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In this report after giving a brief historical background, vision and mission of PIA, we have discussed its hierarchical structure and the values and services provided to the customers.

We also describe the strengths, weaknesses, opportunities and threats of PIA. Thirdly we have described the various corporate responsibilities of PIA along with the strategies followed for the selection of various the target segments. Our focus is to explore the reasons behind the downfall of national airline. As in few last years we have seen that the market share of PIA was continuously declining as compare to its domestic and international competitors. We find out that there are number of internal and external factor which causes the downfall of PIA. The lack of true leadership, government excessive interference, organizational internal conflicts and corruption and the new air aviation policies are the few major reasons behind the losing market share. In the end we sum up the whole findings of our report in terms of conclusion of the whole scenario and we also suggest some ways to the management of PIA that how they can overcome these crisis, how they can retain and motivate their employees, and what to do in order to gain their lost glory.

PIA for short, can trace its beginnings to the days when Pakistan still was not an independent state. In 1946 Muhammad Ali Jinnah realized the need for an airline network for the forming country and called upon the help of an experienced industrialist Mirza Ahmad Ispahani to develop a flag carrier for the nation. Meanwhile, an airline called Orient Airways, registered in Kolkata, was formed on October 23 1946. Services were started in June from Kolkata to Sittwe and Yangon. This was the first post-war airline flight by a South Asian registered airline company. Two months after this service began, Pakistan was formed. Orient Airways began relief flights to the new nation and, soon after, it moved its operations to Karachi, where it began flights to Dhaka on June 7, 1954. In addition, the first two domestic routes in Pakistan were established, from Karachi to Lahore to Peshawar, and from Karachi to Quetta to Lahore.

The Government of Pakistan, realizing the operation was failing economically, proposed that Orient Airways merge into a new national airline. On March 11 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, from Karachi to London Heathrow Airport.

In March 1960, PIA became the first Asian airline to enter the jet age when Boeing 707 services were introduced. The aircraft were wet leased from Pan American and in 1961 services were begun to John F. Kennedy International Airport in New York.

VISION OF PIA:

“To be a world class airline exceeding customer expectations through

Dedicated employees Committed to excellence.”

MISSION OF PIA:

“As a Symbol of National Pride, We Aspire to be a Choice Airline, Operating Profitably on Modern Commercial concepts and Capable of Competing with the Best in the International as well as Domestic Markets.”

HIRARCHY OF PIA:

This organization is divided into following departments: Human Resource and Administration, Marketing, Corporate Planning, Information Services, Finance, Flight Services, Flight Operation, Engineering, Procurement and Logistics, Customer Services, Training and Development, Quality Assurance. The organogram of the organization follows, with the Chairman at the top and directors of departments reporting to him. The structure is centralized with the top-level management making the decisions.

VALUES:

1. Customer Expectations

PIA is the most trusted name in the industry. The reason of its goodwill is according the expectation of their customers that PIA has fulfilled always. By providing competitive tariff, extensive care, and convenience to their valued and potential customers.

2. Service

PIA aims at providing valuable and unique services to its customers. They are more personalized and courteous to their customers. The services are valuable and rare; this is the reason why customers trust PIA.

3. Innovation

PIA currently has a number of 43 fleets and aims at increasing this numbers to 53 by the next few years.PIA is adoptive to changes and believe in innovation that’s create new ideas and translating these ideas into action.

4. Reliability

PIA is the most experience airline with its service with more than 53 years. This has built in PIA has become the most reliable airline. PIA is known for its loyalty and consistency.

5. Safety

The most challenging responsibility of any organization is to provide complete satisfaction to its employees and customers together. This satisfaction rewards favorable and easy working conditions. The in-flight services are customers friendly and the organizational the organizational environment is also employees oriented.

6. Cohesiveness

PIA has 12 departments working in their own direction and also provides a number of services including speedex courier service, catering etc. The most impressive part is these all department and services are integrated in a cohesive way.

SERVICES:

PIA offers two types of services.

Business Class

It’s the only Business Class service that feels like First Class. A comfortable seat makes all the difference on a long flight. PIA’s Business Class Seats elevate the concept of luxury to a new level, fully endorsing your decision to choose PIA Business Class. Sit back and relax in our exclusive Business Class Lounges at the Karachi, Lahore, and Islamabad airports. Our hospitable staff will ensure that you’re well looked after during your stay with us at the airport.

Business Class passengers arriving at Airport will receive a warm welcome from PIA. Our representatives will walk you right through all the arrival formalities so that you don’t have to stand in line or worry about clearance.

Economy Class

PIA’s economy class is also comfortable for passenger as Business class. Economy Class offer seats with a 32-inch pitch, adjustable footrests and “winglet” headrests for improved neck comfort. The personal TV provides on-going entertainment including audio and video on-demand choices.

Passengers enjoy the same caring service from our flight attendants, along with skillfully prepared meals and a wide range of in-flight entertainment options to choose from. Free newspapers are also provided to all Economy class passengers. The PIA in-flight magazine, Hamsafar, is provided to all passengers on all international flights.

FINANCIAL PERFORMANCE:

During the first quarter of 2007, the airline achieved a 5% growth in overall revenue mainly due to increase in passenger traffic. The revenue growth was lowered by a 10% reduction in cargo revenue. The EU ban on PIA in March 2007 reduced the revenue growth because only the Boeing 777 was allowed to enter in Europe. Many of the European routes were put on hold until the airplanes were repaired and brought up to EU standards. The impact of the 2006 salary rise, increased cost of leased airplanes, and higher maintenance cost of the 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 of 2008.

MAJOR COMPETITORS:

PIA is still holding the first position in market. It has 48% market share. Its major competitors are: Air blue and Shaheen International Airline.

MARKET SHARE:

Now PIA has the total market share of about 48% of total air transport in Pakistan.

PRIVATISATION:

PIA is owned by the government of Pakistan. In the late 1990s, the Government of Pakistan thought of giving the airline to the private sector due to the persistent losses suffered by the airline. The Government announced the privatization plans but was never implemented. The rising fuel prices are increasing the operating costs of the airline which consequently increase the losses. 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. Back door discussions with potential buyers continue without any positive results. 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.

PIA’s Network

Domestic Networks

International Networks

CHAPTER # 2: SWOT ANALYSIS

SWOT ANALYSIS OF PIA:

STRENGTHS

1. LEADING MARKET POSITION

PIA is one of Pakistan’s leading air carriers, with more than 800 daily flights. Around 150,000 passengers a month fly on PIA, making it one of the major operators in the domestic market in terms of passenger kilometers. PIA’s international market share was 43.5%, In the Domestic market, its market share was 69.4%. On a system-wide basis, PIA’s market share was 51.2% at the end of year 2007. Its strong market position is driven by consistently low fares as well as reliable service, frequent and convenient flights, use of new technologies like e-ticketing and self check-in terminals, comfortable cabins and superior customer service.

2. BRAND RECOGNITION

PIA has high brand recall. It is recognized by travelers all over the country. PIA is a national airline, operating passenger and cargo services covering eighty-two domestic and foreign. PIA has earned the number one ranking in customer satisfaction. This strong market position gives the company a scale advantage and helps it strengthen its brand image.

3. SUPERIOR OPERATING STRUCTURE

PIA has maintained its position as the low cost carrier. It has been first class Pakistani airline to use the latest technology. Factors’ contributing consists of different series of Boeing and Airbus and an efficient, high-utilization and point- to-point route structure. Flying one type of aircraft significantly simplifies scheduling, maintenance, flight operations, and training activities. PIA has continually achieved high asset utilization and employee efficiency. Superior operating structure serves as the primary competitive advantage of PIA.

4. NETWORK PRESENCE

PIA enjoys a strong network in key domestic and international destinations. The company’s network includes three the major airports in Pakistan, as well as major international airport such as Dubai International Airport. Having a strong network means that PIA can generate traffic feed for both its domestic and international Flights.

5. HUB AIRPORT AT KARACHI

PIA operates from its hub in Jinnah International Airport, Karachi. Jinnah International is one of the world’s busiest airports in terms of number of passengers carried. It is also one of the largest international gateways to Asia. It is also the leading international air passenger (and cargo) gateway to Pakistan. The company’s strong presences in airports with heaviest traffic levels in Pakistan give it a competitive advantage.

6. EFFECTIVE USE OF TECHNOLOGY

PIA has successfully incorporated latest technology in all its systems, giving it an edge over competitors.PIA takes credit for introducing most new technologies to the Pakistani market. It was the second carrier in Pakistan to incorporate the c-ticketing system and the second in South Asia to introduce self check in systems at the Jinnah International Airport, Karachi.

WEAKNESSES

1. FORMULATION OF GOVT. RULES

The Basic flaw of this organization is its consolidation that is centralized system. The key policies, strategies and set of laws are designed by the upper management. The centralized system is one of the biggest obstacles of long term success of PIA. PIA centralizes structure lead to barrel between different level of management, decreased motivation, and hard access to information.

2. HIGH DEPENDENCE ON PASSENGER REVENUES

Passenger revenues accounted for 87 percent of the PIA’s total revenue in 2007. Cargo services allow airlines to generate additional revenues from existing passenger flights. In addition, cargo revenues are usually counter cyclical to passenger revenues and have lower demand elasticity than passenger business, which allows airlines to pass on fuel price hikes to customers.

3. DEBT

PIA has a significant amount of 42 billion debts. Current and future debts could have important consequences for stakeholders of the company. For example, debt could impair PIA ability to make investments and obtain additional financing for working capital, capital expenditures, acquisitions or general corporate or other purposes. Debts could also put PIA at a competitive disadvantage to competitors that have lesser debt and could also increase the company’s vulnerability to interest rate increases.

4. RELIANCE ON OIL PRICES

PIA’s sustainability, growth and revenues directly depend on oil prices. A steep rise in oil prices can seriously damage the long term viability of any airline. Recently many airlines around the world went bankrupt due to rising oil prices. Airlines need to hedge against this risk by taking proper measures.

OPPORTUNITIES

1. HAVING THE MAXIMUM ROUTE AND FLEET

PIA is having the maximum route and fleet domestic and international destinations network in Pakistan as compared to its Competitors. Route and fleet expansion will positively impact the company’s operations by increasing revenues.

2. GROWING DEMAND FOR LOW COST AIRLINES

The growing demand for air travel is driven by lower fares and consumer confidence. A survey by International Aviation Authority showed that ticket price is the number one criterion for passengers when selecting a flight, well ahead of the availability of a non-stop service.

3. CUSTOMER LOYALTY

PIA’s frequent flyer and loyalty programs can help it retain customers. PIA’s Awards+plus (frequent flyer program) was established to develop passenger loyalty by offering awards and services to frequent travelers. Such schemes encourage repeat travel on PIA, as passengers seek to accrue the benefits given to regular travelers. This enables the airline to retain customers and reduce costs, as it does not have to spend money targeting new customers to replace those lost to other airlines.

4. SHIFTING CUSTOMER NEEDS

The needs of air passengers are increasingly changing, as they are becoming more and more price sensitive. If PIA succeeds in making its prices more competitive, then the company will be able to gain significant market share.

5. INDUSTRY RECOVERY

Market analysts believe that the global airline industry will experience an upturn in fortunes over the next few years. This represents an opportunity for PIA, as it could generate increased revenues and command market share if it capitalizes on increases in demand.

THREATS

1. HIGH INTEREST RATES

The past few years have seen State Bank of Pakistan impose high as well as low interest rates to check inflation and the overheating of Pakistani economy. Inflation in Pakistan may see another raise in the short-term.

2. ACCIDENTS

There had been five accidents with PIA listed as below:

Pakistan International Airlines Flight PK 705 was a Boeing 720 – 040 B that crashed while descending to land on Runway 34 at Cairo International Airport on May 20, 1965 resulting in 119 fatalities.

Pakistan International Airlines Flight PK740 was a Boeing 707-340C that crashed after takeoff from Jeddah International Airport on November 26, 1979. All 156 aboard were killed.

Pakistan International Airlines Flight 268 was an Airbus A300B4-203, registration AP-BCP, which crashed on approach to Kathmandu’s Tribhuvan International Airport on September 28, 1992. All 167 on board were killed.

. PIA Flight 554 is the flight number of a Pakistan International Airlines (PIA) Fokker F27 that was hijacked on May 25, 1998. The flight started its journey at Gwadar in Balochistan after originating in Turbat, and was flying to Pakistan’s southern port city of Karachi. The aircraft was carrying 24 passengers and 5 crew members.

Pakistan International Airlines Flight 688 (PK688, PIA688) was scheduled to operate from Multan to Lahore and Islamabad at 12:05 pm on July 10, 2006. It crashed into a field after bursting into flames a few minutes after takeoff from Multan International Airport. All 41 passengers and four crewmembers on board were killed.

PIA has to continuously ensure utmost safety and security of its passengers. Accidents can adversely affect customer confidence in PIA and result in declined revenues intensifying competition.

3. STRONG COMPETITION BY AIRBLUE

PIA is now competing against carriers such as Airblue and Shaheen Airline. PIA remains Airblue’s strongest competitor because of the huge market it has gained over time, strong brand image and customer loyalty.PIA has started new low-fares subsidiary “PIA Express” to stop the Airblue market share growing to fast. Moreover, major legacy airlines have been focusing on restructuring costs, which has improved their competitiveness. With costs restructured, the legacy airlines are becoming more formidable competitors in terms of increasing capacity, matching prices and leveraging their frequent flier programs. Increasing competition could adversely affect the company’s margins.

4. INTEREST AND FOREIGN CURRENCY EXCHANGE RATES

Fluctuating foreign currency exchange rates can have a significant impact on PIA’s earnings. For example, as PIA is providing its services to the UK. Negative or positive effects arise from exchange rate movements as change in expenses. Strengthening of foreign currencies against the British Pound will positively impact PIA and vice versa.

5. DECLINE IN AIRLINE INDUSTRY

A number of factors have caused the current decline in the airline industry. For example, the threat of further terrorist attacks since September 11 and a fall in the number of business travelers have both caused passenger numbers to fall. These and other factors may continue to affect demand for air travel in the future, which will affect revenues of PIA.

CHAPTER # 3

Corporat Social Responsibility

Corporate Social Responsibility of PIA:

Committed to Creating a Better World

PIA is driven by the highest standards of corporate governance and social responsibility. As a public sector organization and a business leader, PIA believes in building strong relationships with customers, partners, employees, and the communities in which it operates. The organization’s values are exemplified in a range of corporate initiatives designed to impact positively on the lives of multiple stakeholders. PIA practices active corporate citizenship through social services, support for non-profit organizations, medical services for employees, the promotion of sports, and educational initiatives.

PIA has institutionalized the practice of good governance by establishing a Corporate Social Responsibility Committee. The Committee provides a platform to evaluate, update, and recommend best practices as PIA continues on its mission to adhere to business ethics and stamp out corruption. Corporate Social Responsibility (CSR) is woven into the fabric of daily operations at PIA. Our employees wholeheartedly contribute to our commitment to develop the organization, the communities in which we function, and the country.

Social Services

Boy Scouts Association

The PIA Boy Scouts Association (PIA-BSA), a provincial segment of the Pakistan Boy Scouts Association, is based on the value system of the Scout Promise and Law. The PBSA’s mission is to actively train and develop members through Youth Training Programs. Scouting contributes to the education of young people and helps build a better world where individuals can play constructive roles in society. The PIA-BSA’s major contributions include providing Haj services at domestic and Saudi Arabian airports, engaging in activities with the Heritage Association of Pakistan, Helping special children at PIA’s Al-Shifa Trust, and participating in a number of health, cleanliness, literacy, tree plantation, drug prevention, and blood donation drives. The PIA-BSA has also started a cricket academy where thousands of youth have received cricket coaching from PIA’s renowned test and first-class cricketers. Following the earthquake tragedy of 8th October, 2005, the PIA-BSA immediately deployed contingents in Islamabad followed by scout deployments in Balakot, Garhi Habibullah, Muzaffarabad, and Bagh where relief goods were distributed and emergency services were rendered.

PIA Planetariums

Through a combination of projectors, optics, electronics, and precision engineering, PIA offers a range of cosmic experiences to the Pakistani people. The PIA Planetariums enable the viewing of virtual universes, replete with stars, planets, and nebulae and visitors throng the planetariums to look at astronomical phenomena such as eclipses, alien landscapes, planets, and the sun. PIA is the only airline in the world to have invested in an innovative and educational planetarium project that is open to the general public at affordable rates.

PIA Horticulture

Plants and trees provide habitat, shelter, food, materials and medicines to human beings and animals. Realizing the significance of a healthy and pollution-free environment, PIA set up a horticulture division in 1996. In addition to maintaining indoor and outdoor plants and trees, PIA Horticulture provides seasonal flowers for display in PIA’s offices and for a range of events, winning several awards and accolades at flower exhibitions across the country. To reduce pollution and contribute towards a greener Pakistan, PIA Horticulture actively participates in tree plantation campaigns during each spring and monsoon season.

Support for Non-Profit Organizations

As part of its corporate social responsibility initiatives, PIA supports a number of charities and trusts:

Al-Shifa Trust provides relief and rehabilitation services to special children suffering from cerebral palsy and other motor disorders.

Zindagi Trust provides education to underprivileged and working children.

The Citizens Foundation runs a professionally managed network of purpose-built schools in the poorest rural areas and most neglected urban slums of Pakistan

CHAL is a network of non-profit organizations and individuals dedicated to providing rehabilitating services to disabled persons.

SIUT (Sind Institute of Urology and Transplantation) provides medical services to the patients suffering from Urology, Nephrology, Transplantation and Liver Diseases.

Training and Education

PIA Training Center

The PIA Training Center is a leading airline training institution that delivers the highest standards of aviation instruction. The Training Center is built around a highly advanced training infrastructure, approved by local and international regulatory authorities such as CAA, ICAO, and IATA. The PIA Training Center’s courses are based on a unique, standards-based curriculum designed to impart knowledge and best practices in all the aspects of the airline industry. The PIA Training Center provides quality training to PIA’s pilots, engineers, air hostesses, and to employees of other associated PIA divisions.

PIA Model Secondary School

The PIA Model Secondary School was set up in 1980 to provide high quality education to the children of PIA’s employees at an affordable fee. Situated at a distance from the hubbub of the city, the school is housed in a modern building that spans over 10 acres of land and is staffed by teachers dedicated to empowering children with knowledge and skills for the future. Equal emphasis is placed on curricular and extracurricular activities in order to produce well-rounded, holistic, and responsible citizens.

PIA Industrial Training Institute

The PIA Industrial Training Institute was established in 1986 to provide technical, vocational, and industrial knowledge to the families of PIA’s employees. With the sustained support of top-level management at PIA, the Institute has functioned smoothly for over two decades, and has emerged as a leading industrial training center in the region. The Institute imparts industry knowledge, and specialized training courses in arts and crafts to the families of employees for a very nominal fee, empowering them to earn livelihoods and gain respect in their communities.

Medical Services

PIA Employee Health and Medical Services

The health and welfare of our employees has always been a matter of utmost importance and significance at PIA. All employees are provided with a comprehensive medical package, in collaboration with reputable hospitals, diagnostic labs, and medical institutions. In 1959, PIA established a Medical Division to supply wide-ranging medical coverage to active and retired employees. To ensure that the highest standards of aviation are maintained, a Crew Center periodically carries out air crew checks, in conformity with international and Civil Aviation Authority standards.PIA’s medical facilities cover the parents and spouses of serving employees, children up to the age of 27, unmarried daughters, and disabled, mentally challenged children of any age. Retired employees and their spouses are also eligible for medical care at PIA’s Medical Centers. In addition to coverage in Pakistan’s major cities, PIA has extended its medical network to 35 smaller stations, in collaboration with private and public sector hospitals. PIA also looks after its overseas employees under the Local National Health Scheme and Insurance Schemes.

PIA Sports Division

In continuation of its unwavering commitment to Pakistan’s development, the PIA Sports Division was set up in 1958. PIA’s contribution to the advancement of Pakistani sports remains unparalleled – no other organization in the country has consistently invested in the promotion and development of sports.

Visionary leadership at PIA provided the impetus for the airline to set up a unique career development plan for sportsmen. PIA provides attractive and stable jobs to outstanding sportsmen, empowering them to focus on what they do best. Sportsmen are provided gear, travel facilities, and benefits that have enabled them to excel and make Pakistan proud. PIA’s sportsmen have been and continue to form Pakistan’s lineup for major sports including cricket, hockey, football, squash, polo, tennis, bridge, chess, table tennis, cycling, and body building. PIA has dramatized the world of Pakistani sports by transforming popular games into national sports, national sportsmen into international heroes, and national tournaments into international sports bonanzas.

Safety

a) Corporate Safety & Quality Assurance

The PIA Corporate Safety & Quality Assurance Division ensures safe operations by adopting international standards and recommended industry practices. Strict adherence to Safety & HSEQ policy and procedures during flight as well as on ground helps in maintaining a hazard free workplace environment. Corporate Safety & QA Division is responsible for effective implementation of Safety Management System (SMS), Health Safety & Environment (HSE) Program, Flight & Ground Safety Management, Flight Data Monitoring & Analysis Program, Emergency Response Planning (ERP) and Fire Protection Services as well as Quality Assurance Program encompassing overall operations of the airline.

b) IOSA (IATA Operational Safety Audit) Certification

PIA is proudly maintaining its IOSA Certification and thus IATA Registration since 2005. The IATA Operational Safety Audit Programmed is an internationally recognized and accepted system for assessing the operational management and control systems of an airline.

IOSA is based on industry proven quality audit principles and structured to ensure a standardized audit with consistent results. Airlines that meet all standards become registered with IATA as an IOSA Operator. IOSA Audit covers Organization and Management System, Flight Operations, Operational Control & Flight Dispatch, Aircraft Engineering & Maintenance, Cabin and Cargo Compartment Operations, Aircraft Ground Handling, Cargo Operations and Operational Security of the airline.

By virtue of PIAs IOSA Certification, PIA is able to ensure safety of passengers as well as employees.

c) Fire Safety-in the Workplace and at Home

PIA has made a number of arrangements to handle incidental fires and allied hazards. First Aid Fire Stations have been set up in Karachi, Lahore and Islamabad, and Fixed Fire Protection Systems have been installed at sensitive premises. PIA’s locations are equipped with portable fire extinguishers and a range of other fire safety devices. All the installed equipment is inspected regularly and maintained in accordance with international standards.

Fire Safety Courses are conducted regularly to equip employees with fire fighting skills and to impart critical knowledge of preventive measures. Fire Prevention Courses are also conducted at the Staff Township and PIA Model Schools so that employees and their families can take appropriate fire prevention measures at home.

PIA’s Corporate Safety & QA Division also actively engages in advocacy sessions to create awareness through print publications and sharing of experiences. Working in collaboration with the Fire Protection Association of Pakistan, PIA is committed to creating and promoting a culture of safety at a nation-wide level. The division’s future plans include running fortnightly fire and safety awareness sessions at government and private schools.

Emergency Response Planning

Passenger care is an airline’s most crucial responsibility. Acknowledging the significance of Emergency Response Planning (ERP), PIA has set up a discrete section to handle emergencies. The Emergency Response Planning Section has developed an Emergency Response Manual and manages Emergency Response Center Teams, Field Teams, Family Helpance and Support Teams, and Volunteers. The ERP Section will also train volunteers in the areas of aircraft emergencies, rescue, basic first aid, and fire fighting to effectively respond to natural disasters.

Emergency Response Facilities include the computerized data storage of teams and volunteers with an automated emergency call out system. The software application also provides a technology supported callback system for contacting families of the affected.

PIA’s Emergency Response Planning Section hopes to contribute meaningfully towards national capacity building in the area of emergency management, through financial and human resource investments.

CHAPTER # 4 STRATEGIC FAILURES

Market Segmentations and Targeting Strategies of PIA

Demographic Segmentation:

Income Segmentation—— audience who falls under the category of upper and upper middle class.

Occupation Segmentation—— working class and business class.

Behavioral Segmentation:

Occas