PIA Project

Causes of loss to PIA

Research Project on Determinants of Loss to PIA

Pakistan International Airlines Company

A Dissertation/Project to Fulfill the Requirements for Obtaining the Degree of Master in Business Administration

DEPARTMENT OF BUSINESS ADMINISTRATION G.C.UNIVERSITY, FAISALABAD

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Research Project on Determinants of Losses to PIA

Pakistan International Airlines Company

SUBMITTED BY:

AHSEN ALI 509ADNAN MEHMOOD 530ABEERAH ZAIDI 540

SUBMITTED TO:

Mr. HAZOOR MOHAMMAD SABIR



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DedicatedToOur

parents&

Teachers

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ACKNOWLEDGEMENT

When We start writing, We stop for while and think what to write? How to write? We have no words to express our feelings. But We have to write to offer our humblebees sense to “ALL MIGHTY ALLAH” The most beneficial, gracious and merciful who enable us to perceive higher ideas of life and helped us through out our life especially in writing this report and all blessing to His favorite PROPHET MUHAMMAD(PBUH) who is the greatest personality of this universe.

After God we owe our heartiest gratitude to our parents and our family whose prayers encouraged us to complete our task.

We are also extremely thankful to all of our teachers for their sympathetic treatment, reward less help, precious suggestions, constant encouragement and personal interest and kind guideline that enable to write our report.

At the end we shall like to thank all our class fellows who always helped us in our studies when we neededWe are also thankful to Mr. Ashraf(air traffic controller) and Mr. M. Nasir(salary Maintainer) For co-operating with us.

ABEERAH ZAIDIAHSEN ALI

ADNAN MEHMOOD

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Contents

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Synopsis…………...…………………………

Executive summary ………………………..

Introduction of organization…………….......

Departments……….…………......................

Objectives…………………………………….

Method of investigation……………………..

Data analysis………………………………...

Description of problem…….........................

Determinants………………........................

Conclusion and recommendations…….. …

Implementation of programme……………..

References…………….…………………...

Achievements and Recognitions………….

SWOT Analysis……………………………..

References………………………………...

Filled questionnaires……………………….

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Synopsis

Topic

The topic of our research report is the causes of losses to Pakistan

International Airlines (PIA).

Purpose

The purpose of conducting the research is to find out the problem of

Pakistan international airlines and suggest remedies for the problems.

Scope

Pakistan International Airlines (also referred to as PIA), is the national flag

carrier of Pakistan and the national airline operating passenger and cargo services

around the world. It is now suffering losses but it has the capacity to earn profit and

contribute towards the GDP of country.

Method

We get the information from net by using several search engines such as

Google, yahoo, msn, answers etc. We construct two questionnaires. One of them is

filled from customers and other is filled from PIA’s employees at Faisalabad airport.

We also visit airport for getting information and interviews.

Source

We get the data from primary as well as secondary sources. In secondary

sources we get most of the data from internet and newspapers also providing

sufficient information about current situation of the organization.

Fact and figures

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Major facts and figure that causing loss to Pakistan International airlines are

ageing fleets, Overage employees, high increase in fuel and insurance expenses, high

salary of staff, political element, overstaffing.

Executive Summary:

Pakistan International Airlines is the national flag carrier and was established in 1955.

It not only provides transportation services, but its operations extend to providing

cargo services and courier services also. Pakistan International Airlines serves two

markets – Domestic and International. In the domestic sector, it has out performed

itself by stretching its networks to areas where other airlines do not fly to. In the

international market it faces severe competition, especially due to the fact that these

international organizations are providing fares much lower than Pakistan International

Airlines. Internationally also, Pakistan International Airlines is encountered with a

severe and strong challenge with many renowned international names. Pakistan

International Airlines faces competition with not only international airlines but also

with local airlines on the various routes to the Middle East and the Gulf.

Due to fierce competition and rising oil prices, international aviation industry

regulations and some internal factors such as human resource issues of over

recruitment, de-motivated employees, mismanagement of resources both in case of

manpower and other resources, aged fleet, corruption and lack of accountability PIA

is facing a deep financial crisis. It is losing its market share both in international

market and domestic circuit. The present report is written about the current situation

of PIA and future plan of action for PIA.

The report comprises of three sections. First section introduces the organization and

gives an overview of Pakistan aviation industry. The second section focuses on

determining the problems areas and describing it. The third part of the report calls for

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the immediate changes that are required to make in PIA in order to take out some

better performance from the national flag carrier. It describes the department wise

strategies internally as well as strategies to face external threats such as rising oil

prices and providing better services in a competitive environment.

Introduction of organization

Pakistan International Airlines (also referred to as PIA), is the national flag carrier of

Pakistan and the national airline operating passenger and cargo services around the

world. Its main hubs are Jinnah International Airport, Karachi, the Allama Iqbal

International Airport, Lahore and the Islamabad International Airport,

Islamabad/Rawalpindi.

It also serves regional airports, including Peshawar International Airport, Peshawar,

Faisalabad International Airport, Faisalabad and Multan International Airport, Multan

that connect to the main hubs and have flights to the Middle East.

Pakistan International Airlines PIA can trace its beginnings to the days when Pakistan

still was not a nation. In 1946, Muhammed Ali Jinnah, also known as Quaid-e-Azam,

realized the need for an airline network for the forming country. He called upon the

help of an experienced industrialist Mirza Ahmad Ispahani. Orient Airways,

registered in Calcutta, was formed on October 23 1946, In February 1947, three DC-3

airplanes were bought from a company in Texas, and in May of that year, the airline

was granted a license to fly. Services were started in June from Calcutta to Akyab and

Rangoon. This was the first post war airline flight by a South Asian registered airline

company.

Two months after this service began, Pakistan as a nation was formed. Orient Airways

began relief flights to the new nation, and soon after, it moved operations to Karachi,

where it began the important route from Karachi to Dhaka. In addition, their initial

domestic route in Pakistan was established, from Karachi to Lahore to Peshawar, and

from Karachi to Quetta to Lahore.

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The government of Pakistan, realizing the operation was failing economically, asked

the airline to merge into a new national airline that the government was planning. On

March 11 of 1955, Orient Airways merged with the Government's proposed airline,

becoming Pakistan International Airlines Corporation. During the same year the

airline opened its first international service, under the PIA name, from Karachi to

London Heathrow Airport in London, United Kingdom, via Cairo International

Airport in Cairo, Egypt and Leonardo Da Vinci International Airport in Fiumicino,

Italy using Lockheed Constellations. The DC-3s continued operating the domestic

services in Pakistan.

The most important element of any airline service is the aircraft itself. Currently PIA

has 43 aircraft in its fleet. These aircraft are:

Types of Aircraft In Service

Airbus A310-300 12

Airbus A321-200 -

ATR 42-500 7

Boeing 737-300 7

Boeing 747-200 2

Boeing 747-367 6

Boeing 777-240ER 4

Boeing 777-240LR 2

Boeing 777-340ER 3

Total 43

Pakistan Aviation Industry:

Air Transportation is a fast growing industry, highly capital intensive, highly sensitive

to business cycles, facing increasingly deregulated environment and hence highly

competitive background. The transportation sector holds a very important position in

the economy of Pakistan. Currently it contributes almost 10% in the GDP.

The aviation sector was deregulated just 11 years ago. This encouraged many airlines

that stopped their operation many years back due to Millions of Civil Aviation

Authority dues. Bhoja, Hajvery and Raji were closed down, but they have been

granted license again.

Air Blue and Royal airlines have initiated their operations also and they are the

second already operating in Karachi-Dubai cargo flights.

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One market which is not served by the Private Airlines includes all flights to those

domestic which are not profitable. It is required by the government that PIA offers its

services in not so profitable areas, which is a liability of PIA being a semi private

organization. PIA calls it “loss making sector”.

Private airlines have stunned the aviation industry as they charge below cost fares. At

the moment when fuel prices are touching all-time high levels in the international

market, cut-throat competition among private airlines has placed a million-dollar

question about the feasibility of these airlines.

PIA operates in two major markets; Domestic and International. Pakistan

International Airlines has the lion’s share in the domestic market. As it is the oldest

and the pioneers it has the better fleet as compared to its competitors who are

comparatively newer in this segment. Besides this, Pakistan International Airlines has

a huge network of flights through out the country. The number of flights remains the

same during on-season and off-season.

Internationally also, Pakistan International Airlines is encountered with a severe and

strong challenge with many renowned international names. Pakistan International

Airlines faces competition with not only international airlines but also with local

airlines on the various routes to the Middle East and the Gulf.

Current Airlines of Pakistan: Pakistan International Airlines

Aero Asia

Air Blue

Shaheen Air International

Cargo Airlines of Pakistan: Pakistan International Cargo

DHL Cargo Pakistan

Royal Air Cargo

Star Air

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TCS Couriers

MARKET SIZE AND MARKET GROWTH:

The total market size for the year 2006-2007 was 14.199 million passengers as

compared to 14.615 million passengers for the year 2005-2006, therefore resulting to

an in decrease.

Defining the Problem

Problem is the PIA is getting losses for many years. No serious effort is done to get

out it from losses. During the last year Pakistan International Airlines (PIA) has

stained a loss of PKR13.4 billion ($207.5 million). Operationally, it was also

blacklisted by the European Union during the year, which hit its bottom line along

with its prestige.

Losses for the year have widened slightly from a loss of PKR12.76 billion recorded in

2006.

A fall of 0.2% in full-year revenue, to PKR70.48 billion, was mitigated by a fall in

expenses by 5.2% to PKR66.22 billion. However, non-operating costs, related to

increased borrowing, went up nearly 50%. Operating loss also came down to

PKR5.94 billion from PKR8.45 billion in 2006. Pakistan International Airline is

currently ranked amongst the top 20 airlines of Asia. It has the capacity of becoming

on top of the list. But due to certain reasons its market share has been decreasing both

in the domestic as well as in the international market. Although it is still occupying a

strong position in the domestic circuit being the national flag carrier but the current

position is threatening for the national flag carrier. During the last four years the

company has beard the accumulated loss in excess of 30 billion rupees, while its total

debt is almost reaching 1 billion $. The expenses of the company are increasing but

the profits are decreasing. All the shareholders’ money is gone and the company is

facing the worst financial situation. PIA has lost its market share in domestic airline

market, which has dropped to 69 % in the FY 2007/08. Things on international front

were also not so different for PIA, as national airline’s market share in the

international market dropped from 48 to 43 %. Profitability of PIA is decreasing. The

share price of PIA closed at Rs 5.25 on June 14, 2008, exhibiting capital loss of

approximately 14% since last month. On May 2, 2008 the price per share for the

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company was Rs 6.03. The company beard the lost of 13.39 billion Rs. In 2007, about

12 billion Rs. in 2006 and 4 billion Rs. in 2005. Pakistan International Airlines is

currently facing a loss of approximately 40 million Rs. per day.

Method of Investigation

We get the data from primary and secondary sources. Secondary data is collected

from research on internet by various search engines such as Google, yahoo, msn,

answers etc. We also get information from the PIA’swebsite.for the purpose of getting

the primary data we develop questionnaires ad visit of the organization. Where we

take the personal interviews of employees of different level. We construct two

questionnaires. These questionnaires are designed according to the needs of the

research. One questionnaire is filled from the customers and another is filled from the

employees of the organization. For the purpose filling the questionnaire the customer

are select randomly.

Problem Description:

According to our research the company is having the problem in the following areas.

The problems for Pakistan International Airlines include:

Over recruitment:

Pakistan International Airlines is a large organization with 18,043 employees. Its

fleet comprises of 43 planes. It operating planes are just 33. It means round about

525 employees per plane. The industry average is being between 150-250 people.

This describes the position of the company clearly. This drives the cost of the

company further.

De-motivated employees:

Pakistan International Airlines is a company which is constantly going in loss.

Higher number of employees and the company already going in loss de-motivates

the employees. The employees do not feel secure themselves in the company and

try to move to other successful organizations. Also certain issues such as

centralized decision making and salary issues also de-motivate the employees

taking their attention away from their job.

Nepotism and Political involvement during recruitment and selection:

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Pakistan International Airlines being the government organization has the strong

influence of the politicians and government officials. Reports say that Mr. Tariq

Kirmani was appointed chairmen PIA due to being a friend of Prime minister.

Similarly Mr. Kirmani appointed his own friend Director MIS at a heavy salary.

Selection and recruitment is not done on merit. Current deputy managing director

is another example of this who was a pilot by profession and now deputy

managing director still flies some hours a week to keep his license on.

Lack of experience relating to aviation industry for the top management:

Look at the background of former three chairmen of PIA. Mr. Tariq Kirmani was

from PSO, Mr. Zafar Khan was from PTCL and Mr. Ahmad Saeed was from

Service industry having no experience of aviation industry. What could they

contribute to the organization with no such knowledge?

Lapses in the management:

The PIA’s management is ineffective to resolve and plan at the right time. Planes

with damaged Nose Randome are grounded for consistent 9 days. For an Airline

with cargo aircraft and a frequency of eight weekly flights to USA, such an

inordinate delay in procuring Nose Radome is amazing to say the least. New

flights to America are thought to start but with American aviation industry there is

no talk. Strikes by engineers happen due to the mismanagement and cause a great

loss to the company. Million of rupees worth cargo off loading from A VVIP

flight is another example of this.

Low scale advertisements and awareness:

A common Pakistani may even not know about Pakistan International Airlines.

No advertisements and awareness to the organization’s brands in such a modern

era of marketing. Cricket stars and sportsmen are hired on heavy salaries but with

no profit to the organization. Pakistan International already being an ethnic airline

is just confining itself to its own country. No such efforts to enhance the brighter

and soft image of the nation as well as airline are made.

Government’s and Civil Aviation authority’ policies:

Pakistan International Airlines has to pay a big amount as an expense on its

borrowings from banks. Already being in such a big crisis, the company is getting

no support in this regard like WAPDA is getting. Also civil aviation authority of

Pakistan’ policies are hampering PIA a great deal. Pakistan International Airlines

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being a national carrier has to go to those routes which are going in loss. Routes

such as, Swat, Bahawalpur, Dalbandin etc are called socioeconomic routes and

PIA has to get to those routes despite of great loss. On these airports, airport staff

is greater numbers as compared to passengers. The money which is received as for

providing services to passengers is taxed by the government at a very high rate.

Rising fuel prices in the World:

There is been consistent rise in fuel prices in the international market. Fuel prices

have impacted on almost every airline in the world. This has affected Pakistan

international Airlines more than any other airline due to its aged fleet. New planes

are fuel efficient as compared to old ones. In an airline normally 30-35% of

expenses account for fuel expenses but in Pakistan International Airlines this

number goes to 45-50%. Due to these factors PIA has to charge more fare to

customers that’s dissatisfies the customers.

Global impact of 9/11 on aviation industry:

After the 9/11 attacks air traffic has been decreased all over the world. It has

affected Pakistan international Airlines also. Passengers are more inclined towards

traveling to other countries such as European countries. Air traffic in Asia,

especially in south Asia has decreased.

Aged fleet:

Pakistan International Airlines fleet has total 43 planes. Out of those 43, only 33

are operating at the moment. The average age of the fleet is 13 years which has

become 13 years with the induction of 4 new planes. Previously it was 14. Due to

aged fleet the fuel is consumed more and maintenance expenses are increase. Thus

theses factors result in increment in expenses. Due to the aged fleet and

maintenance problem PIA has to pay higher amount in terms of insurance cost.

Maintenance problems:

Beside having a large number of engineers, there is always been a question mark

on PIA’s fleet maintenance. Last year European Union banned 20 out of 42 planes

were banned from operating in Europe. This results a 4 billion Rs. loss to the

company just from Europe’s segment to the company. This ban was imposed just

due to the lack of proper maintenance.

Corruption at its peak:

Corruption is a sin that has hollowed Pakistani society bases. Like all other

departments of our country corruption is at its peak in Pakistan International

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Airlines. Sale of Roosevelt hotel in Dubai is a clear example of it. The hotel was

valued about 1 billion but it was sold only in 40 millions. The sale of PIA’s

kitchen centre in Karachi is another example of this. There a profit making unit of

the company was sold. It was generating great revenues for the company but was

sold confidentially.

Less technology advanced as compared to its competitors:

PIA is competing with the airlines from all over the country especially with the

Middle East airlines which are coming in with heavy investment. Its competitors

such as Emirates and Qatar airways have great capital. Theses Middle East

organizations are putting in newer and newer technology and acquiring greater

manpower. PIA being already in a financial crunch faces a tough task.

Poor image:

With already going in financial loss, 9/11 impact on the industry and above all incapability of Pakistan International Airlines’ management has badly damaged the image of the Airline. Due to all such problems the fares of PIA are higher but service is not up to that class. This also gives a bad image to the passengers.

Lack of training facilities:

Although PIA is running a training and development department in Karachi but it is in sufficient to feed such a big organization with almost 18000 employees. Special skills such as engineering, technicians are lacking. If they are there, they are not delivering.

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Data analysis

We filled the questionnaire from low level of management of PIA. Through this

questionnaire following facts and figures are disclosed to us. 60% of low level

management think that they are not part of decision making. The second question

shows that only 20% employees are not happy with the salary package. Response of

question six indicates that 60% employees are satisfied and 40% are partly satisfied

with the facilities provide in the department. Majority of the employees are satisfied

with quality of training program. Repair cost is the major cause of loss to PIA in the

opinion of employees. 80% employees are satisfied with code of conduct.60%

employees admit the political influence on working of PIA. Majority of employee

suggest that proper training is needed to make the organization successful. 60% of the

employees are not happy with high transfer rate.

On the other hand data collecting from customers reveal the following facts. 50% of

customers are not happy with the services of PIA. Non punctuality of departure and

arrival of flights also displeased the customers. Many customers angry with ticket

getting process.

By taking a view of profit and loss account of PIA that indicate many of the expenses

increases at a very high rate which causes loss to PIA. These expenses are fuel cost

that increases due to rapid rise in oil prices in recent years. Repairing expenses also

becoming the major of cost that is very as compared to others companies of same

business. Due to war against terrorism in Afghanistan is also badly affected the

revenue of PIA. Due to this war the insurance expenses also increases. And it also

causes to decrease the number passengers. As the value of rupee decreases which

causes a loss to company.

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Recommendations and suggestions:

Needed better functioning of human resource and administration department

Management is needed to perform it responsibility professionally. Reducing

costs and trying to achieve more market share by combining the organization.

Marketing department must deliver in order to create a strong figure for the

organization. It must be responsible for creating more sales and getting more

market share. Providing awareness about the good characteristics of the

organization. Getting information on related field and report to the top

officials.

Coping with fuel rising prices in a way as most successful airlines are doing

Modernizing the airline’s fleet is badly needed as well proper maintenance of

the fleet is required.

Must take advantage of the increment in the air transportation especially

towards Middle East countries and India.

Better and modern functioning of training and development department

Need for accountability.

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Implementation of program:

Human resources and administration department:

Pakistan International Airlines is a huge company with over 18, 000 employees. A

human resources and administration department is working but it is needed to be work

efficiently and according to the standards. If it would have been working properly

then there would not been 525 ratio of employees per plane.

Jobs must be designed by this department. Each and every position must be clearly

defined. From the chairman to a sales agent and even further down everyone must be

clear about his responsibilities. He should be held responsible for his job.

International standards for recruitment must be adopted. Right number of persons

must be appointed for a specific job. Proper advertisements for each and every job

must be done. So that as many talented candidates can come in front. PIA’s

manpower should be combination of youth and experience. Both the age groups shall

be included in order to gain profitability.

Rewards and incentives must be attached with the performance. Similarly there

should be a check if an employee is not fulfilling his or her responsibilities. Job

security must be done so that employees feel secure within the organization and

remain loyal and committed to it, work for its benefits. Employee participation in the

decision making must be enhanced.

For the top level management such as chairman or managing director people having

aviation industry experience must be hired. There should be no political or

government influence during recruitment or selection. Merit must be considered at

first.

Management issues:

There should be no compromise on discipline. Discipline should be the key factor for

the organization. Policies must be clearly defined. Goals and objectives should be

determined for the organization as a whole and individually as well. Management

must assure that each and every person is committed to his job and the organization is

going towards the achievement of its targets. Management should ensure the

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punctuality of flight, in flights services and their standard must be world class. Safety

and maintenance issues for the planes must be strongly checked. Management’s

perspective should be to increase the profitability and ensure the good image of

Pakistan. Security and safety of cargo must be ensured. It must be management’s

responsibility to ensure services to the passengers both in plane and at airport as well.

The management must talk to the government on roué rationalization. Only those

routes must be held which are profiting or which can provide profits in the future. The

management needs to bring all the available resources in use and bring the modern

facilities, softwares and information to the organization or at least report the need to

top level decision makers. Management should be done by objectives, both short term

and long term. Short term objectives to increase the profit and market share by

reducing the costs and expenses. Long term objectives must be image building,

providing state or the art equipment and fleet to the organization and creating

corporate culture and value in the organization.

Marketing department:

Pakistan International Airlines marketing department has two divisions. It is

passengers division and cargo division.

Passenger sales division must be held responsible to boost sales by introducing different types of packages. It must also have the responsibility for handling customer queries and complaints. Effective campaigning of the special interests tourists’ packages for Pakistan to increase the travel to Pakistan must be done. Soft and brighter image of Pakistan and PIA must be enhanced.

Cargo division must be responsible for supplying both perishable and non-perishable

goods in the global market place.

The major objectives of this division should be:

• To develop Strategic alliances with other carriers so as to increase the capacity on

the high yield sectors.

• Annually enhancing the cargo reservation services, terminal services and

warehousing services at domestic and international stations to be competitive other

carriers in the industry.

• Revisions of cargo fares and offerings on annual basis to optimize the full potential

of cargo space on all the sectors

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Marketing planning should be done in such a way:

• It must gather effective information regarding marketing and sales activities of

various airlines.

• Must Adopt and access the emerging softwares / programs which are needed to

remain competitive in the industry.

• Annual assignment of realistic sales targets must be given to each sales area

• Effective evaluation of the sales targets on monthly basis must be done to take

corrective measures for fulfillment of the sales targets.

• The organization must provide a lot of activities in-flight to ensure that the

passengers are entertained during their journey. These activities include movies,

music, and in-flight duty free shops.

•The pricing objective of PIA should be to maximize profits. It is considered an

airline which charges high prices as compared to its competitors. So it must provide

services to the passengers comparable to its price. Prices and services must be settled

in accordance with the industry.

PIA being huge organization must use a lot of promotional methods to persuade

people to use its services. These must include advertising (newspaper, internet),

through its own magazine, personal selling, sales promotion, and public relations.

Advertising is an impersonal form of communication which should be used by PIA in

many ways, such as TV ads, print ads.

PIA can also use internet for its promotion. The passengers must provide online

booking facility, online checking facility and up to date flight schedule.

PIA is treated much of an ethnic airline rather than being a commercial airline. Its

image must be advertised and portrayed in such a way so that every group and

segment of passengers can travel on it.

How to cope with rising fuel prices:

Most of the world airlines are having a great problem in handling rising fuel prices in

the international market. PIA is already in a financial crunch and such situation where

there is a price rise every day faces a difficult situation. PIA can adopt the policy of

hedging like many other airlines which are going in profit. It can borrow money from

banks with the help of government (as having full support of the government) and

hedge the fuel for certain periods.

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Another way to cope rising fuel prices is to insure the fuel or to sign future contract

with jet fuel providing companies such as Shell.

By maintaining the fleet in a good condition with the passage of time can also save

the fuel to great deal.

Modernization of fleet:

A big reason for the decrease of market share and profits is due to the aged fleet of

Pakistan International Airlines. PIA is competing with the rich and wealthy airline

companies from the Middle East. Average age of PIA’s fleet is 13 now with the

induction of 4 new planes, while its competitors have average age fleet between 7-8

years. PIA must modernize its fleet. At the moment it has 43 planes out of which only

33 are operating while rest of them are not in operating condition. PIA must

modernize and expand it fleet number to 55 in the coming two years. Fuel efficient

planes must be bought. It will not only enhance the brighter image but also will bring

great financial benefits by reducing maintenance cost and fuel consumption. The

modern fleet will be well equipped with all the modern facilities.

Explore more market:

India can be a great market for Pakistan international Airlines. It is a huge market and

needed to increase its flight to India. Similarly the frequency of flights can be raised

to profit making routes. According to IATA average annual growth in passengers will

be 5.8% for Asia pacific and 6.8% for Middle East from 2007-2011. PIA can take

advantage of this situation and by providing greater services it can get more market

share.

Training and development department:

Training and development must function properly. It must prepare the employees for

the upcoming challenges and threats in the industry. Both the airline’s staff and other

employees of the organization must be well equipped with the latest techniques and

skils used in the airline industry. Engineering department plays a vital role in this

regard. A lot of money can be saved if engineers and technicians are well equipped.

No need to go abroad for maintenance and over hauling of the planes.

Accountability:

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There should be proper check and balance in the organization. Everyone should be

held responsible for its responsibilities. There should be proper audit of each and

every department of the organization. If found any mishap, the responsible people

must be punished.

Finance:

Government of Pakistan holds 83% of the shares of PIA.13 % or more shares

can be sold through IPO’s so that more finance will come into the company.

Also private investors’ interest will rise. Both the government and private

interest will give a new look to the company. The way of thinking will be

changed entirely.

Pakistan international can lease its some of the international routes which are

going in loss (such as American routes) and it is thinking to close these

stations. Similarly it can arrange an agreement with domestic airlines.

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Benefits

By purchasing new fleets the repairing cost decreases and attracts the

customers that cause to decrease the cost and increase the revenue of PIA.

Fleet modernization will bring more security, safety, less maintenance

expenses and will project a brighter image of the airline.

By applying the modern techniques of management, management will focus

on its objectives and goal in an efficient and productive manner which will

reduce the expenses and focus on the achieving the profit

By properly marketing itself PIA will present a better image to the world. By

clearly describing facilities and projecting its image it will help in growing

market share

Training and development of employees will prepare the employees for

current tasks and for future challenges.

By removal of old employees it creates an opportunity for fresh energetic

candidates to show their performance. It also causes to reduce the cost because

their salaries have been increases very high.

By the publication of magazine the awareness of the people about PIA

increases. It increases the number of passenger that increases the revenue.

Timely decisions are possible by decentralizing the decision making power.

Strict control on inventory stock will reduced the cost.

By appointing employees on permanent basis the sense of ownership will

increases. When employees secure about future they can focus on their work

more efficiently.

By giving the importance to the suggestion of lower level management and

their participation in decision making, they wok with responsibility and tried

their best for the organization.

Reducing the HR budget by clearly defining the job and designing the jobs.

So right number of people and required number of people will work. A proper

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performance and reward system will induce employees to work effectively,

efficiently and remain loyal to the organization

Financial performance

During the first quarter of 2007, the airline achieved a 5% growth in overall revenue

mainly supported by 7.6% increase in passenger revenue which was partially lowered

by a 10% reduction in cargo revenue. The revenue growth was reduced due to the EU

ban from early March which meant only the Boeing 777 were able to operate into

Europe. This caused many of the European services to be put on hold until the aircraft

that were considered to be inefficient to be brought up to EU standards so they can

continue flying. Even with the fuel cost remaining at the 2006 level due to stable oil

prices in the first quarter 2007, the operating and financing cost increased in

proportion. The impact of 2006 salary hike, increased cost of leased aircraft and

higher maintenance cost of PIA fleet increased the overall operating expenses by

19%. Consequently, the airline suffered an operating loss of Rs 2.5 billion in the first

quarter.

Privatization

PIA is owned by the government of Pakistan. The privatization of PIA has been

announced but was never implemented by the government. Though PIA reported a

total turnover of $1 billion in 2005, profitability was affected due to doubling of

global fuel prices since 2000. The high oil prices have increased yearly losses. In first

six months of 2006, PIA has lost $100 million dollars (Rs. 6 billion). Another source

of PIA's inefficiency has been the over-staffing of employees over the past 10-20

years that has crippled the organization’s finances. Another reason for losses in PIA is

that the higher officials of PIA tend to go abroad with their families on the expense of

PIA. Back door discussions with potential buyers continue without any positive result.

Following the global trend, several steps towards outsourcing of non-core business

have been initiated. Catering units (starting with Karachi Flight Kitchen), Ground

Handling (starting with Ramp Services) and Engineering, are to be gradually carved

out of the airline and operated as independent companies.

24


Achievements and Recognitions

First airline from an Asian country to fly the Super Constellation.

First Asian airline to operate a jet aircraft.

First Asian airline to be granted maintenance approval by the US Federal

Aviation Administration (FAA) and the Air Registration Board, predecessor of

the British Civil Aviation Authority (CAA).

First non-communist airline to fly to the People's Republic of China, and

operate a service between Asia and Europe via Moscow.

First airline in Asia to induct the new technology Boeing 737-300 aircraft.

An IBM 1401, the first computer in Pakistan, was installed in PIA.

First airline in the world to operate scheduled helicopter services.

First airline to show in-flight movies on international routes.

PIA set up Pakistan's first planetarium at Karachi.

The first airline in South Asia to introduce auto-ticketing facility.

The first airline in the world to fly to Tashkent, capital of the newly

independent state of Uzbekistan.

First airline in the world to start Air Safari with jet aircraft.

First Asian airline to start flights to Oslo, the capital city of Norway.

First airline in the world to induct Boeing 777-200LR, the world's longest

range commercial airliner.

First airline in the world to take delivery of the Boeing 777-200LR Worldlier

(Longer Range Variant).

Pakistan International Airlines Flight Services Department was awarded the

ISO 9001:2000 certification award during May 2006.

First airline in the south east region to offer seat reservations through mobile

communications.

First airline in Pakistan to operate a flight with an all female crew at command

and serving in the cabin.

25

http://www.answers.com/topic/first


PIA was briefly featured in the Adam Sandler movie 'Anger Management.'

SWOT Analysis of Pakistan International Airlines:

Strengths:

• Domestic and International Reputation • Direct flights from small cities to foreign destinations • Organized distribution channels • Product Quality on domestic sector

Weaknesses:

• Centralized decision making • Aging Fleet • Ground services (lack of staff, improper management) • Less technologically advanced as compared to foreign airlines • High charges as compared to other airlines • Weak financial position.

Opportunities: • New product innovations • Improving quality by new techniques and resources• 2007-2011 great increase in world air transportation

Threats:

• Unstable Government policies • Inflation • Increasing competition • Increasing fuel prices.

26


References

http://www.piac.com.pk/http://en.wikipedia.org/wiki/Pakistan_International_Airlineshttp://www.answers.com/topic/pakistan-international-airlines?cat=biz-finhttp://news.bbc.co.uk/1/hi/business/1561315.stmPIA ANNUAL REPORTS(2004,2005,2006,and 2007)

Philip Kotler and Kevin Keller,”Marketing Management”12th edition

Mr. Ashraf(air traffic controller) 0344-7868287

Mr. M. Nasir(salary Maintainer) 0333-2386892

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http://news.bbc.co.uk/1/hi/business/1561315.stm

http://www.answers.com/topic/pakistan-international-airlines?cat=biz-fin

http://en.wikipedia.org/wiki/Pakistan_International_Airlines

http://www.piac.com.pk/

Documents

PIA Project