 64,074,470 1,159,638

69,882,217 58,940,836 1,148,057

Gross profit 704,929 5,133,634 11,581

Distribution costs 30 4,395,061 3,809,169 72,204