Contents...notes forming part thereof for the six months period then ended (here-in-after referred to as the "interim financial information"). Management is responsible for the preparation

Contents

Corporate Profile 02

Directors’ Report 05

Unconsolidated Financial Statements 06

Consolidated Financial Statements 27

Half Yearly Report 2012 01

Air Chief Marshal (Retd)Rao Qamar SulemanChairman & CEO

Capt M. Junaid YunusDeputy Managing Director

AVM Amin Ullah KhanDirector - Precision Engineering Complex

Mr Babar KamalDirector - Engineering & Maintenance

Capt. Anwar Adil ShaikhDirector - Flight Operations

Mr Mamoon RashidDirector - Corporate Services

Mr Mazhar Z. KianiDirector - Customer Services

Mr Rashid AhmedActing Director - HRA & Coordination

Mr Waqar Ahmad SiddiquiActing Chief Financial Officer

Board of Directors Executive Management

Corporate Profile (as at August 28, 2012)

Air Chief Marshal (Retd)Rao Qamar SulemanChairman & CEO - PIA

Malik Nazir Ahmed

Mr Javed Akhtar

Syed Omar Sharif Bokhari

Mr Husain Lawai

Makhdum Syed Ahmad Mahmud

Lt Gen (Retd.) Asif Yasin MalikFederal Secretary Defence

Mr Abdul Wajid RanaFederal Secretary Finance

Khawaja Jalaluddin Roomi

Mr Yousaf Waqar

Corporate Secretary

Mr Younus M. Khan

Half Yearly Report 201202


Messrs A. F. Ferguson & CoChartered Accountants(Member firm PWC).

Messrs M. Yousuf Adil Saleem & CoChartered Accountants(Member firm Deloitte).

Share Registrar

Central Depository Company of Pakistan Ltd.Shares Registrar Department CDC House,99 - B, Block-B Sindhi MuslimCooperative Housing Society,Main Shahrah-e-FaisalKarachi - 74400, PakistanPh: Customer Support Services(Toll Free) 0800 - CDCPL (23275)Fax: (92-21) 3432 6053Email: [email protected]: www.cdcpakistan.com

Head Office

PIA Building.Jinnah International Airport, Karachi - 75200,Pakistan.UAN: 111-786-786 / 111-FLY-PIAwww.piac.aero

External Auditors


Board of Directors’ Committees (as at August 28, 2012)

Board’s Audit Committee

Mr Husain Lawai Chairman

Mr Javed Akhtar Member

Syed Omar Sharif Bokhari Member

Khawaja Jalaluddin Roomi Member

Mr Yousaf Waqar Member

Board’s Finance Committee

Mr Abdul Wajid Rana Chairman

Mr Husain Lawai Member

Malik Nazir Ahmed Member


Mr Yousaf Waqar Member

Board’s Human Resource & Remuneration Committee

Makhdum Syed Ahmad Mahmud Chairman

Malik Nazir Ahmed Member

Mr Javed Akhtar Member

Khawaja Jalaluddin Roomi Member



Directors’ Report to the Shareholders – June 2012The Directors of Pakistan International Airlines Corporation are pleased to present their report along with the financial statementsfor the six months ended June 30, 2012.

The financial results for the period under review are summarized below:

2012 (Rs. Billion) 2011 (Rs. Billion)Revenues (Net) 54.21 55.82Operating Cost & ExpensesFuel Cost 30.23 29.56Other Cost of service 24.90 24.53Distribution & Admin Expenses 7.04 6.61Exchange (Gain)/Loss 4.35 0.10Other incomes & adjustments 0.17 0.21Finance Cost 5.40 4.93Loss Before Taxation 17.88 10.12Loss After Taxation 18.02 10.74

The 1st half of the year was challenging for the airline industry. IATA’s quarterly forecast in June 2012 remained unchanged and itis expected that net post-tax profits for the whole industry to fall from $7.9 billion in 2011 to $3 billion in 2012, which is just 0.5%of revenues. Average fuel prices were slightly higher during the six months (2011: $107.18/b, 2012: $115.65/b) however IATA revisedfuel prices down from $115/b to $110/b. The outlook is still unclear due to the concerns about Eurozone’s sovereign debt criseswhich is expected to intensify and add further stress to the airline industry.

Global Revenue Passenger Kilometers (RPK) increased by 6.5% while Freight Tonne Kilometer (FTK) decreased by 2.1%. Contrary tothe global increase PIA’s RPKs decreased by 10% which was partly due to the decrease in the capacity floated in the market anddecrease in charter business which saw a surge last year due to political situation various Middle Eastern countries as well as a dropin seat factor of 4.3pp.

Due to the above challenges the Airline registered decrease of PKR 1.61bn (2.9%) in overall revenue compared to the correspondingfigure of the last year. Passenger revenues decreased due to lower capacity and availability of aircraft while cargo revenues decreasedin line with global slowdown in freight business and decrease in capacity.

Exchange rate plummeted during the period which added further strain on the bottom line. Depreciation in Pak rupee increasedexchange losses by PKR 4.2 billion. Pak rupee was weaker by nearly 10% on June 30th 2012, closing at PKR 94.55/USD as comparedto PKR 85.95/USD on June 30th 2011. Financial charges increased by PKR 467 million.

During the period our subsidiary companies namely PIA Investments Limited and Skyrooms (Pvt.) Limited posted net profit of USD5.2 million and PKR 11.2 million respectively. Considering the overall economic downturn and worsening security conditions ofPakistan as well as West, the hospitality business is expected to grow at a very slow rate in the coming years with thinning profitmargins as the market players would try to bridge the gap between a rather constant supply and a very unpredictable demand.

Rising fuel cost, expected exchange rate volatility and deteriorating economic and security situation will continue to impact ourbusiness in the coming periods. Your board and the new management are fully aware of the significance of these risks. Fuel hedgingis being undertaken with a view to smoothen the volatility. The management shall continue to engage the GoP for speedyimplementation of the business plan. Concrete steps have been taken for adding newer aircraft to fleet. Our survival in this competitivemarket depends on financial and human resource restructuring and implementation of integrated information systems.

We are confident that the dedication of our people, the commitment of our management and the valuable support of GoP asshareholder shall in sync bring the organization out of this difficult situation. PIA has been serving the nations for decades with prideand will Insha’Allah continue to do the same in the future.

For and on behalf of the Board

Air Chief Marshal (Retd.) Rao Qamar SulemanChairman

August 28, 2012

1st Quarterly report 2012 01

Unconsolidatedfinancial statements


AUDITORS' REPORT TO THE MEMBERS ONREVIEW OF INTERIM FINANCIAL INFORMATION

Introduction

We have reviewed the accompanying unconsolidated condensed interim balance sheet of PAKISTAN INTERNATIONALAIRLINES CORPORATION (the Corporation) as at June 30, 2012 and the related unconsolidated condensed interim profitand loss account, unconsolidated condensed interim statement of comprehensive income, unconsolidated condensedinterim cash flow statement and unconsolidated condensed interim statement of changes in equity together with thenotes forming part thereof for the six months period then ended (here-in-after referred to as the "interim financialinformation"). Management is responsible for the preparation and presentation of this interim financial information inaccordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Our responsibilityis to express a conclusion on this interim financial information based on our review. The figures of the unconsolidatedcondensed interim profit and loss account and the unconsolidated condensed interim statement of comprehensive incomefor the quarters ended June 30, 2012 and 2011 have not been reviewed, as we are required to review only the cumulativefigures for the six months period ended June 30, 2012.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of InterimFinancial Information Performed by the Independent Auditor of the Entity". A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an audit conducted in accordance with InternationalStandards on Auditing and consequently does not enable us to obtain assurance that we would become aware of allsignificant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financialinformation as of and for the six months period ended June 30, 2012 is not prepared, in all material respects, in accordancewith approved accounting standards as applicable in Pakistan for interim financial repor ting.

Emphasis of matter

We draw attention to note 1.2 to the interim financial information, which states that during the current period, theCorporation incurred a net loss of Rs 18,022.282 million, resulting in accumulated losses of Rs 136,898.736 million as ofJune 30, 2012, and, as of that date, the Corporation's current liabilities exceeded its current assets by Rs 123,395.725 million.These conditions indicate the existence of a material uncertainty which may cast doubt on the Corporation's ability tocontinue as a going concern. Our conclusion is not qualified in respect of this matter.

A. F. Ferguson & Co. M. Yousuf Adil Saleem & Co.Chartered Accountants Chartered Accountants

Engagement Partner Engagement PartnerKhurshid Hasan Syed Asad Ali Shah

Date: August 28, 2012Place: Karachi

M. Yousuf Adil Saleem & Co.Chartered AccountantsCavish Court, A-35, Block 7 & 8KCHSUSharah-e-FaisalKarachi

A. F. Ferguson & Co.Chartered AccountantsState Life Building No. 1-CI. I. Chundrigar RoadP. O. Box 4716Karachi - 74000

June 30, December 31, June 30, December 31,2012 2011 2012 2011

(un-audited) (audited) (un-audited) (audited)

UNCONSOLIDATED CONDENSED INTERIMBALANCE SHEET

AS AT JUNE 30, 2012

-------- Rupees in '000 --------- -------- US $ in '000 -----------

ASSETS

NON CURRENT ASSETSFixed assets- Property, plant and equipment 4 97,512,414 96,632,229 1,031,332 1,074,340- Intangibles 43,157 52,855 457 587

97,555,571 96,685,084 1,031,789 1,074,927Long-term investments 4,442,417 4,440,454 46,985 49,368Long-term advances - - - -Long-term deposits and prepayments 5 8,900,453 9,140,474 94,135 101,622

110,898,441 110,266,012 1,172,909 1,225,917CURRENT ASSETSStores and spares 4,047,750 3,863,885 42,811 42,958Trade debts 9,841,400 8,396,481 104,087 93,351Advances 555,320 316,862 5,873 3,523Trade deposits and prepayments 662,825 795,465 7,010 8,843Other receivables 6 3,166,906 2,275,838 33,495 25,302Short-term investments 19,220 19,220 203 214Cash and bank balances 7 2,227,895 894,814 23,563 9,948

20,521,316 16,562,565 217,042 184,140TOTAL ASSETS 131,419,757 126,828,577 1,389,951 1,410,056

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVESShare capital 28,779,674 28,779,674 304,386 319,967Reserves (132,593,279) (114,713,233) (1,402,361) (1,275,361)

(103,813,605) (85,933,559) (1,097,975) (955,394)Advance against equity from Government of Pakistan (GoP) 8 1,384,925 - 14,648 -TOTAL EQUITY (102,428,680) (85,933,559) (1,083,327) (955,394)

SURPLUS ON REVALUATION OF PROPERTY,PLANT AND EQUIPMENT - NET 7,693,763 7,834,036 81,372 87,097

NON CURRENT LIABILITIES

Long-term financing 9 17,401,624 31,264,901 184,047 347,598Term finance and sukuk certificates 10 7,659,840 10,925,653 81,014 121,469Liabilities against assets subject to finance lease 5.1 45,962,597 47,345,301 486,119 526,376Advance from a subsidiary 1,040,050 989,403 11,000 11,000Long-term deposits 451,834 444,685 4,779 4,944Deferred liabilities 9,721,688 9,174,189 102,821 101,997

82,237,633 100,144,132 869,780 1,113,384CURRENT LIABILITIESTrade and other payables 11 51,453,164 44,578,472 544,190 495,615Accrued interest 6,073,525 4,690,092 64,236 52,144Provision for taxation 863,753 1,045,281 9,135 11,621Short-term borrowings 12 40,883,930 25,801,027 432,405 286,851Current maturities of:- Long-term financing 9 23,901,154 10,957,001 252,789 121,818- Term finance and sukuk certificates 10 11,929,920 8,664,107 126,176 96,326- Liabilities against assets subject to finance lease 8,811,595 9,047,988 93,195 100,594

143,917,041 104,783,968 1,522,126 1,164,969TOTAL LIABILITIES 226,154,674 204,928,100 2,391,906 2,278,353TOTAL EQUITY AND LIABILITIES 131,419,757 126,828,577 1,389,951 1,410,056

CONTINGENCIES AND COMMITMENTS 13

The annexed notes 1 to 23 form an integral part of these unconsolidated condensed interim financial statements.

Air Chief Marshal (Retd.) Syed Omar Sharif BokhariRao Qamar SulemanChairman Director

Note


REVENUE - net 14 54,211,215 55,825,234 27,766,644 29,642,780 573,360 649,508

COST OF SERVICES

Aircraft fuel (30,232,514) (29,557,250) (15,086,280) (16,450,347) (319,752) (343,889)

Others 15 (24,904,631) (24,531,870) (12,281,823) (12,259,022) (263,402) (285,420)

(55,137,145) (54,089,120) (27,368,103) (28,709,369) (583,154) (629,309)

GROSS (LOSS) / PROFIT (925,930) 1,736,114 398,541 933,411 (9,794) 20,199

Distribution costs (3,183,819) (3,430,735) (1,837,772) (1,826,590) (33,673) (39,915)

Administrative expenses (3,853,751) (3,176,895) (2,023,933) (1,681,129) (40,759) (36,962)

Other provisions and adjustments 16 (307,751) (291,626) (166,174) (237,087) (3,255) (3,393)

Exchange loss - net (4,350,038) (103,500) (3,613,311) (833,643) (46,008) (1,204)

Other operating income 137,305 76,906 (251,655) 31,832 1,452 895

(11,558,054) (6,925,850) (7,892,845) (4,546,617) (122,243) (80,579)

LOSS FROM OPERATIONS (12,483,984) (5,189,736) (7,494,304) (3,613,206) (132,037) (60,380)

Finance cost 17 (5,400,499) (4,933,748) (2,710,073) (2,539,489) (57,118) (57,403)

LOSS BEFORE TAXATION (17,884,483) (10,123,484) (10,204,377) (6,152,695) (189,155) (117,783)

Taxation 18 (137,799) (613,927) (5,576) (352,102) (1,457) (7,143)

LOSS FOR THE PERIOD (18,022,282) (10,737,411) (10,209,953) (6,504,797) (190,612) (124,926)

UNCONSOLIDATED CONDENSED INTERIMPROFIT AND LOSS ACCOUNT (UN-AUDITED)

FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2012

June 30, June 30, June 30, June 30, June 30, June 30,2012 2011 2012 2011 2012 2011

------------------------------- Rupees in '000 ---------------------------------- ------------ US $ in '000 ----------

------------------------------------------ Rupees ------------------------------------- --------------- US $ ---------------EARNINGS PER SHARE - BASIC AND DILUTED

Loss attributable to:

- ''A' class ordinary shares of Rs 10 each 19 6.11 4.02 3.41 2.39 0.06 0.05

- ''B' class ordinary shares of Rs 5 each 19 3.06 2.01 1.71 1.20 0.03 0.03


Six months period ended Quarter ended Six months period ended


Note


UNCONSOLIDATED CONDENSED INTERIM STATEMENTOF COMPREHENSIVE INCOME (UN-AUDITED)


Loss for the period (18,022,282) (10,737,411) (10,209,953) (6,504,797)

Other comprehensive income:

Unrealised gain / (loss) on re-measurement

of available for sale investments 1,963 (4,452) 3,202 (1,231)

Total comprehensive income for the period (18,020,319) (10,741,863) (10,206,751) (6,506,028)

Surplus/(deficit) arising on revaluation of property, plant and equipment has been reported in accordance with the

requirements of the Companies Ordinance, 1984, in a separate account below equity.


------------------------- Rupees in '000 --------------------------

June 30, June 30, June 30, June 30,2012 2011 2012 2011

Six months period ended Quarter ended




CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operationsafter working capital changes 20 19,467 8,500,577 206 98,901

Profit on bank deposits received 23,325 18,411 247 214Finance costs paid (4,017,066) (4,132,483) (42,486) (48,080)Taxes paid (319,327) (271,058) (3,377) (3,154)Staff retirement benefits paid (494,076) (421,701) (5,226) (4,906)Long-term deposits and prepayments - net 627,666 174,686 6,638 2,033Net cash (used in) / generated from operating activities (4,160,011) 3,868,432 (43,998) 45,008

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (4,418,939) (1,541,507) (46,737) (17,935)Purchase of intangibles - (187) - (2)Proceeds from sale of property, plant and equipment 149,774 14,543 1,584 169Short-term investments - net - 2,218 - 26Net cash used in investing activities (4,269,165) (1,524,933) (45,153) (17,742)

CASH FLOWS FROM FINANCING ACTIVITIES

Advance against equity from GoP 1,384,925 1,549,670 14,648 18,030Repayment of long-term financing (2,926,577) (4,009,566) (30,953) (46,650)Proceeds from long-term financing 500,000 5,839,183 5,288 67,937Redemption of term finance certificates - (2,560) - (30)Receipt of advance from a subsidiary - 859,500 - 10,000Long-term deposits - net 7,149 (2,642) 76 (31)Repayment of obligations under finance lease (4,286,143) (4,249,963) (45,332) (49,447)Net cash (used in) / generated from financing activities (5,320,646) (16,378) (56,273) (191)(Decrease) / Increase in cash and cash equivalents (13,749,822) 2,327,121 (145,424) 27,075

Cash and cash equivalents at the beginning of the period (24,906,213) (21,271,355) (263,418) (247,485)

Cash and cash equivalents at the end of the period (38,656,035) (18,944,234) (408,842) (220,410)

CASH AND CASH EQUIVALENTS

Cash and bank balances 7 2,227,895 3,807,959 23,563 44,304Short-term borrowings 12 (40,883,930) (22,752,193) (432,405) (264,714)

(38,656,035) (18,944,234) (408,842) (220,410)


Six months period ended Six months period endedJune 30, June 30, June 30, June 30,

2012 2011 2012 2011

UNCONSOLIDATED CONDENSED INTERIMCASH FLOW STATEMENT (UN-AUDITED)


-------- Rupees in '000 ------- ------- US $ in '000 ----------

Note



Balance as at January 1, 2011 25,774,948 - 2,501,038 1,779,674 27,900 (92,327,743) (62,244,183)

Total comprehensive income for the periodended June 30, 2011:

Loss for the period - - - - - (10,737,411) (10,737,411)

Other comprehensive income for the period - - - - (4,452) - (4,452)

Total comprehensive income for the period - - - - (4,452) (10,737,411) (10,741,863)

Advance against equity from GoP - 1,549,670 - - - - 1,549,670

Surplus on revaluation of property, plant andequipment realised during the period onaccount of incremental depreciationcharged thereon - net of tax - - - - - 52,364 52,364

Balance as at June 30, 2011 25,774,948 1,549,670 2,501,038 1,779,674 23,448 (103,012,790) (71,384,012)

Balance as at January 1, 2012 28,779,674 - 2,501,038 1,779,674 22,782 (119,016,727) (85,933,559)

Total comprehensive income for the periodended June 30,2012:

Loss for the period - - - - - (18,022,282) (18,022,282)

Other comprehensive income for the period - - - - 1,963 - 1,963

Total comprehensive income for the period - - - - 1,963 (18,022,282) (18,020,319)

Advance against equity from GoP - 1,384,925 - - - - 1,384,925

Surplus on revaluation of property, plant andequipment realised during the period onaccount of incremental depreciation charged thereon - net of tax - - - - - 140,273 140,273

Balance as at June 30, 2012 28,779,674 1,384,925 2,501,038 1,779,674 24,745 (136,898,736) (102,428,680)


UNCONSOLIDATED CONDENSED INTERIMSTATEMENT OF CHANGES IN EQUITY (UN-AUDITED)


--------------------------------------------- Rupees in '000 -----------------------------------


1. THE CORPORATION AND ITS OPERATIONS

1.1 Pakistan International Airlines Corporation (the Corporation) was incorporated on January 10, 1955 under PIACOrdinance, 1955, which was subsequently repealed and replaced by the Pakistan International Airlines CorporationAct, 1956 (PIAC Act). The shares of the Corporation are quoted on all stock exchanges of Pakistan. The principalactivity of the Corporation is to provide commercial air transportation, which includes passenger, cargo and postalcarriage services. Other activities of the Corporation includes provision of engineering and allied services. The headoffice of the Corporation is situated at PIA Building, Jinnah International Airport, Karachi.

1.2 During the current period, the Corporation incurred a net loss of Rs 18,022.282 million (June 30, 2011: Rs 10,737.411million) resulting in accumulated loss of Rs 136,898.736 million as of June 30, 2012 (December 31, 2011: Rs 119,016.727million). Further, as of June 30, 2012, current liabilities of the Corporation exceeded its current assets by Rs 123,395.725million (December 31, 2011: Rs 88,221.403 million).

The Government of Pakistan (GoP), being majority shareholder of the Corporation, had through its finance division'sletter dated September 2, 2008 communicated that it would extend all maximum support to maintain the Corporation'sgoing concern status. Accordingly, since then it has been extending support to the Corporation through the followingmeasures to ensure that it (the Corporation) continues and sustains in the long-term as a viable business entity:

- Reimbursement of financial charges on term finance and sukuk certificates payable by the Corporation. In this respect, amounts aggregating Rs 9,287 million have been provided to the Corporation towards equity since the year ended December 31, 2008 to date;

- During the years ended December 31, 2009 and 2010, the GoP has provided long-term financing aggregatingRs 8,000 million to meet working capital requirements; and

- Issuance/ renewal of guarantees to financial institutions, both local and foreign so as to enable the Corporationto raise funds.

During the previous years and the current period, the Corporation continued to pursue approval of its business planwith the GoP at various levels. Presentations on the business plan were made to the President and Prime Ministerof Pakistan during meetings held with them and the business plan was amended based on the guidelines givenduring those meetings. During financial year 2011, the business plan was approved by the Economic Reforms Unitof the Ministry of Finance and was submitted to the Economic Coordination Committee (ECC) of the Cabinet forapproval, which is awaited. Meanwhile, the ECC has, subsequent to June 30, 2012, accorded approval for extendingthe repayment period of the term finance certificates aggregating Rs 12,790 million alongwith conversion of certainshort term loans amounting to Rs 20,700 million into long term loans.

The business plan includes GoP's support in term of providing necessary funding for recapitalization, restructuringof existing loans and issuing GoP guarantees as and when required. The objectives of the business plan, amongother measures, include improving the governance structure and achieving operational efficiency through upgradingof aircraft fleet, enhancing revenues and controlling costs.

In view of the situation described above, although material uncertainty exists which may cast doubt on theCorporation's ability to continue its operations in the foreseeable future, management believes that consideringthe mitigating factors set out in the preceding paragraphs, the going concern assumption is appropriate and has,as such, prepared these unconsolidated condensed interim financial statements on a going concern basis.

NOTES TO THE UNCONSOLIDATED CONDENSED INTERIMFINANCIAL STATEMENTS (UN-AUDITED)



2. BASIS OF PREPARATION

2.1 These unconsolidated condensed interim financial statements of the Corporation for the six months period endedJune 30, 2012 have been prepared in accordance with the requirements of approved accounting standards asapplicable in Pakistan for interim financial reporting which comprise the International Accounting Standard 34 -Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984 (theOrdinance). In case where requirements differ, the provisions of or directives issued under the Ordinance have beenfollowed.

2.2 The unconsolidated condensed interim profit and loss account and unconsolidated condensed interim statementof comprehensive income and notes thereto for the quarters ended June 30, 2012 and 2011 are also included inthese unconsolidated condensed interim financial statements which were not subjected to review.

2.3 These unconsolidated condensed interim financial statements do not include all the information and disclosuresrequired in the annual financial statements, and therefore should be read in conjunction with the Corporation'sfinancial statements for the year ended December 31, 2011.

2.4 The US $ amount reported in the unconsolidated condensed interim balance sheet, unconsolidated condensedinterim profit and loss account and unconsolidated condensed interim cash flow statement are stated as additionalinformation, solely for the convenience of the users of these unconsolidated condensed interim financial statements.The US $ amounts in the unconsolidated condensed interim balance sheet have been translated into US $ at therate of Rs 94.55 = US $ 1 (December 31, 2011: Rs 89.9457 = US $ 1). The US $ amounts in unconsolidated condensedinterim profit and loss account, and unconsolidated condensed interim cash flow statement have been translatedinto US $ at the rate of Rs 94.55 = US $ 1 (June 30, 2011: Rs 85.95 = US $ 1).

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies, estimates, judgments and methods of computation adopted in the preparation of theseunconsolidated condensed interim financial statements are the same as those applied in the preparation of thefinancial statements of the Corporation for the year ended December 31, 2011, except for the change in estimateas stated in note 4.2.

4. PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 4.1 & 4.2 96,286,950 95,658,681Capital work-in-progress 1,225,464 973,548

97,512,414 96,632,229

June 30, December 31,2012 2011

(un-audited) (audited) --------------- Rupees in '000 --------------

Note


4.1 The following are the additions/transfers/adjustments and deletions during the period:

Six months period endedJune 30, June 30,

2012 2011(un-audited) (un-audited)

Additions / Transfers / Adjustments

OwnedBuildings on leasehold land 1,238 879Workshop and hangers 2,875 -Renovation and improvements 24,314 3,389Aircraft fleet / Engines overhauling 194,254 -Operating ground, catering,

communication and meteorological equipment 9,105 495Engineering equipment and tools 11,009 19,234Traffic equipment - 4,112Furniture, fixtures and fittings 7,878 4,535Motor transport 25,507 15,292Office equipment 103 106Computer and office automation 3,617 7,598Precision engineering equipment - 1,249Other equipment 1,371 12,093Capital spares 38,522 67,369 319,793 136,351Leased - aircraftEngines overhauling 3,847,230 1,247,977 4,167,023 1,384,328

Deletions / write offs - net book value

OwnedRenovation and improvements - * -Operating ground, catering, -communication and meteorological equipment - *Engineering equipment and tools - * - *Furniture, fixtures and fittings - * - *Motor transport 3,060 1,519Computer and office automation 140 -Reservation equipment - * -Other equipment - * - *Capital spares 169,189 8,894 172,389 10,413LeasedVehicles - 635 172,389 11,048

* Certain assets have been written off in these categories which had a net book value of Rs Nil.

-------- Rupees in '000 -------


4.2 Change in estimates

As a result of revaluation exercise conducted by an independent valuer as of December 31, 2011, the useful livesof aircraft fleet have been reassessed. In addition, the management has reassessed the residual values of aircraftand related capital spares. These changes in accounting estimates have an impact on depreciation expense forthe current period. Had there been no change in useful lives and residual values of aircraft and related spares,depreciation expense pertaining to aircraft fleet and capital spares for the period would have been higher byRs 21.943 million, whereas the effect on future periods is impracticable to ascertain considering subsequentmeasurement of aircraft fleet under the revaluation model and inherent uncertainties attached thereto.


(un-audited) (audited)

--------- Rupees in '000 -------

5. LONG-TERM DEPOSITS AND PREPAYMENTS

Deposits 5.1 8,092,063 8,136,943Current maturity of long-term deposits (101,013) -

7,991,050 8,136,943Prepayments 5.2 909,403 1,003,531

8,900,453 9,140,474

5.1 This includes maintenance reserve amounting to Rs 4,042.738 million (US $ 42.758 million) required to be keptby the Corporation under the terms of the leasing agreement with a lessor which is reimbursable to the Corporationagainst qualifying work carried out in accordance with the terms of the agreement. The Corporation is entitledto the unutilised remaining balance of the maintenance reserve upon conclusion of the lease agreement in casethe title to the underlying assets is transferred to the Corporation.

During the period, the Corporation has entered into an agreement with the lessor for early purchase of six A310-300 leased aircraft at a price of US $ 5.028 million per aircraft (i.e. aggregating US $ 30.168 million), which will beadjusted against the maintenance reserve. The remaining balance of the maintenance reserve will be availableto the Corporation as a credit for future purchases from the lessor. In accordance with the agreement, thetransaction for relevant aircraft will be executed on the delivery date of such relevant aircraft, i.e. the date atwhich the title of relevant aircraft will be transferred to the Corporation and a bill of sale will be executed by thelessor. Further, the Corporation has also signed lease amendment and termination agreement by virtue of whichthe original lease agreement of A310-300 aircraft will be terminated upon delivery of aircraft. The outstandingbalance of liabilities against asset subject to finance lease in respect of six A310-300 aircraft as at June 30, 2012is Rs 4,154.269 million (USD 43.937 million).

The title of six aircraft have been transferred to the Corporation subsequent to June 30, 2012, and therefore noadjustment has been made in these unconsolidated condensed interim financial statements. Accountingadjustments to reflect the aforementioned transaction shall be incorporated in the period subsequent to June30, 2012.

5.2 This represents consideration paid to Ex-Im Bank for the purpose of 12 year guarantees issued by it in favour ofthe Corporation, which is being amortised over the lease term.

6. OTHER RECEIVABLES

This includes sales tax receivable amounting to Rs 2,418.613 million (December 31, 2011: Rs 1,595.090 million).

Note





7. CASH AND BANK BALANCES

In hand 12,527 7,606In transit 41,920 47,103 54,447 54,709With banks:

- in current accounts 1,987,502 660,755- in deposit accounts 185,946 179,350 2,173,448 840,105

2,227,895 894,814

8. ADVANCE AGAINST EQUITY FROM GOVERNMENT OF PAKISTAN (GoP)

This represents advance received from the GoP as reimbursement of mark-up payments on term finance and sukukcertificates. Ordinary shares of Rs 10 each shall be issued thereagainst shortly.

9. LONG-TERM FINANCING

Financier Note Type of Facility Repayment Number of Mark-up June 30, December 31,facility amount period installments 2012 2011

(million) / mode (un-audited) (audited)

From Banking Companies - secured

Citibank, N.A. Demand 82 2006 - 2017 20 half yearly 5.28% fixed 3,604,490 3,795,958Finance USD

Citibank, N.A. Islamic 75 USD & 91. 2012 - 2014 30 monthly 3 month LIBOR + 4.25% & 9,455,000 8,994,570Finance 825 AED 3 month EIBOR + 3.75%

Faysal Bank Term 2,000 2013 - 2016 36 monthly 6 month KIBOR 2,000,000 2,000,000 Limited Finance PKR + 1.75%

KASB Bank 9.2 Demand 500 2012 - 2013 36 fortnightly 3 month KIBOR 347,000 -Limited Finance PKR + 2.5%

National Bank of Syndicate 120 2013 Bullet 3 month LIBOR 11,346,000 10,793,484 Pakistan - Bahrain Finance USD + 3.25% & 3.6%

National Bank of 9.3 Term 70 2010 - 2012 24 monthly 1 month LIBOR 1,654,625 2,098,733 Pakistan - Bahrain Finance USD + 5.50%

National Bank of 9.3 Demand 30 2010 - 2012 24 monthly 1 month LIBOR 709,125 1,124,321 Pakistan - Bahrain Finance USD + 5.50%

National Bank of 9.3 Demand 40 USD & 2011 - 2013 24 monthly 1 month LIBOR + 5.25% & 1 2,521,291 3,282,992 Pakistan - Bahrain Finance 75 SAR month SIBOR + 5.25%

Royal Bank of Demand 59.50 2009 - 2013 19 quarterly 3 month LIBOR 1,665,247 2,131,844 Scotland - Finance USD + 1.60% Netherlands

Others - unsecuredLong term loan - GoP 9.4 Term 8,000 2011 - 2020 16 half yearly 10% fixed 8,000,000 8,000,000

Finance PKR41,302,778 42,221,902

Current maturity shown under current liabilities (23,901,154) (10,957,001) 17,401,624 31,264,901

9.1 There has been no change in the securities for the above loans as disclosed in note 20 to the financial statementsfor the year ended December 31, 2011. However, one new finance facility has been obtained during the period, thedetails of which have been set out in note 9.2 below.

9.2 The finance is secured by way of 1st Pari Passu charge over the Corporation's receivables amounting to Rs 666.66million (with 25% margin).

9.3 During the period, the Corporation has not made principal and interest payments of long - term financing aggregatingUS $ 25.083 million and US $ 0.692 million respectively. The Corporation is currently in theprocess of rescheduling the overdue amounts. These overdue principal amounts are currently included in current maturity.

9.4 As of June 30, 2012, the Corporation has not paid the principal and accrued markup installments amounting toRs. 562.5 million and Rs. 1,845.24 million respectively. The overdue principal amount is included in current maturity.

-------- Rupees in '000 --------

------ Rupees in '000 -------


10. TERM FINANCE AND SUKUK CERTIFICATES

Note Security Repayment Number of Mark-up June 30, December 31, period installments 2012 2011

(un-audited) (audited)---------- Rupees in '000 -------

Term finance 10.1 GoP 2009- 2014 10 half yearly 6 month KIBOR 12,789,760 12,789,760 certificates guarantee + 0.85%

Sukuk 10.2 GoP 2012 - 2014 6 half yearly 6 month KIBOR 6,800,000 6,800,000 certificates Guarantee + 1.75%

19,589,760 19,589,760

Current maturity shown under current liabilities (11,929,920) (8,664,107) 7,659,840 10,925,653

10.1 The Corporation has not made payments of principal redemptions aggregating Rs 4.265 billion due on August20, 2011 and February 20, 2012 as per repayment schedule. The management applied for restructuring of TFCsprior to the due date and the Trustee on behalf of the TFC investors has not notified any event of default to theCorporation. Subsequent to the period end, the Economic Coordination Committee (ECC) has decided / approvedthe restructuring of term finance certificate from various banks amounting to Rs 12,790 million into a long-termdebt for a period of 5-7 years on the terms and conditions to be approved by Ministry of Finance. The restructuringprocess with a consortium of TFC investors is at advanced stage and it will also include restructuring of certainshort term borrowings (refer note 12.1.2). This overdue principal amount is included in current maturity.

10.2 The Corporation has not made payments of principal redemption amount of Rs 1,133 million which became dueon April 20, 2012. The Sukuk investors were requested to re profile the principal repayment schedule alongwithother terms of Sukuk Certificates with the assistance of Ministry of Finance. The revised proposal is currentlypending the approval of Ministry of Defence. This overdue principal amount is included in current maturity.


(un-audited) (audited)--------- Rupees in '000 --------

11. TRADE AND OTHER PAYABLES

Trade Creditors

Goods 4,065,714 6,190,476Services 5,861,833 4,093,180 Airport related charges 6,334,901 4,978,793

16,262,448 15,262,449OthersAccrued liabilities 5,790,126 5,528,459Advance against transportation (other than Hajj) 6,833,089 6,865,903Advance against transportation - Hajj 2,967,317 -Obligation for compensated absences 3,760,482 3,506,407Unredeemed frequent flyer liabilities 1,774,041 1,610,507Advance from customers 886,865 683,848Payable to employees' provident fund 4,409,938 3,378,726Unclaimed dividend - Preference shares 8,493 8,494Collection on behalf of others 6,670,091 4,187,483Customs and central excise duty 82,841 152,846Capital value tax 1,532,217 2,832,283Income tax deducted at source 181,244 239,180Short-term deposits 293,972 321,887

51,453,164 44,578,472

Note June 30, December 31,2012 2011


12. SHORT-TERM BORROWINGS

Short-term loans - secured 12.1 36,274,700 21,390,191Running finance under mark-up arrangements 12.2 4,609,230 4,410,836

40,883,930 25,801,027

12.1 Short-term loans - secured

Financier Security Facility Repayment June 30, December 31,amount Period 2012 2011(million) (un-audited) (audited)

From Banking Companies

Askari Bank Limited GoP Guarantee 1,500 12 months 1,500,000 1,500,000PKR (notes 12.1.2

& 12.1.3)

Habib Bank Limited GoP Guarantee 2,000 12 months 2,000,000 2,000,000PKR (notes 12.1.2

& 12.1.3)


& 12.1.3)


& 12.1.3)

Habib Bank Limited GoP Guarantee 1,000 12 months 1,000,000 1,000,000PKR

GoP Guarantee; rankingcharge over current andfixed assets amounting toRs 6,667 million; lien /specific right to set-off overreceivables in connectionwith sales routed throughcollection account in NBPAirport Branch, Karachi;lien over receivables andcargo proceeds from UAE

5,000 12 months 5,000,000 5,000,000PKR (notes 12.1.2

& 12.1.3)

National Bank of Pakistan

GoP Guarantee; rankingcharge over current andfixed assets amounting toRs 4,800 million; lien /specific right to set-off overreceivables in connectionwith sales routed throughcollection account in NBPAirport Branch, Karachi

Habib Allied International Bank Limited - London


3,600 12 months 3,600,000 3,600,000PKR (note 12.1.2)


Hypothecation of entirereceivables, book debts,s t o c k s a n d s p a r e samounting to Rs 2,667million and lien / specificright to set-off overreceivables in connectionwith sales routed throughcollection account in NBPAirport Branch, Karachi

2,000 12 months 2,000,000 1,880,680PKR (notes 12.1.2

& 12.1.3)

National Bank of GoP Guarantee 1,500 12 months 1,500,000 1,500,000 Pakistan PKR (note 12.1.2)

KASB Bank Limited GoP Guarantee 500 9 months 500,000 500,000PKR (note 12.1.2)

KASB Bank Limited GoP Guarantee 1,000 12 months 1,000,000 -

PKR

Balance carried forward 22,550,950 21,390,191

-------- Rupees in '000 --------

EURO receivables 9 3 months 850,950 809,511USD

-------- Rupees in '000 --------


Financier Security Facility Repayment June 30, December 31,amount Period 2012 2011(million) (un-audited) (audited)

Balance brought forward 22,550,950 21,390,191

---------- Rupees in '000 -----------

GoP Guarantee; ranking chargeover current and fixed assets of thecompany amounting to Rs 5,813million; lien / specific charge to set-off over all receivables inconnection with sales routedthrough collection account in NBPAirport Branch, Karachi



GoP Guarantee; ranking chargeover current and fixed assets of thecompany amounting to Rs 2,667Million; lien / specific charge to set-off over all receivables inconnection with sales routedthrough collection account in NBPAirport Branch, Karachi

Lien over UK and Saudi Arabiacollections and receivables





National Bank of Pakistan - Bahrain

4,360 12 months 4,360,000 - PKR

3,000 12 months 3,000,000 -PKR

2,000 12 months 2,000,000 -PKR

2,000 12 months 2,000,000 -PKR

25 12 months 2,363,750 -USD (note 12.1.4)

36,274,700 21,390,191

12.1.1 The borrowings in PKR carry mark up with a spread of 0.85% to 2.0% over 1 month and 3 months KIBOR (December31, 2011: spread of 0.85% to 2.0% over 1 month and 3 months KIBOR). The borrowings in foreign currency carrymarkup of 3.5% over 1 month LIBOR and 5.75% over 3 months LIBOR with a floor of 6% (December 31, 2011: aspread of 2.25% over 3 months LIBOR).

12.1.2 Subsequent to the period end, the Economic Coordination Committee (ECC) has approved the conversion ofshort-term loans amounting to Rs 20,700 million into a long-term debt for a period of 5-7 years on the terms andconditions to be approved by Ministry of Finance. The restructuring process is at advanced stage (refer note 10.1).As mentioned in Note 12.1.3, these short-term loans also include some overdue balances.

12.1.3 The Corporation has not paid the balances of these short-term loans that became due during the period. As atJune 30, 2012, the overdue balance of principal and markup of these short-term loans aggregate Rs 10,600 millionand Rs 615.501 million respectively.

12.1.4 During the period, the Corporation has not paid the principal and accrued markup relating to short-term loanamounting to US $ 10.417 million and US $ 0.520 million respectively.


12.2 Running finance under mark-up arrangements

Banks Security Facility Unavailed Repayment June 30, December 31,amount credit Period 2012 2011(million) (million) (un-audited) (audited)

-------- Rupees in '000 --------

Secured

Habib Bank Limited


KASB Bank Limited


The Bank of Punjab

United Bank Limited - Karachi

Un-secured

Habib American Bank

Citibank N.A.

Hypothecation chargeon all present and futurespare parts, accessoriesof aircraft assets and ondomestic receivables

EURO receivables

First pari passu chargeon certain specificreceivables amountingto Rs 533.330 million

F i r s t p a r i p a s s uhypothecation charge ofRs 767 million on allpresent and futurecurrent assets and lien /specific right to set-offover receivables inconnection with salesr o u t e d t h r o u g hcollection account inNBP Airport Branch,Karachi

Ranking charge onpresent and futurestocks and book debtsof Mirpur Azad JammuKashmir (AJK) for Rs1,000 million

Hypothecation chargeof Rs 3,427 million on allpresent and future stocka n d s p a r e s a n da s s i g n m e n t o freceivables from Karachiand Lahore

-

-

350 10 12 months 339,880 256,168PKR PKR

3 - On Demand 283,736 271,257 USD

400 39 12 Months 361,108 397,768PKR PKR

575 104 12 Months 470,532 572,750 PKR PKR

550 25 12 Months 524,602 546,220PKR PKR

2,570 253 12 months 2,317,357 2,017,009 PKR PKR

1.5 1.2 On Demand 28,365 79,827USD USD

3 - On Demand 283,650 269,837USD 4,609,230 4,410,836

12.2.1 The borrowings in PKR carry mark-up with a spread of 2.0% to 2.5% over 1 month and 3 months KIBOR(December 31, 2011: 2.0% to 2.5% over 1 month and 3 months KIBOR). Borrowings in US $ comprise offixed and variable rate borrowings. Fixed rate borrowing carries mark-up at the rate of 3.25% per annumwhereas variable rate borrowings carry mark-up with a spread of 3% to 5% over 1 month and 3 monthsLIBOR (December 31, 2011: 3% to 5% over 1 month and 3 months LIBOR).


13. CONTINGENCIES AND COMMITMENTS

13.1 Contingencies

13.1.1 There has been no change in the status of contingencies as disclosed in notes 29.1 (a) to (j) to the unconsolidatedfinancial statements for the year ended December 31, 2011 except for the following:

(i) As disclosed in note 29.1 (d), in respect of tax period of April 2011 the CIR(A) has issued orders againstappeals filed, whereby the levy of penalty amounting to Rs 2,000 million, default surcharge and 5% penalty amounting to Rs 12.648 million were deleted. Further, the Corporation has made payments to FederalBoard of Revenue (FBR) under the amnesty scheme announced by FBR thereby the show cause noticesissued on account of short payment of sales tax and federal excise duty for the months of May 2011 andJuly to November 2011 have lapsed.

(ii) As disclosed in note 29.1 (i), the Corporation is contesting several litigations mainly relating to suits filedagainst it for unlawful termination of contracts, breach of contractual rights and obligations, non-performanceof servicing stipulations due to negligence or otherwise. The Corporation's management is of the view thatthese cases have no sound legal footing and it does not expect these contingencies to materialise.Accordingly, no provision has been made in these unconsolidated condensed interim financial statementsagainst these claims amounting to Rs 4,800 million (December 31, 2011: Rs 4,700 million).

(iii) As disclosed in note 29.1 (j) the claims against Corporation not acknowledged as debt aggregate Rs 1,314million (December 31, 2011: Rs 1,184 million).

13.1.2 Contingencies relating to income tax matters are disclosed in note 18.

13.2 Commitments

(a) Commitments for capital expenditure amounted to Rs 75.597 million (December 31, 2011: Rs 27.525 million).

(b) Outstanding letters of credit amounted to Rs 218.020 million (December 31, 2011: Rs 402.311 million).

(c) Outstanding letters of guarantee amounted to Rs 495.710 million (December 31, 2011: Rs 531.210 million).

(d) The amount of future payments in operating lease arrangement relating to Aircraft 777-200 ER and the period inwhich these payments will become due is as follows:



Not later than one year 1,184,777 1,132,260Later than one year but not later than five years 4,344,181 4,508,326Later than five years - 187,847

5,528,958 5,828,433

--------- Rupees in '000 ----------

(e) There has been no change in the commitments as disclosed in note 29.2 (e) and (f ) to the unconsolidated financialstatements for the year ended December 31, 2011.



(un-audited) (un-audited) (un-audited) (un-audited)------------------------------ Rupees in '000 -----------------------------


14. REVENUE - net

Passenger 49,100,151 49,680,298 25,112,084 26,482,533Cargo 2,799,575 3,079,693 1,451,978 1,689,367Excess baggage 496,382 543,766 241,601 254,138Charter services 226,200 720,963 147,965 243,961Engineering services 291,063 439,219 119,849 216,896Handling and related services 322,225 322,839 168,819 172,874Mail 188,322 241,436 105,073 139,894Others 787,297 797,020 419,275 443,117

54,211,215 55,825,234 27,766,644 29,642,780

15. COST OF SERVICES - Others

Salaries, wages and allowances 5,183,059 4,944,495 2,596,864 2,480,509Welfare and social security costs 25,968 215,645 16,855 17,905Retirement benefits 489,587 578,106 236,621 327,825Compensated absences 168,655 54,443 486 15,185Legal and professional charges 3,087 47,778 1,175 38,049Stores and spares consumed 1,158,080 1,484,176 509,209 708,705Maintenance and overhaul 2,845,624 2,146,771 1,286,328 955,739Flight equipment rental 826,341 599,988 367,096 291,298Landing and handling 6,318,177 6,313,272 3,227,801 3,174,233Passenger services 1,775,924 1,908,207 921,471 972,163Crew layover 1,574,218 1,637,011 840,059 776,706Staff training 36,247 45,911 17,464 28,466Utilities 16,238 12,936 6,792 7,324Communication 15,996 30,331 9,489 16,622Insurance 626,090 710,287 317,760 352,014Rent, rates and taxes 307,509 354,753 160,136 128,215Printing and stationery 132,996 98,744 67,504 61,769Depreciation 3,278,904 3,184,121 1,702,808 1,801,686Amortisation 9,698 1,258 4,854 345Others 112,233 163,637 (8,949) 104,264

24,904,631 24,531,870 12,281,823 12,259,022

16. OTHER PROVISIONS AND ADJUSTMENTS

Capital spares written off 34,655 8,894 (28,119) 2,274Provision for slow moving and obsolete spares 129,594 109,831 50,791 61,912Provision against doubtful debts 143,502 149,477 143,502 149,477Provision against doubtful advances - 23,424 - 23,424

307,751 291,626 166,174 237,087


17. FINANCE COST

Mark-up on:- long-term financing 1,295,254 1,065,615 785,468 633,888- term finance certificates 840,256 910,367 407,514 465,866- short-term borrowings 1,887,594 1,332,140 892,668 622,970- advance from a subsidiary 8,852 5,663 8,852 4,277

4,031,956 3,313,785 2,094,502 1,727,001Profit on sukuk certificates 465,810 511,703 233,039 260,867Interest on liabilities against

assets subject to finance lease 536,252 655,713 205,139 321,700Interest on loans from provident fund 225,200 229,096 132,033 127,041Arrangement, agency and commitment fee 17,197 88,219 (11,957) 33,814Bank charges, guarantee

commission and other related charges 124,084 135,232 57,317 69,066

5,400,499 4,933,748 2,710,073 2,539,48918. TAXATION

Current - for the period 137,799 559,728 5,576 297,903 - for prior periods - 54,199 - 54,199

137,799 613,927 5,576 352,102


(un-audited) (un-audited) (un-audited) (un-audited)------------------------- Rupees in '000 -------------------------


18.1 In view of available tax losses, provision for minimum taxation has been made under section 113 of the IncomeTax Ordinance, 2001.

During the period, the Federal Board of Revenue (FBR) issued an S.R.O. 57 (I)/ 2012 dated January 24, 2012whereby the rate of minimum tax for the Corporation was reduced by 50%. Further, through Finance Act 2012,the rate of turnover tax under section 113 was revised downward from 1% to 0.5% of turnover. Therefore, theapplicable rate of minimum tax rate for the Corporation for tax year 2013 became 0.25% of turnover and theprovision for taxation has been made accordingly.

18.2 During the period, the FBR has issued a show cause notice to the Corporation alleging that as per annualstatement filed under section 149 of Income Tax Ordinance, 2001, tax amounting to Rs 393.355 million hasbeen short deducted. The Corporation has filed a reply to aforesaid notice. The management believes that theissue will be decided in favour of the Corporation without any additional tax liability.

18.3 There has been no change in the status of contingencies as disclosed in notes 37.1.2 and 37.1.3 to theunconsolidated financial statements for the year ended December 31, 2011 except for the following:

(i) In respect of tax year 2005, Deputy Commissioner Inland Revenue (DCIR) has issued a notice whereby thedemand of Rs 898.177 million was perused by the department for which a reply has been filed by theCorporation requesting that the proceedings be kept in abeyance till its resolution or disposal at AppellateTribunal Inland Revenue (ATIR) level.

(ii) In respect of tax year 2006, the Additional Commissioner Inland Revenue (ACIR) has issued an order datedJune 27, 2012 under section 122 (5A) of Income Tax Ordinance 2001 whereby the disallowances of expensesmainly on account of depreciation on leased aircraft were made. The Corporation is in the process of filingappeal against the aforementioned order.


19. EARNINGS PER SHARE - BASIC AND DILUTED

Loss after taxation 18,022,282 10,737,411 10,209,953 6,504,797

Weighted average number of ordinary shares outstanding 2,951,256,415 2,668,306,356 2,992,047,824 2,723,350,592

Loss attributable to:- 'A' class ordinary shares 6.11 4.02 3.41 2.39- 'B' class ordinary shares 3.06 2.01 1.71 1.20

19.1 Since the 'advance against equity' is convertible into ordinary share capital of the Corporation, its impacthas been taken into account while calculating 'earnings per share - basic (class A)'.

19.2 As at June 30, 2012 the authorised share capital of the Corporation was inadequate to cover the amountof ordinary shares to be issued in lieu of advance against equity. Therefore, the weighted average numberof shares as at June 30, 2012, exceeds the number of authorised shares of the Corporation. The Corporationis currently in the process of increasing its authorised share capital.

19.3 There were no dilutive potential ordinary shares outstanding as at June 30, 2011 and 2012.


(un-audited) (un-audited) (un-audited) (un-audited)---------------------------------Rupees in '000 -------------------------------


------------------------------------ Rupees --------------------------------------

--------------------------- No. of ordinary shares --------------------------

June 30, June 30,2012 2011

(un-audited) (un-audited)--------- Rupees in '000 ---------

Six months period ended

20. CASH GENERATED FROM OPERATIONS

Loss before taxation (17,884,483) (10,123,484)

Adjustments for non-cash and other items:Depreciation 3,366,365 3,311,311Gain on disposal of property, plant and equipment (12,040) (12,389)Amortisation 9,698 10,006Capital Spares written off 34,655 8,894Provision for slow moving stores and spares 129,594 109,831Provision for employees' benefits 1,041,575 1,066,757Provision for doubtful debts 143,502 149,477Provision for doubtful advances - 23,424Finance costs 5,400,499 4,933,748Unrealised exchange loss 3,837,501 134,156Profit on bank deposits (23,325) (18,411)Cash used in operations before working capital changes (3,956,459) (406,680)

Working capital changes:Increase in stores and spares (313,459) (148,342)Increase in trade debts (1,588,421) (1,471,772)Increase in advances (238,458) (124,083)Decrease in trade deposits and prepayments 132,640 349,321Increase in other receivables (891,068) (580,372)Increase in trade and other payables 6,874,692 10,882,505

3,975,926 8,907,257Cash generated from operations after working capital changes 19,467 8,500,577


21. TRANSACTIONS WITH RELATED PARTIES

The related parties comprise of subsidiaries, associates, joint ventures, directors, key management personnel andemployee benefit funds. The Corporation in the normal course of business carries out transactions with variousrelated parties. The transactions with related parties, other than those relating to issuance of tickets at concessionalrates to employees and directors according to the terms of employment / regulations and those not mentionedelsewhere in these unconsolidated condensed interim financial statements are as follows:

Relationship

Subsidiaries and joint venture

Profit oriented state-controlled entities- common ownership

Retirement funds

GoP - major shareholder

Key management personnel

Nature of transaction

Advance from a subsidiaryMarkup on advance from a subsidiaryPayments made against in-transit passengersSalaries paid

Purchase of fuelInsurance premiumInterest charged on loans

Contributions chargedInterest on loans from provident fund

Interest charged on loanAdvance against Hajj operationsAdvance against equity

Salaries, wages and other benefits

- 859,500

8,852 5,663

142,128 129,701 7,607 3,748

12,328,000 10,197,213 650,352 724,773 1,615,015 788,342

207,446 199,514

225,200 229,096

398,904 396,712 300,000 2,800,000 1,384,925 1,549,670

65,632 70,288

The Corporation's sales of transportation services to subsidiaries, associates, joint ventures, directors and keymanagement personnel are not material in the overall context of these unconsolidated condensed interim financialstatements.

22. BENAZIR EMPLOYEES' STOCK OPTION SCHEME (BESOS)

As disclosed in note 45 to the annual financial statements for the year ended December 31, 2011, the Securitiesand Exchange Commission of Pakistan (SECP) has granted exemption to State Owned Enterprises from theapplication of IFRS 2, 'Share-based payments' in respect of BESOS. Had the exemption not been granted, theaccumulated losses as at June 30, 2012 would have been higher by Rs 478.935 million (December 31, 2011:Rs 412.275 million), staff costs and loss after taxation of the Corporation for the six months period then endedwould have been higher by Rs 66.660 million (June 30, 2011: Rs 75.879 million) while earnings per share wouldhave been lower by Rs 0.02 and Rs 0.01 per share for class 'A' and 'B' shareholders respectively.

23. DATE OF AUTHORISATION FOR ISSUE

These unconsolidated condensed interim financial statements were authorised for issue on August 28th, 2012by the Board of Directors of the Corporation.

-------- Rupees in '000 --------

June 30, June 30,2012 2011

(un-audited) (un-audited)

Six months period ended




CONSOLIDATED CONDENSED INTERIMBALANCE SHEET

AS AT JUNE 30, 2012

Note June 30, December 31, June 30, December 31,2012 2011 2012 2011

(un-audited) (audited) (un-audited) (audited)----------- Rupees in '000 ------------- -------------- US$ in '000 ------------

ASSETS

NON CURRENT ASSETS

FIXED ASSETS

- Property, plant and equipment 4 149,141,931 146,214,419 1,577,387 1,625,585- Intangibles 2,928,459 2,973,990 30,973 33,064 152,070,390 149,188,409 1,608,360 1,658,649Long-term investments 26,307 86,088 278 957Receivable from Centre Hotel 714,270 679,487 7,554 7,554Long-term loans and advances 122,071 15,407 1,291 171Long-term deposits and prepayments 5 9,006,565 9,278,981 95,257 103,162

161,939,603 159,248,372 1,712,740 1,770,493CURRENT ASSETS

Stores and spares 4,085,610 3,895,832 43,211 43,313Trade debts 10,558,230 8,936,690 111,668 99,357Short-term loans and advances 528,465 329,433 5,589 3,663Trade deposits and prepayments 870,816 1,305,268 9,210 14,512Other receivables 6 3,479,957 2,423,473 36,805 26,944Short-term investments 568,846 594,749 6,016 6,612Taxation - net 91,748 93,680 970 1,042Cash and bank balances 7 5,397,900 3,239,943 57,090 36,021

25,581,572 20,819,068 270,559 231,464TOTAL ASSETS 187,521,175 180,067,440 1,983,299 2,001,957

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

capital 28,779,674 28,779,674 304,386 319,967Reserves (124,405,274) (107,420,680) (1,315,762) (1,194,284)Advance against equity from the Government of Pakistan (GoP) 8 1,384,925 - 14,648 -Attributable to the Holding company's shareholders (94,240,675) (78,641,006) (996,728) (874,317)Non-controlling interest 1,177,289 1,081,405 12,451 12,023TOTAL EQUITY (93,063,386) (77,559,601) (984,277) (862,294)

SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS - NET OF TAX 23,194,127 22,854,589 245,311 254,093

NON-CURRENT LIABILITIES

Long-term financing 9 31,261,812 44,633,808 330,638 496,231Term finance and sukuk certificates 10 7,659,840 10,925,653 81,014 121,469Liabilities against assets subject to finance lease 5.1 45,962,598 47,351,568 486,119 526,446Long-term deposits 451,966 444,817 4,777 4,945Advance rent - 4,831 - 54Deferred taxation 15,795,572 15,189,571 167,061 168,875Deferred liabilities 9,776,890 9,228,697 103,404 102,603

110,908,678 127,778,945 1,173,013 1,420,623CURRENT LIABILITIES

Trade and other payables 11 53,547,351 46,336,731 566,339 515,163 Accrued interest 6,103,623 4,727,025 64,554 52,554 Provision for taxation 913,126 1,072,935 9,658 11,929Short-term borrowings 12 40,883,930 25,801,027 432,405 286,851 Current maturities of:- Long-term financing 9 24,274,911 11,317,288 256,742 125,824 - Term finance and sukuk certificates 10 11,929,920 8,664,107 126,176 96,326 - Advance rent - 4,392 - 49 - Liabilities against assets subject to finance lease 8,828,895 9,070,002 93,378 100,839

146,481,756 106,993,507 1,549,252 1,189,535 TOTAL LIABILITIES 257,390,434 234,772,452 2,722,265 2,610,158 TOTAL EQUITY AND LIABILITIES 187,521,175 180,067,440 1,983,299 2,001,957

CONTINGENCIES AND COMMITMENTS 13

The annexed notes 1 to 21 form an integral part of these consolidated condensed interim financial statements.




CONSOLIDATED CONDENSED INTERIMPROFIT AND LOSS ACCOUNT (UN-AUDITED)


REVENUE - net 14 59,622,731 60,894,896 30,933,570 32,784,963 630,595 708,492

COST OF SERVICES

Aircraft fuel (30,232,514) (29,557,250) (15,086,280) (16,450,347) (319,752) (343,889)

Others 15 (29,221,611) (28,360,892) (14,434,953) (14,244,842) (309,060) (329,970)

(59,454,125) (57,918,142) (29,521,233) (30,695,189) (628,812) (673,859)

GROSS PROFIT 168,606 2,976,754 1,412,337 2,089,774 1,783 34,633

Distribution costs (3,210,770) (3,527,370) (1,864,723) (1,923,225) (33,958) (41,040)

Administrative expenses (3,884,514) (3,407,727) (2,042,354) (1,904,489) (41,084) (39,648)

Other provisions and adjustments (307,751) (268,202) (189,133) (200,424) (3,255) (3,120)

Exchange loss - net (4,348,735) (103,500) (3,611,238) (833,643) (45,994) (1,204)

Other operating income 172,043 88,650 (223,261) 41,669 1,820 1,031

(11,579,727) (7,218,149) (7,930,709) (4,820,112) (122,471) (83,981)

LOSS FROM OPERATIONS (11,411,121) (4,241,395) (6,518,372) (2,730,338) (120,688) (49,348)

Finance costs 16 (5,759,557) (5,097,794) (2,928,277) (2,623,227) (60,915) (59,311)

LOSS BEFORE TAXATION (17,170,679) (9,339,189) (9,446,650) (5,353,565) (181,603) (108,659)

Taxation 17 (308,150) (838,745) (136,535) (540,591) (3,259) (9,759)

LOSS FOR THE YEAR (17,478,829) (10,177,934) (9,583,185) (5,894,156) (184,862) (118,418)

Attributable to:

Equity holders of the Holding company (17,500,584) (10,215,761) (9,591,857) (5,926,200) (185,093) (118,859)

Non-controlling interest 21,755 37,827 8,672 32,044 231 441

(17,478,829) (10,177,934) (9,583,185) (5,894,156) (184,862) (118,418)

LOSS PER SHARE - BASIC AND DILUTED

Loss attributable to:

'A' class Ordinary shares of Rs 10 each 18 5.92 3.81 3.20 2.16 0.06 0.04

'B' class Ordinary shares of Rs 5 each 18 2.96 1.91 1.60 1.08 0.03 0.02


---------------------------------- Rupees --------------------------------------- --------------- US$ ----------------

June 30, June 30, June 30, June 30, June 30, June 30,2012 2011 2012 2011 2012 2011

------------------------------- Rupees in '000 ----------------------------- ---------- US $ in '000 -----------

Six months period ended Quarter ended Six months period endedNote



Loss for the period (17,478,829) (10,177,934) (9,583,185) (5,894,156)

Other comprehensive income

Unrealised loss on re-measurement of available for sale investments 1,963 (4,452) 2,801 (1,231)

Exchange differences on translation of foreign operations 447,883 375,734 (117,487) 375,734

Total comprehensive income (17,028,984) (9,806,652) (9,697,872) (5,519,653)

Attributable to: Equity holders of the Holding company (17,124,868) (9,932,579) (9,793,728) (5,639,797) Non-controlling interest 95,884 125,927 95,856 120,144

(17,028,984) (9,806,652) (9,697,872) (5,519,653)

Surplus / (deficit) arising on revaluation of operating fixed assets has been reported in accordance with the requirements of theCompanies Ordinance, 1984, in a separate account below equity.


CONSOLIDATED CONDENSED INTERIMSTATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)



----------------- Rupees in '000 ----------------- --------------- Rupees in '000 ---------------




CONSOLIDATED CONDENSED INTERIMCASH FLOW STATEMENT (UN-AUDITED)


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 19 (3,021,758) 8,145,297 (33,485) 94,768Profit on bank deposits received 23,325 18,411 258 214Finance costs paid (4,382,959) (4,132,483) (48,570) (48,080)Taxes paid (466,027) (490,411) (5,164) (5,706)Staff retirement benefits paid (494,076) (422,477) (5,475) (4,915)Long-term deposits and prepayments - net 279,565 161,175 3,098 1,875Net cash (used in) / generated from operating activities (8,061,930) 3,279,512 (89,338) 38,156

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (4,843,791) (1,671,448) (53,677) (19,447)Proceeds from sale of operating fixed assets 172,403 14,543 1,910 169Currency translation differences 1,112,889 (1,493,472) 12,333 (17,376)Purchase of intangibles - - - -Payments against long term loans and advances (106,664) - (1,182) -Short term investments - net - 508,296 - 5,914Net cash used in investing activities (3,665,163) (2,642,081) (40,616) (30,740)

CASH FLOWS FROM FINANCING ACTIVITIES

Advance against equity 1,384,925 1,549,670 15,347 18,030Repayment of long-term financing (761,374) - (8,437) -Proceeds from long-term financing 347,000 1,875,753 3,845 21,824Redemption of term finance certificates - (2,560) - (30)Receipt / (payment) of advance rent (9,223) - (102) -Proceeds from long-term deposits 7,149 - 79 -Payment of dividend to non-controlling interest - - - -Repayment of obligations under finance lease - net (2,166,329) (4,158,868) (24,006) (48,387)Net cash generated from financing activities (1,197,852) (736,005) (13,274) (8,563)

Decrease in cash and cash equivalents (12,924,946) (98,574) (143,228) (1,147)

Cash and cash equivalents at the beginning of the year (22,561,084) (16,737,115) (250,013) (194,730)

Cash and cash equivalents at the end of the period (35,486,030) (16,835,689) (393,241) (195,877)

CASH AND CASH EQUIVALENTS

Cash and bank balances 7 5,397,900 5,916,504 59,817 68,837Short-term borrowings 12 (40,883,930) (22,752,193) (453,058) (264,714)

(35,486,030) (16,835,689) (393,241) (195,877)



-------Rupees in '000-------- -----------US$ in '000----------

Six months period ended Six months period endedNote


CONSOLIDATED CONDENSED INTERIMSTATEMENT OF CHANGES IN EQUITY (UN-AUDITED)


Issued,subscribed,and paid-upcapital

Unrealisedloss onremeasur-ement ofinvestments

Advanceagainstequity

Capitalreserves

Revenuereserves

Foreigncurrencytranslationreserves

Accumulatedloss

Otherreserves

Total Non-controllinginterest

Total

Balance as at January 1, 2011

Total comprehensive income for the period ended June 30, 2011:

- Loss for the period

- Other comprehensive income for the period:

- Currency translation differences

- Unrealised loss on re-measurement of investments

Total comprehensive income for the period transferred to equity

Surplus on revaluation

Surplus on revaluation of operating fixed assets realised during the period on account of incremental depreciation charged thereon - net of tax

Advance against Equity

Balance as at June 30, 2011

Balance as at January 1, 2012

Total comprehensive income for the period ended June 30, 2012:

- Loss for the period

- Other comprehensive income for the period:

- Currency translation differences

- Unrealised gain on re-measurement of investments

Total comprehensive income for the period transferred to equity

Surplus on revaluation

Surplus on revaluation of operating fixed assets realised during the period on account of incremental depreciation charged thereon - net of tax

Advance against equity

Balance as at June 30, 2012

25,774,948 - 2,501,038 1,779,674 27,899 2,570,423 (89,212,633) 573 (56,558,078) 1,191,149 (55,366,929)

- - - - - - (10,215,761) - (10,215,761) 37,827 (10,177,934)

- - - - - 285,085 - 2,549 287,634 88,100 375,734

- - - - (4,452) - - - (4,452) - (4,452)

- - - - (4,452) 285,085 (10,215,761) 2,549 (9,932,579) 125,927 (9,806,652)

- - - - - - - - - - -

- - - - - - 52,364 - 52,364 - 52,364

- 1,549,670 - - - - - - 1,549,670 - 1,549,670

25,774,948 1,549,670 2,501,038 1,779,674 23,447 2,855,508 (99,376,030) 3,122 (64,888,623) 1,317,076 (63,571,547)

28,779,674 - 2,501,038 1,779,674 22,781 2,987,298 (114,722,720) 11,249 (78,641,006) 1,081,405 (77,559,601)

- - - - - - (17,500,584) - (17,500,584) 21,755 (17,478,829)

- - - - - 367,666 (3,144) 9,232 373,754 74,129 447,883

- - - - 1,963 - - - 1,963 - 1,963

- - - - 1,963 367,666 (17,503,728) 9,232 (17,124,867) 95,884 (17,028,983)

- - - - - - - - - - -

- - - - - - 140,273 - 140,273 - 140,273

- 1,384,925 - - - - - - 1,384,925 - 1,384,925 -

28,779,674 1,384,925 2,501,038 1,779,674 24,744 3,354,964 (132,086,175) 20,481 (94,240,675) 1,177,289 (93,063,386)


Attributable to the Holding company's shareholdersReserves



NOTES TO AND FORMING PART OF THE CONSOLIDATED CONDENSEDINTERIM FINANCIAL STATEMENTS (UNAUDITED)


1. THE GROUP AND ITS OPERATIONS

1.1 The "Group" consists of Pakistan International Airlines Corporation, i.e. the Holding company, its subsidiaries andan associate.

Pakistan International Airlines Corporation

Pakistan International Airlines Corporation (the Holding company) was incorporated on January 10, 1955 underPIAC Ordinance, 1955, which was subsequently repealed and replaced by the Pakistan International AirlinesCorporation Act, 1956 (PIAC Act). The shares of the Holding company are quoted on all Stock Exchanges of Pakistan.The principal activity of the Holding company is to provide commercial air transportation, which includes passenger,cargo and postal carriage services. Other activities of the Holding company include provision of engineering andallied services. The head office of the Holding company is situated at PIA Building, Jinnah International Airport,Karachi.

Subsidiaries

PIA Investments Limited (PIAIL) was incorporated on September 10, 1977, in Sharjah, United Arab Emirates, as alimited liability company under a decree issued by H.R.H. the Ruler of Sharjah and is currently registered in BritishVirgin Islands. During 1986, PIAIL was registered in British Virgin Islands under International Business CompaniesOrdinance, 1984, (now BVI Business Companies Act, 2004) as a company limited by shares. The principal activitiesare to carry on business as promoters of and investors in projects related to construction, development and operationof hotels, motels and restaurants throughout the world. The Holding company's controlling interest in PIAIL is 100%(December 2011: 100%). Following are the details of PIAIL’s subsidiaries:

Location Nature of Effective Effectivebusiness ownership ownership and

and voting voting powerpower of of the HoldingPIAIL (%) company (%)

● RHC Operating LLC State of Owner of 100 100

Delaware, USA RooseveltHotel,

New York

● Minhal France (Curacao) N.V. Luxembourg See note (A) 100 100[Formerly Minhal France (Curacao)N. V.]

● Minhal France B.V. Netherlands See note (A) 100 100

● Minhal France S.A. (MFSA) France Owner of 90 90Scribe

Hotel, Paris

● PIA Fuel Management Limited British Virgin See note (A) 100 100Islands

Note (A): These companies are intermediary holding companies except PIA Fuel Management Limited, whichis a dormant company.


Note (B): Roosevelt Hotel Corporation N. V. (RHC) is the intermediary holding company and a sole member of RHCOperating LLC, a company which owns the Roosevelt Hotel. In 2004, to comply with the requirement of loan , RHCtransferred the net operating assets of the Hotel to RHC Operating LLC.

Skyrooms (Private) Limited (SRL) was incorporated on May 20, 1975 in Pakistan as a private limited companyunder the Companies Ordinance, 1984. SRL runs and manages 'Airport Hotel', Karachi. SRL is a wholly ownedsubsidiary of the Holding company.

The subsidiaries of the Holding company, PIA Holding (Private) Limited, PIA Shaver Poultry Breeding Farms(Private) Limited and PIA Hotel Limited, had applied under the 'Easy Exit Scheme' announced by the Securitiesand Exchange Commission of Pakistan (the SECP) for voluntary winding up. Assets and liabilities of these subsidiarieswere taken over by the Holding company, and, accordingly, not consolidated in these financial statements.

Special Purpose Entities (SPE) formed for acquiring aircraft have not been consolidated in these financial statementsas the shareholding, controlling interest, risk and rewards of SPE rests with the trustees' representing foreign banks.

Abacus Distribution Systems Pakistan (Private) Limited (Abacus) was incorporated in Pakistan on October 12,2004 as a private company limited by shares under the Companies Ordinance, 1984. The registered office of Abacusis situated at Karachi. Abacus markets and distributes a computer reservation system which incorporates a softwarepackage that performs various functions including real time airline seat reservation, schedules, bookings for avariety of air, car and hotel services, automated ticketing and fare displays. The Holding company's interest inAbacus is 70% which will increase to 75% over a period of nine years ending in year 2013. Abacus has beenconsolidated on the basis of its unaudited financial statements as the same is not considered to be material tothese consolidated financial statements.

Associate

Minhal Incorporated (Minhal), Sharjah was incorporated on January 1, 1977, in Sharjah, United Arab Emiratesas a limited liability company and is currently registered in British Virgin Islands. The principal activities of Minhalare to carry on business as promoters and the managers of projects related to construction, development andoperation of hotels, restaurants and clubs throughout the world. The Holding company's interest in the companyis 40%.

1.2 During the current period, the Holding Company incurred a net loss of Rs. 18,022.282 million (June 30, 2011:Rs. 10,737.411 million) resulting in accumulated loss of Rs. 136,898.736 million as of June 30, 2012 (December 31,2011: Rs. 119,016.727 million). Further, as of June 30, 2012, current liabilities of the Holding Company exceededits current assets by Rs. 123,395.725 million (December 31, 2011: Rs. 88,221.403 million).

The Government of Pakistan (GoP), being majority shareholder of the Holding Company, had through its financedivision's letter dated September 2, 2008 communicated that it would extend all maximum support to maintainthe Holding Company's going concern status. Accordingly, since then it has been extending support to the HoldingCompany through the following measures to ensure that it (the Holding Company) continues and sustains in thelong-term as a viable business entity:

- Reimbursement of financial charges on term finance and sukuk certificates payable by the Corporation. In thisrespect, amounts aggregating Rs. 9,287 million have been provided to the Corporation towards equity sincethe year ended December 31, 2008 to date;

- During the years ended December 31, 2009, and 2010 the GoP has provided long-term financing aggregatingRs. 8,000 million to meet working capital requirements; and

- Issuance / renewal of guarantees to financial institutions, both local and foreign so as to enable the Holding Company to raise funds.


During the previous years and the current period, the Holding Company continued to pursue approval of its business

plan with the GoP at various levels. Presentations on the business plan were made to the President and Prime

Minister of Pakistan during meetings held with them and the business plan was amended based on the guidelines

given during those meetings. During financial year 2011, the business plan was approved by the Economic Reforms

Unit of the Ministry of Finance and was submitted to the Economic Coordination Committee (ECC) of the Cabinet

for approval, which is awaited. Meanwhile, the ECC has, subsequent to June 30, 2012, accorded approval for extending

the repayment period of the term finance certificates aggregating Rs. 12,790 million alongwith conversion of certain

short term loans amounting to Rs. 20,700 million into long term loans.

The business plan includes GoP's support in term of providing necessary funding for recapitalization, restructuring

of existing loans and issuing GoP guarantees as and when required. The objectives of the business plan, among

other measures, include improving the governance structure and achieving operational efficiency through upgrading

of aircraft fleet, enhancing revenues and controlling costs.

In view of the situation described above, although material uncertainty exists which may cast doubt on the Holding

Company's ability to continue its operations in the foreseeable future, management believes that considering the

mitigating factors set out in the preceding paragraphs, the going concern assumption is appropriate and has, as

such, prepared these consolidated condensed interim financial statements on a going concern basis.

2. BASIS OF PREPARATION

2.1 These condensed interim financial statements of the Group for the six month period ended June 30, 2012, have

been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial

Reporting and provisions of and directives issued under the Companies Ordinance, 1984, (the Ordinance). In case

where requirements differ, the provisions of or directives issued under the Ordinance have been followed.

2.2 The comparative condensed interim profit and loss account and condensed interim statement of comprehensive

income and notes thereto for the six month periods ended June 30, 2012 and 2011 are also included in these

condensed interim financial statements which were not subjected to review.

2.3 These condensed interim financial statements do not include all the information and disclosures required in the

annual financial statements, and should be read in conjunction with the Group's December 2011 consolidated

financial statements.

2.4 The US $ amount reported in the consolidated condensed interim balance sheet, consolidated condensed interim

profit and loss account and consolidated condensed interim cash flow statement are stated as additional information,

solely for the convenience of the users of these consolidated condensed interim financial statements. The US $

amounts in the consolidated condensed interim balance sheet have been translated into US $ at the rate of Rs. 94.55

= US $ 1 (December 31, 2011: Rs. 89.9457 = US $ 1). The US $ amounts in consolidated condensed interim profit and

loss account, and consolidated condensed interim cash flow statement have been translated into US $ at the rate

of Rs. 94.55 = US $ 1 (June 30, 2011: Rs. 85.95 = US $ 1)

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 The accounting policies, estimates, judgments and methods of computation adopted in the preparation of these

consolidated condensed interim financial statements are the same as those applied in the preparation of the financial

statements of the Group for the year ended December 31, 2011.


Additions / Transfers / AdjustmentsOwnedBuildings on leasehold land 1,238 10,631Workshop and hangers 2,875 -Renovation and improvements 24,314 3,389Aircraft fleet / Engines overhauling 194,254 -Operating ground, catering,communication 9,105 495

and meteorological equipmentEngineering equipment and tools 11,009 19,234Traffic equipment - 4,112Furniture, fixtures and fittings 7,878 53,530Motor transport 25,507 18,886Office equipment 103 106Computer and office automation 3,617 7,598Precision engineering equipment - 1,249Other equipment 1,371 12,093Capital spares 38,522 67,369

319,793 198,692Leased - aircraftEngines overhauling 3,847,230 1,247,977

4,167,023 1,446,669Deletions

OwnedRenovation and improvements - * -Operating ground, catering,communication

and meteorological equipment - Engineering equipment and tools - * Furniture, fixtures and fittings - * - *Motor transport - * - * Computer and office automation 3,060 1,519Reservation equipment 140 -Other equipment - * -Capital spares - * - *

169,190 8,894 172,390 10,413

Leased Vehicles - 635

172,390 11,048

* Certain assets have been written off in these categories which had a net book value of Rs Nil.

4.2 Change in Estimates

As a result of revaluation exercise conducted by an independent valuer as of December 31, 2011 the useful livesof aircraft fleet have been reassessed. In addition, the management has reassessed the residual values of aircraftand related capital spares. These changes in accounting estimates have an impact on depreciation expense for thecurrent period. Had there been no change in useful lives and residual values of aircraft and related spares,depreciation expense pertaining to aircraft fleet and capital spares for the period would have been higher byRs. 21.943 million, whereas the effect on future periods is impracticable to ascertain considering subsequentmeasurement of aircraft fleet under the revaluation model and inherent uncertainties attached thereto.



4. PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 147,898,444 144,817,713Capital work-in-progress 1,243,487 1,396,706

149,141,931 146,214,419

4.1 Following are the additions / transfers and deletions during the period:

----------- Rupees in '000 ----------

June 30, June 30,2012 2011


Six month period ended

----------- Rupees in '000 ----------




5. LONG-TERM DEPOSITS AND PREPAYMENTS

Deposits 8,097,162 8,180,751Current maturity of long-term deposits - (224,300)

8,097,162 7,956,451Prepayments 909,403 1,322,530

9,006,565 9,278,981

5.1 This includes maintenance reserve amounting to Rs. 4,042.738 million (US $ 42.758 million) required to be kept bythe Holding Company under the terms of the leasing agreement with a lessor which is reimbursable to the HoldingCompany against qualifying work carried out in accordance with the terms of the agreement. The Holding Companyis entitled to the unutilised remaining balance of the maintenance reserve upon conclusion of the lease agreementin case the title to the underlying assets is transferred to the Holding Company.

During the period, the Holding Company has entered into an agreement with the lessor for early purchase of sixA310-300 leased aircraft at a price of US $ 5.028 million per aircraft (i.e. aggregating US $ 30.168 million), which willbe adjusted against the maintenance reserve. The remaining balance of the maintenance reserve will be availableto the Holding Company as a credit for future purchases from the lessor. In accordance with the agreement, thetransaction for relevant aircraft will be executed on the delivery date of such relevant aircraft, i.e. the date at whichthe title of relevant aircraft will be transferred to the Holding Company and a bill of sale will be executed by thelessor. Further, the Holding Company has also signed lease amendment and termination agreement by virtue ofwhich the original lease agreement of A310-300 aircraft will be terminated upon delivery of aircraft. The outstandingbalance of liabilities against asset subject to finance lease in respect of six A310-300 aircraft as at June 30, 2012, isRs. 4,154.269 million (USD 43.937 million).

The title of six aircraft have been transferred to the Holding Company subsequent to June 30, 2012 and thereforeno adjustment has been made in these consolidated condensed interim financial statements. Accounting adjustmentsto reflect the aforementioned transaction shall be incorporated in the period subsequent to June 30, 2012.

5.2 This represents consideration paid to Ex-Im Bank for the purpose of 12 year guarantees issued by it in favour of theHolding Company, which is being amortised over the lease term.

----------- Rupees in '000 ----------

6. OTHER RECEIVABLES

Considered goodClaims receivable 231,870 71,751Excise duty 100,007 100,000Sales tax receivable 2,152,796 1,595,090Receivable from GoP - 332,809Others 995,284 323,823

3,479,957 2,423,473Considered doubtful 177,077 177,077Less: provision for doubtful other receivables 6.1 (177,077) (177,077)

- - 3,479,957 2,423,473

6.1 Movement in provision is as follows:

Balance at the beginning of the period / year 177,077 177,077Provision for the period / year - -Balance at the end of the period / year 177,077 177,077



7. CASH AND BANK BALANCES

In hand 12,803 21,001 In transit 41,920 59,495

54,723 80,496 With banks: - in current accounts 2,171,511 1,515,369 - in savings accounts 3,171,666 1,644,078

5,343,177 3,159,447 5,397,900 3,239,943

--------- Rupees in '000 --------


(un-audited) (audited)---------- Rupees in '000 ---------

Note


8. ADVANCE AGAINST EQUITY FROM GOVERNMENT OF PAKISTAN

This represents advance received from the GoP as reimbursement of mark-up payments on term finance and sukukcertificates. Ordinary shares of Rs 10 each shall be issued thereagainst shortly.

9. LONG-TERM FINANCING

Type offacility

Financier Limit(million)

Repaymentperiod

Number ofinstallments /

mode

Mark-up June 30, December 31,2012 2011


From Banking Companies - secured

Citibank, N.A.

Citibank, N.A.

Faysal BankLimited

KASB Bank Limited

National Bankof Pakistan -Bahrain

National Bank of Pakistan- Bahrain

National Bank of Pakistan- Bahrain


Royal Bank ofScotland -Netherlands

JP Morgan Chase

JP Morgan Chase

Hong Kong ShanghaiBanking

Abacus International (pte) Limited Singapore

Others - unsecured

Long term loan - GoP

Demandfinance

Islamic finance

TermFinance

DemandFinance

Syndicate finance

Termfinance

Demandfinance

Demandfinance

Demandfinance

Loan

Mezzanine Finance

Loan

Loan

TermFinance

US $82

USD 75& AED 91.825

2,000PKR

500PKR

US $120

US $70

US $30

US $ 40 &SAR 75

US $59.50

75USD

56.5USD

28.867Euro

0.75USD

8,000PKR

2006 - 2017

2011 - 2014

2013 - 2016

2012 - 2013

2013

2010 - 2012

2010 - 2012

2011 - 2013

2009 - 2013

2011-2014

2011-2014

2004-2017

2006 - 2013

2011 - 2020

20 half yearly

30Monthly

36 monthly

36 fortnightly

Bullet

24 monthly

24 monthly

24 monthly

19 quarterly

Variable

Variable

Variable

Monthly

16 half yearly

5.28% fixed

3 month LIBOR + 4.25% &3 month EIBOR + 3.75%

6 month KIBOR+ 1.75%

3 month KIBOR+ 2.5%

3 month LIBOR+ 3.25% & 3.6%

1 month LIBOR+ 5.50%


1 month LIBOR+ 5.25% & 1 month

SIBOR + 5.25%


1 month LIBOR +5.85%

1 month LIBOR +5.85%

3 months EURIBOR + 1.15%

-

10% fixed

3,604,490

9,455,000

2,000,000

347,000

11,346,000

1,654,625

709,125

2,521,291

1,665,247

6,973,540

5,253,400

1,993,907

13,098

8,000,000

55,536,723

(24,274,911)

31,261,812

3,795,958

8,994,570

2,000,000

-

10,793,484

2,098,733

1,124,321

3,282,992

2,131,844

6,609,924

4,979,476

2,122,371

17,423

8,000,000

55,951,096

(11,317,288)

44,633,808

Current maturity shown under current liabilities

--------- Rupees in '000 ----------

9.1 There has been no change in the securities for the above loans as disclosed in note 21 to the consolidated financialstatements for the year ended December 31, 2011. However, one new finance facility has been obtained duringthe period, the details of which have been set out in note 9.2 below.

9.2 The finance is secured by way of 1st Pari Passu charge over the Holding Company's receivables amounting toRs. 666.66 million (with 25% margin).

9.3 During the period, the Holding Company has not made principal and interest payments of long - term financingaggregating US $ 25.083 million and US $ 0.692 million (approx Rs. 62 million) respectively. The Holding Companyis currently in the process of rescheduling the overdue amounts. These overdue principal amounts are currentlyincluded in current maturity.

9.4 As of June 30, 2012 the Holding Company has not paid the principal and accrued markup installments amountingto Rs. 562.5 million and Rs. 1,845.24 million respectively. The overdue principal amount is included in currentmaturity.


10. TERM FINANCE AND SUKUK CERTIFICATES

Term finance certificates(TFCs)

Sukuk certificates

Current maturity shown under current liabilities

Security

GoPGuarantee

GoPGuarantee

Repayentperiod

2009-2014

2012-2014

Number ofinstallments /

mode

10 half yearly

6 half yearly

Mark-up(%)

6 monthKIBOR+ 0.85%

6 monthKIBOR+ 1.75%

Note

10.2

10.2


(un-audited) (audited)---------- Rupees in '000 --------

12,789,760

6,800,000

(11,929,920) 7,659,840

12,789,760

6,800,000

(8,664,107) 10,925,653

10.1 The Holding Company has not made payments of principal redemptions aggregating Rs. 4.265 billion due on August20, 2011, and February 20, 2012 as per repayment schedule. The management applied for restructuring of TFCsprior to the due date and the Trustee on behalf of the TFC investors has not notified any event of default to theHolding Company. Subsequent to the period end, the Economic Coordination Committee (ECC) has decided /approved the restructuring of term finance certificate from various banks amounting to Rs. 12,790 million into along-term debt for a period of 5-7 years on the terms and conditions to be approved by Ministry of Finance. Therestructuring process with a consortium of TFC investors is at advanced stage and it will also include restructuringof certain short term borrowings (refer note 12.1.2).

10.2 The Holding Company has not made payments of principal redemption amount of Rs. 1,133 million which becamedue on April 20, 2012. The Sukuk investors were requested to re profile the principal repayment schedule alongwithother terms of Sukuk Certificates with the assistance of Ministry of Finance. The revised proposal is currently pendingthe approval of Ministry of Defence.



11. TRADE AND OTHER PAYABLES

Trade creditors

Goods 4,132,846 6,190,476 Services 5,866,187 4,102,748 Airport related charges 6,334,901 4,978,793

16,333,934 15,272,017Others

Accrued liabilities 5,806,001 6,555,344 Advance against transportation (unearned revenue) 9,800,406 6,865,903 Obligation for compensated absences- Holding company 3,760,482 3,506,407 Unredeemed frequent flyer liabilities 1,774,040 1,610,507 Advance from customers 893,893 683,848 Earnest money 2,144 2,144 Payable to employees' provident fund 4,409,938 3,378,726 Unclaimed dividend - Preference shares 8,493 8,494 Capital Value Tax 1,532,217 Collection on behalf of others 6,670,091 4,187,483 Customs and federal excise duty 82,841 2,985,129 Income tax deducted at source 181,244 244,433 Sales tax payable 6,840 5,076 Bed tax 11,438 2,432 Payable to EOBI/SESSI 350 447 Short-term deposits 293,972 321,887 Others 1,979,027 706,454

53,547,351 46,336,731

---------- Rupees in '000 ---------


12.112.2

36,274,700 4,609,230

40,883,930

21,390,191 4,410,836

25,801,027

12.1 Short term loans - secured

Financier

From Banking Companies

Askari BankLimited

Habib BankLimited

Habib BankLimited

Habib BankLimited

Habib BankLimited



Carried forward to next page

Security

GoP guarantee

GoP guarantee

GoP guarantee

GoP Guarantee andpromissor y notesamounting to Rs 2,133million

GoP guarantee

G o P G u a r a n t e e ;ranking charge overcurrent and fixedassets of the companyamounting to Rs 2,666million; lien / specificcharge to set-off overal l receivables inconnection with salesr o u t e d t h r o u g hcollection account inNBP Airport Branch,Karachi

G o P G u a r a n t e e ;ranking charge overcurrent and fixedassets of the companyamounting to Rs 2,667Million; lien / specificcharge to set-off overal l receivables inconnection with salesr o u t e d t h r o u g hcollection account inNBP Airport Branch,Karachi

Facilityamount(million)

PKR1,500

PKR2,000

PKR2,000

PKR1,600

PKR1,000

PKR2,000

PKR2,000

Maturity Date

12 months(notes 12.1.2 &

12.1.3)


12.1.3)


12.1.3)


12.1.3)


12.1.3)

12 months

12 months

1,500,000

2,000,000

2,000,000

1,600,000

1,000,000

2,000,000

2,000,000

12,100,000

1,500,000

2,000,000

2,000,000

1,600,000

1,000,000

-

-

8,100,000


(un-audited) (audited)---------- Rupees in '000 ---------Note


(un-audited) (audited)---------- Rupees in '000 ---------

12. SHORT-TERM BORROWING

Short term loans -securedRunning finance under mark-up arrangments


Financier

Brought forward from last page

Habib Allied InternationalBank Limited -London





National Bank ofPakistan


KASB Bank Limited

KASB Bank Limited


Security

Euro receivables

GoP Guarantee; ranking charge over current andfixed assets amounting to Rs 6,667 million; lien /specific right to set-off over receivables in connectionwith sales routed through collection account in NBPAirport Branch, Karachi; lien over receivables andcargo proceeds from UAE

GOP Guarantee

GoP Guarantee; ranking charge over current andfixed assets amounting to Rs 4,800 million; lien /specific right to set-off over receivables in connectionwith sales routed through collection account in NBPAirport Branch, Karachi

GoP Guarantee; ranking charge over current andfixed assets of the company amounting to Rs 5,813million; lien / specific charge to set-off over allreceivables in connection with sales routed throughcollection account in NBP Airport Branch, Karachi

GoP Guarantee; ranking charge over current andfixed assets of the company amounting to Rs 4,000million; lien / specific charge to set-off over allreceivables in connection with sales routed throughcollection account in NBP Airport Branch, Karachi

Charge over UK, Saudi Arabia, Bangladesh, & Omanreceivables

GoP Guarantee

GoP Guarantee

Hypothecation of entire receivables, book debts,stocks and spares amounting to Rs 2,667 millionand lien / specific right to set-off over receivablesin connection with sales routed through collectionaccount in NBP Airport Branch, Karachi


US $ 5 &US $ 4

5,000PKR

1,500PKR

3,600PKR

4,360PKR

3,000PKR

25US $

500PKR

1,000PKR

2,000PKR

Maturity Date

3 months


12.1.3)

12 months(note 12.1.2)


12 months

12 months



12 months


12.1.3)

12,100,000

850,950

5,000,000

1,500,000

3,600,000

4,360,000

3,000,000

2,363,750

500,000

1,000,000

2,000,000

36,274,700

8,100,000

809,511

5,000,000

1,500,000

3,600,000

-

-

-

500,000

-

1,880,680

21,390,191


(un-audited) (audited)------ Rupees in '000 -------

12.1.1 The borrowings in PKR carry mark up with a spread of 0.85% to 2.0% over 1 month and 3 months KIBOR (December31, 2011: spread of 0.85% to 2.0% over 1 month and 3 months KIBOR). The borrowings in foreign currency carrymarkup of 3.5% over 1 month LIBOR and 5.75% over 3 months LIBOR with a floor of 6% (December 31, 2011: aspread of 2.25% over 3 months LIBOR).

12.1.2 Subsequent to the period end, the Economic Coordination Committee (ECC) has approved the conversion of shortterm loans amounting to Rs. 20,700 million into a long-term debt for a period of 5-7 years on the terms andconditions to be approved by Ministry of Finance. The restructuring process is at advanced stage (refer note 10.1).As mentioned in Note 12.1.3, these short-term loans also include some overdue balances.

12.1.3 The Holding Company has not paid the balances of these short-term loans became due during the period. As atJune 30, 2012 the overdue balance of principal and markup of these short-term loans aggregate Rs. 10,600 millionand Rs. 615.501 million respectively.

12.1.4 During the period, the Holding Company has not paid the principal and accrued markup relating to short-termloan amounting to US $ 10.417 million and US $ 0.520 million respectively.


12.2 Running finance under mark-up arrangementFinancier

SecuredUnited Bank Limited - Karachi

National Bank ofPakistan


KASB Bank Limited

Habib Bank Limited

Bank of Punjab

Un-secured

Habib AmericanBank

Citibank N.A.

Security

Hypothecation charge of Rs 3,427 millionon all present and future stock and sparesand assignment of receivables fromKarachi and Lahore

First pari passu hypothecation charge ofRs 767 million on all present and futurecurrent assets and lien / specific right toset-off over receivables in connection withsales routed through collection accountin NBP Airport Branch, Karachi

EURO receivables

First pari passu charge on certain specificreceivables amounting to Rs 533.330million

Hypothecation charge on all present andfuture spare parts, accessories of aircraftassets and on domestic receivables

Ranking charge on present and futurestocks and book debts of Mirpur AzadJammu Kashmir (AJK) for Rs 1,000 million

-

-


PKR 2,570

PKR575

US $3

400PKR

350PKR

PKR550

1.5USD

3USD

Unavailed credit

(million)

253 PKR

104 PKR

-

39PKR

10PKR

25PKR

1.2 USD

-

Maturitydate

12 Months

12 Months

On demand

12 months

12 months

12 months

On Demand

On Demand

2,317,357

470,532

283,736

361,108

339,880

524,602

28,365

283,650

4,609,230

2,017,009

572,750

271,257

397,768

256,168

546,220

79,827

269,837

4,410,836

12.2.1 The borrowings in PKR carry mark-up with a spread of 2.0% to 2.5% over 1 month and 3 months KIBOR (December 31,2011: 2.0% to 2.5% over 1 month and 3 months KIBOR). Borrowings in US $ comprise of fixed and variable rate borrowings.Fixed rate borrowing carries mark-up at the rate of 3.25% per annum whereas variable rate borrowings carry mark-upwith a spread of 3% to 5% over 1 month and 3 months LIBOR (December 31, 2011: 3% to 5% over 1 month and 3 monthsLIBOR).

13. CONTINGENCIES AND COMMITMENTS

13.1 Contingencies

13.1.1 There has been no change in the status of contingencies as disclosed in notes 30.1 (a) to (j) to the consolidated financialstatements for the year ended December 31, 2011, except for the following:

(i) As disclosed in note 30.1 (d), in respect of tax period of April 2011 the CIR(A) has issued orders against appeals filed,whereby the levy of penalty amounting to Rs. 2,000 million, default surcharge and 5% penalty amounting to Rs. 12.648million were deleted. Further, the Holding Company has made payments to Federal Board of Revenue (FBR) under theamnesty scheme announced by FBR thereby the show cause notices issued on account of short payment of sales taxand federal excise duty for the months of May 2011 and July to November 2011 have been lapsed.

(ii) As disclosed in note 30.1 (i), the Holding Company is contesting several litigations mainly relating to suits filed againstit for unlawful termination of contracts, breach of contractual rights and obligations, non-performance of servicingstipulations due to negligence or otherwise. The Holding Company's management is of the view that these cases haveno sound legal footing and it does not expect these contingencies to materialise. Accordingly, no provision has beenmade in these consolidated condensed interim financial statements against these claims amounting to Rs. 4,800 million(December 31, 2011: Rs. 4,700 million).

(iii) As disclosed in note 30.1 (j) the claims against Holding Company not acknowledged as debt aggregate Rs. 1,314 million(December 31, 2011: Rs. 1,184 million).

13.1.2 Contingencies relating to income tax matters are disclosed in note 18.

13.2 Commitments

(a) Commitments for capital expenditure amounted to Rs. 75.597 million (December 31, 2011: Rs. 27.525 million).

(b) Outstanding letters of credit amounted to Rs. 218.020 million (December 31, 2011: Rs. 402.311 million).

(c) Outstanding letters of guarantee amounted to Rs. 495.710 million (December 31, 2011: Rs. 531.210 million).

(d) The amount of future payments in operating lease arrangement relating to Aircraft 777-200 ER and the period in whichthese payments will become due is as follows:



---------- Rupees in '000 -----------


(un-audited) (audited)------- Rupees in '000 -------

1,184,777 4,344,181

- 5,528,958

1,132,260 4,508,326

187,847 5,828,433

Not later than one yearLater than one year but not later than five yearsLater than five years


Six month period ended Quarter Ended

15. COST OF SERVICES - Others

Salaries, wages and allowances 9,505,535 6,210,519 5,002,706 2,639,178Welfare and social security costs 41,442 232,926 25,689 28,059Retirement benefits 489,587 578,106 236,621 327,825Compensated absences 168,655 54,443 486 15,185Legal and professional charges 3,087 47,778 1,175 38,049Stores and spares consumed 1,162,364 1,488,736 510,052 713,265Repair, Maintenance and overhaul 2,855,314 2,376,105 1,290,481 1,182,221Flight equipment rental 826,341 599,988 324,486 291,298Landing and handling 6,318,177 6,313,272 3,227,801 3,174,233Passenger services 1,775,924 1,908,207 921,471 972,163Crew layover 1,574,218 1,637,011 840,059 776,706Staff training 36,247 45,911 17,464 28,466Food Cost 20,165 288,513 9,889 279,549Hotel running expense - 1,318,639 (200,000) 757,257Utilities 35,112 31,869 18,541 23,575Communication 62,656 30,494 33,835 16,705Insurance 626,139 751,091 317,784 372,490Rent, rates and taxes 315,625 693,147 164,407 465,121Printing and stationery 103,466 99,002 37,806 61,913Amortisation 10,129 1,258 4,858 345Depreciation 3,284,987 3,402,694 1,705,889 1,910,719Others 6,441 251,183 (56,547) 170,520

29,221,611 28,360,892 14,434,953 14,244,842

16. FINANCE COSTS

Mark-up on:

- long term financing 1,663,156 1,235,315 969,476 721,894 - short term borrowings 1,887,594 1,332,149 892,664 622,979

3,550,750 2,567,464 1,862,140 1,344,873Return on term finance certificates 840,256 910,367 407,514 465,866Profit on sukuk certificates 465,810 511,703 233,039 260,867Interest on liabilities against assets subject to finance leases 536,252 655,713 248,183 321,700Interest to pension / provident fund 225,200 229,096 132,033 127,041Arrangement, agency and commitment fee 17,197 88,219 (11,957) 33,814Bank charges, guarantee

commission and other related charges 124,092 135,232 57,325 69,066 5,759,557 5,097,794 2,928,277 2,623,227

17. TAXATION

Current - for the period 308,150 838,745 171,615 540,591 - for prior periods - - - -

308,150 838,745 171,615 540,591


(un-audited) (un-audited) (un-audited) (un-audited)

14. REVENUE - net

Passenger 49,100,151 49,680,298 25,112,084 26,482,533Cargo 2,799,575 3,079,693 1,451,978 1,689,367Excess baggage 496,382 543,766 241,601 254,138Charter 226,200 720,963 147,965 243,961Engineering services 291,063 439,219 119,849 439,219Handling and related services 322,225 322,839 168,819 131,261Mail 188,322 241,436 105,073 139,894Room, food and beverages sales 5,234,985 4,711,913 3,077,852 2,648,938Others 963,828 1,154,769 508,349 755,652 59,622,731 60,894,896 30,933,570 32,784,963

--------Rupees in '000 --------- -------Rupees in '000 -------


17.1 In view of available tax losses, provision for minimum taxation has been made under section 113 of theIncome Tax Ordinance, 2001.

During the period, the Federal Board of Revenue (FBR) issued an S.R.O. 57 (I)/ 2012 dated January 24, 2012whereby the rate of minimum tax for the Holding Company was reduced by 50%. Further, through FinanceAct 2012, the rate of turnover tax under section 113 was revised downward from 1% to 0.5% of turnover.Therefore, the applicable rate of minimum tax rate for the Holding Company for tax year 2013 became 0.25%of turnover and the provision for taxation has been made accordingly.

17.2 During the period, the FBR has issued a show cause notice to the Holding Company alleging that as perannual statement filed under section 149 of Income Tax Ordinance, 2001, tax amounting to Rs. 393.355million has been short deducted. The Holding Company has filed a reply to aforesaid notice. The managementbelieves that the issue will be decided in favour of the Holding Company without any additional tax liability.

17.3 There has been no change in the status of contingencies as disclosed in notes 37.1.2 and 37.1.3 to theconsolidated financial statements for the year ended December 31, 2011, except for the following:

(i) In respect of tax year 2005, Deputy Commissioner Inland Revenue (DCIR) has issued a notice whereby thedemand of Rs. 898.177 million was perused by the department for which a reply has been filed by theHolding Company requesting that the proceedings be kept in abeyance till its resolution or disposal atAppellate Tribunal Inland Revenue (ATIR) level.

(ii) In respect of tax year 2006, the Additional Commissioner Inland Revenue (ACIR) has issued an order datedJune 27, 2012, under section 122 (5A) of Income Tax Ordinance 2001, whereby the disallowances of expensesmainly on account of depreciation on leased aircraft were made. The Holding Company is in the process offiling appeal against the aforementioned order.


(un-audited) (un-audited) (un-audited) (un-audited)

Six month period ended Quarter Ended

18. EARNINGS PER SHARE

- BASIC AND DILUTEDLoss after taxation 17,478,829 10,177,934 9,583,185 5,894,156

Weighted average number of ordinary shares outstanding 2,951,256,415 2,668,306,356 2,992,047,824 2,723,350,592

Loss attibutable to:A' class ordinary shares 5.92 3.81 3.20 2.16B' class ordinary shares 2.96 1.91 1.60 1.08

18.1 Since the 'advance against equity' is convertible into ordinary share capital of the Holding company, theimpact has been taken into account while calculating 'earnings per share - basic (class A)'.

18.2 There were no dilutive potential ordinary shares outstanding as at June 30, 2011 and 2012.

------No. of ordinary shares ---- ----- No. of ordinary shares ------

------------------------------------- Rupees-------------------------------------

-----------Rupees in '000 ----------- -----------Rupees in '000 -----------


19. CASH GENERATED FROM OPERATIONS AFTER WORKING CAPITAL CHANGES

Loss before taxation (17,170,679) (9,339,189)

Adjustments for non cash items:

Depreciation 3,285,422 3,528,749Gain on disposal of property, plant and equipment 13 (12,389)Amortisation on premium - 846Provision for gratuity - 2,700Amortization 10,201 10,006Provision for slow moving stores and spares 129,594 109,831Provision for employees' benefits 658,242 1,066,757Capital Spares written off 34,655 -Provision for doubtful debts - 149,477Finance costs 5,759,557 5,097,794Profit on bank deposits (33,907) -Cash generated from operations before working capital changes (7,326,902) 614,582

Working capital changes:

Decrease / (increase) in stores and spare parts (319,372) (153,823)Increase / (decrease) in trade debts (1,765,042) (2,561,826)Decrease / (increase) in advances (199,032) (127,092)Decrease in trade deposits and prepayments 434,452 349,321Increase in other receivables (1,056,484) (577,090)Increase / (decrease) in trade and other payables 7,210,620 10,601,225

4,305,142 7,530,715Cash generated from operations after working capital changes (3,021,758) 8,145,297

20. TRANSACTIONS WITH RELATED PARTIES

The related parties comprise of directors, key management personnel and employee benefit funds. The Group inthe normal course of business carries out transactions with various related parties. The transactions with relatedparties, other than those relating to issuance of tickets at concessional rates to employees and directors accordingto the terms of employment/regulations and those not mentioned elsewhere in these consolidated condensedinterim financial statements are as follows:

Retirement fundsContribution to Provident fund 207,446 100,448Interest on loans from provident fund 225,200 229,096

Advance against future dividend (PIAIL) - 856,000

Advance against equity from GoP 1,384,925 1,042,423

21. DATE OF AUTHORISATION FOR ISSUE

These consolidated condensed interim financial statements were authorised for issue on August 28, 2012 by theBoard of Directors of the Corporation.

June 30, June 30,2012 2011



--------Rupees in '000 -------

June 30, June 30,2012 2011



--------Rupees in '000 --------


Documents

Contents...notes forming part thereof for the six months period then ended (here-in-after referred to as the "interim financial information"). Management is responsible for the preparation