Part 1

Break-even occurs when Contribution Margin = Fixed Costs

So we need Contribution margin of 48,160, whereas currently it is 39,579.
This represents an increase of (48160/39579 - 1) - 21.68%
So, Load Factor has to increase by 21.68%.
Curently the load factor is 73.8, so to break-even the Load Factor would need to be 73.8 * 1.2168 = 89.80

Current Needed New

Increase
Revenues 107532 21.68% 130844.94
VC 67952 21.68% 82683.99

Cont. Margin 39580 48160.94

Fixed Costs 48160 48160
Profit before tax -8580 0.94 (Rounding diff)

Adjusted for peers' fundamentals

Hawaii Emirates Easy Jet
Load Factor 85.5 67 89
PIA's Load Factor 73.8 73.8 73.8
Adjustment needed (%) 15.9% -9.2% 20.6%

hours of flying per day 8.61 13.7 11.9

PIA's flying hours per day 9.79 9.79 9.79
Adjustment needed (%) -12.1% 39.9% 21.6%

Total Adjustment for the factors 1.9% 27.0% 46.6%

PIA's Current Contribution Margin 39580 39580 39580
PIA's Adjusted Contribution Margi 40328 50284 58019
Less: Fixed Costs 48160 48160 48160
Adjusted Operating Profit 7,832 2,124 9,859

So, PIA would be able to turn around its losses through achieving similar load factors and flying hours per day as Emirates,

Part 2

As the required Load Factor for break-even is 89.80, which incidentally is higher than all others given in the peer group (wh
it's clear that even if PIA were to substantially enhance its load factor, it would still not be able to move out of losses. This i
seems quite unrealistic and unachievable. Thus, even if load factor is slightly above the peer group, the best PIA could do w
Moreover, as per Exhibit 1, all the airlines shown are making positive Operating Income, so PIA is quite the exception here
is the high number of employees in PIA which increases mainly the Fixed Costs considerably.

Part 3
No, size of the fleet is not the main issue, but rather the number of hours in the air per day, and also the load factor - as is sh
Buiying new planes, if anything, would further increase the fixed costs, especially the depreciation of the planes and the fin
PIA further into the red.

Part 4

Revenues 788,900
Less: Variable Costs
Fuel 1,591
Aviation charges 87,564
Maintenance 56,044
Passenger services 27,132
172,331
Contribution Margin 616,569
(in millions)
PIA, overall RPK 15,657
RPK for flight 0.115
Flight proportion 0.000734%

Overall:
Aviation charges 11,921.70
Maintenance 7630.3
Passenger services 3693.9

The flight returns positive contribution, therefore it's worth adding to the flight schedule.
.8 * 1.2168 = 89.80
lying hours per day as Emirates, and especially Easy Jet.

hers given in the peer group (which are all making positive profit before tax),
able to move out of losses. This is because a Load Factor over and above 89.80
r group, the best PIA could do would be to break-even where the others are making profits.
o PIA is quite the exception here. Another major contributing factor for the losses

and also the load factor - as is shown in the Table in Part 2

eciation of the planes and the financing costs, thereby pushing