A Management Project On PIA

Business Policy
and Strategy
GROUP 5
Submitted To,
MR. Ahmed Rana
Section “A”
FINAL PROJECT REPORT
GROUP MEMBERS
FAHAD IQBAL L1F07MBAM2175
ZOHAIB BASHIR L1F07MBAM0085
YASMEEN SADDIQ L1F07MBAM2226
FATIMA AWAN L1F07MBAM0071
AFZIA FAROOQ L1F07MBAM2256
EHSAN AKHTAR L1F07MBAM0115
AYESHA RAFIQUE L1F07MBAM0062
PAKISTAN INTERNATIONAL AIRLINE Page 2

PREFACE
All praise is to Almighty Allah for bestowing us with the wisdom

to accomplish my task.
The main purpose of the project is the fulfillment of the

requirements of the Business Policy & Strategy course, which is
the part of our study work.
PIAC is the national airline of Pakistan. The information has been

gathered from different sources including the web site, web
pages related to the airline, personal discussion with employees,
telephone discussion representatives and visit to the branch
office situated in The Mall Road, Lahore. We have included all
the information obtained from the mentioned sources and no
part of this project has been added from own.
As regards the preparation of this project, all the topics are

added in a proper sequence, starting with the table of contents,
including the history, overall view, company information,
management hierarchy, everything that was required for the
completion of the project.

ACKNOWLEDGEMENT
We would like to offer our humble gratitude to Allah Almighty,

the most Gracious and the most Merciful, who gave us strength
and enabled us to achieve our goals.
The topic of our project was the complete Strategic Analysis of

PAKISTAN INTERNATION AIRLINE (PIA) and its impact on
Pakistan. During our Project, we had to face some difficulties as
data was not readily available; we had to go to PIA office to
collect data after having some solid reference and then sort out
relevant data for our project.
We would like to thank our kind Prof. G.AHMAD RANA for his
continuous and pre-emptive and continuous support. Without his
help we would not have been able to complete our project on
timely manner. We are grateful to employees of various
departments of PIA that helped us during our field work and
helped us in making our project successful.
TABLE OF CONTENTS

INTRODUCTION
Brief History............................................................................. 08
Situational Analysis.................................................................. 12
Number of Employees.... .......................................................... 13
Organizational Hierarchy......................................................... 15
Location of Office.................................................................... 16
Nature of business................................................................... 19
Type of ownership.................................................................... 19
Key players-Board of Directors.................................................. 19
MISSION / VISION STATEMENT 21

GOALS & OBJECTIVES
EXTERNAL ASSESSMENT
STEPLE Analysis........................................................................
Porter’s 5 forces model............................................................
BCG..........................................................................................
SWOT Analysis..........................................................................
EFE Matrix.................................................................................
Competitive Profile Matrix.........................................................
CORE COMPETENCIES ANALYSIS & KSF

CORPORATE CULTURE
STRATEGIES UNDERTAKEN AT THE
Corporate Level.........................................................................
Business Unit Level....................................................................
Functional Level.........................................................................
MANAGEMENT STRATEGIES
HRM.........................................................................................
Administration.........................................................................
Decision Making (Centralized Vs Decentralized)........................
Motivational & Incentive Techniques........................................
MARKET ANALYSIS
Segments & Target Market......................................................
7 P’s..........................................................................................
Market Share............................................................................
USP’s.........................................................................................
Competitive Analysis.................................................................
Main Marketing Strategies and Marketing Positioning..............
FINANCIAL ANALYSIS
Statements................................................................................

Costs / Expenditures.................................................................
Profits........................................................................................
Revenues...................................................................................
Ratios........................................................................................
OTHER STRATEGIES
R&D...........................................................................................
Procurement..............................................................................
CONTROL PROCEDURES
Marketing control....................................................................
Production control...................................................................
Quality control.........................................................................
HR control................................................................................
Finance control.........................................................................
PROBLEM SECTION
Main problems according to the management..........................
Main problems according to your analysis................................
Sub problems............................................................................
STRATEGIC ALTERNATIVES
Solutions to solve the problems................................................
Evaluation of the solutions........................................................
IMPLEMENTATION PLAN.............................................
CONCLUSION
RECOMMENDATIONS
REFERENCES

INTRODUCTION
BRIEF HISTORY
Birth of a Nation, Birth of an Airline

Air transport has probably never been more important to the development
of a new nation than in the case of Pakistan. In June 1946, when Pakistan
was still in the offing, Mr. Mohammad Ali Jinnah, the Founder of the
upcoming nation, instructed Mr. M.A. Ispahani, a leading industrialist, to
set up a national airline, on a priority basis. With his singular vision and
foresight, Mr. Jinnah realized that with the formation of the two wings of
Pakistan, separated by 1100 miles, a swift and efficient mode of transport
was imperative.
Orient Airways Takes to the Skies

On 23rd October 1946, a new airline was
born. Initially registered as a pilot project
in Calcutta, Orient Airways Ltd. had at its
helm Mr. M.A. Ispahani as Chairman and
Air Vice Marshal O.K. Carter as General
Manager. The new carrier's base
remained in Calcutta and an operating
license was obtained in May 1947.
Four Douglas DC-3s were purchased

from Tempo of Texas in February 1947
and operations commenced on 4th June
1947. The designated route for Orient
Airways was Calcutta-Akyab-Rangoon,
which also happened to be the first post-
war international sector to be flown by
an airline registered in India. Within two
months of Orient Airways' operational
beginnings, Pakistan was born. The birth
of a new nation generated one of the
largest transfers of population in the
history of mankind.
Orient Airways, along with the help of BOAC aircraft which had been
chartered by the Government of Pakistan, started relief operations and
transportation of people between Delhi and Karachi, the two capitals.
Subsequently, Orient Airways transferred its base to Pakistan and
established a vital link between Karachi and Dacca, the two capitals of the
two wings of Pakistan. With a skeleton fleet of just two DC-3s, three crew
members, and twelve mechanics, Orient Airways launched its scheduled
operations in a fairy-tale manner.
The initial routes were Karachi-Lahore-

Peshawar, Karachi-Quetta-Lahore and

Karachi-Delhi Calcutta-Dacca. By the end
of 1949, Orient Airways had acquired 10
DC-3s and 3 Convair 240s which were
operated on these routes. In 1950, it had
become increasingly apparent that
additional capacity would have to be
inducted to cater to the growing needs
of the sub-continent.
A New National Flag Carrier for Pakistan

Orient Airways was a privately owned
company, with limited capital and
resources. It could not be expected to
grow and expand independently. It was
then that the Government of Pakistan
decided to form a state-owned airline
and invited Orient Airways to merge with
it. The outcome of the merger was the
birth of a new airline, through PIAC
Ordinance 1955 on January 10, 1955.
In addition to transport activities, Orient
Airways had established the nucleus of
overhaul and maintenance facilities and
acquired trained pilots, engineers and
technicians, measures which proved to
be a great asset for PIA during its
teething phase.
PIA’s First International Service

The year 1955 also marked the inauguration of the fledgling airline's first
scheduled international service - to the glittering, glitzy capital city of
London, via Cairo and Rome. Initially, there was much criticism, as the
public could not comprehend or justify the need to operate an
international route when, in their opinion, other projects vital for a
developing country should have been given a higher priority. However,
PIA's focus was, and continues to be, to serve the Pakistani community at
large. The provision of transportation to expatriates has remained one of
the foremost priorities of the national airline. Moreover, PIA earned
substantial foreign exchange through international services, which it
invested in the purchase of aircraft and spare parts, as fleet expansion
was a grave necessity for the airline.
New Planes, New Directions, New

Management

In 1956, orders were placed for two
Super Constellations and five Viscounts
which were to be delivered in 1959. At
this juncture, PIA possessed a small fleet
which comprised of Convairs, Viscounts,
Super Constellations and DC-3s.
While Mr. M.A. Ispahani was the first
Chairman of the new dynamic airline; it
was the first Managing Director of PIA,
Mr. Zafar-ul-Ahsan, who in his 4 year
tenure, got the ball truly rolling and set
the shape of things to come. The PIA
Head Office building at Karachi Airport,
which houses the entire major
departments of the airline, was the
brain-child of Mr. Zafar-ul- Ahsan. In fact,
on his departure from the airline, the
employees presented him with a silver
replica of the building with the caption,
"The House You Built".
In 1959, the Government of Pakistan
appointed Air Commodore Nur Khan as
the Managing Director of PIA. With his
visionary leadership, PIA 'took off' and
within a short span of 6 years, gained
the stature and status of one of the
world's frontline carriers. In aviation
circles, this period has often been
referred to as the "golden years of
PIA".
Development, expansion, and growth were keywords that the new

management was committed to. In March 1960, PIA launched its first
Boeing 707 jet service on the London-Karachi-Dacca, route which later
proved to be very successful. This trail-blazing accomplishment resulted in
PIA becoming the first Asian Airline to operate a jet aircraft, setting trends
for the future. In 1961, the airline took on the mammoth task of initiating
a cross-Atlantic service from Karachi to New York. By this time, PIA had
placed orders for more new aircraft, which included Fokker F-27s, Boeing
720Bs and Sikorsky helicopters. Helicopter services in East Pakistan had
gained momentum by 1962 and expanded to include Sylhet, Chittagong,
Dacca, Comilla and Ishurdi. PIA's helicopter services carried over 70,000
passengers during the first year of operation. At the time, it was regarded
as a stellar operation, equal to any other in the world. Unfortunately, due
to two mishaps, the service was discontinued in 1966.

Historic Firsts and Unbroken Records
In 1962, finding the upper winds forecast favourable, PIA set out to break
the record for the fastest flight between London and Karachi. With
representatives of FAI (Federation Aeronautique International) on board to
monitor the official timings, PIA completed the flight in 6 hours, 43
minutes, 51 seconds, a record which remains unbroken to this day.
In 1964, PIA achieved another historic first, regarded as major milestones
in the chequered history of the airline. On 29th April, 1964, with a Boeing
720B, PIA earned the distinction of becoming the first airline from a non-
communist country to fly into the People’s Republic of China. PIA's first
service to China was from Karachi to Shanghai via Canton. In 1964-65, PIA
expanded its fleet further with the addition of a fourth Boeing 720B and
two Fokker F-27s. Serious development had become a reality and the PIA
team continued to move ahead with ambitious plans and goals for the
national flag carrier.
A collective pride and joyous buoyancy was pervasive within the PIA
family. Riding high on the crest of success, PIA became a household name
in Pakistan in the mid sixties. The war between India and Pakistan, during
1965, further tested the national airline. PIA played a major role in
providing logistical support to the Armed Forces by operating special
flights using Boeings, Super Constellations, and Viscounts. The Founder of
the Nation, Mr. Jinnah had predicted that the Pakistan Air force would
need the support of a civil airline in special circumstances, and this came
into evidence during the war.
In 1966, a system of feeder services linking eight new points in West
Pakistan was introduced. By this time, the airline's Viscounts were proving
inadequate owing to traffic growth, and had to be replaced by Tridents.
The airline continued up the growth curve, receiving two Fokker F-27s,
two Boeing 707s and one Trident in the following year.
Style, Glamour, and Charisma

Around this time, the airline saw a change in the top slot. Air vice Marshal,
Asghar Khan took over the reins of PIA for a tenure of 3 years. A number
of highpoints are attributed to this period. The most colourful, if not the
most significant, occurrence for PIA was the introduction of a new air-
hostesses' uniform designed by none other than the renowned French
designer, Pierre Cardin. Taking the aviation world by storm, this move,
more than any other single factor, imprinted PIA's name on the
international market. The uniforms were an instant hit, both at home and
abroad.
Safety Management System at PIA

PIA is the first airline to get certified (initial certification) on Safety
Management System (SMS) by Civil Aviation Authority CAA - Pakistan. CAA
Air Navigation Order (ANO 91.0032 issued in September 2008) binds all
airlines operating in Pakistan to have SMS. Well before the issuance of this
ANO, PIA initiated SMS awareness and implementation in July 2008. PIA
awarded initial certification on SMS in 27th February 2009 by CAA.

The Pursuit of Excellence Through Technology and Quality Control
Not content with a number of historic firsts under its belt, PIA made
history yet again, by installing Pakistan's first computer, an IBM1401, in
1967. PIA's first Engine Overhaul Shop, located near the Head Office
building, was also completed and commissioned around this time. The
Ground Training School (GTS) now known as the PIA Training Centre, was
first conceived and developed during 1961-62. Interestingly, training was
initially imparted in the T-shaped building which has now become the PIA
Dispensary, close to the Head Office building.
Besides visible development and growth in traffic and revenues in the
sixties, PIA added additional destinations, new equipment, and cutting-
edge technology to support its ever expanding operations. A new Jet
Hangar for Boeings with a supporting airframe overhaul shop was
completed and commissioned in 1968.
In 1970, PIA set up its own Flight Kitchen in Karachi, which caters, even
today, to the national airline as well as other carriers. Over the years, with
the airline's expansion and increased capacity, the need for a second
Flight Kitchen became imperative.
Ushering In a New Era of Growth and Development

PIA heralded the nineties by donning a bright new corporate identity. Old-
timers may remember the flutter that the earlier green and gold livery
had created when it was first introduced in 1974. However, in keeping
with the changing times, PIA introduced a smart, sporty 90's look. The
familiar PIA green was reinforced with moss green and pale blue stripes
were incorporated into the new corporate identity. The stripes, a universal
symbol of sport, highlighted PIA's active participation and sponsorship of a
diverse range of national games. PIA's players have always been at the
forefront of Pakistani Cricket, Hockey, Squash, Football, Chess, Bridge,
Polo and Table-Tennis teams. The nineties also saw the expansion of PIA's
massive Hajj and Umrah operations to Pakistan's smaller cities, in addition
to the major cities of Islamabad, Peshawar, Lahore, Quetta and Karachi.
PIA's growth continues unabated and the airline now operates globally,
covering the entire domestic landscape and international destinations
spread over 4 continents.
Impressive statistics for a comparatively young airline, since its inception
in 1955, PIA has indeed, come a long way.

SITUATIONAL ANALYSIS
Where the Company is coming from? Air transport has probably never
been more important to the development of a new nation than in the case
of Pakistan. In June 1946, when Pakistan was still in the offing, Mr.
Mohammad Ali Jinnah, the Founder of the upcoming nation, instructed Mr.
M.A. Ispahani, a leading industrialist, to set up a national airline, on a
priority basis. With his singular vision and foresight, Mr. Jinnah realized
that with the formation of the two wings of Pakistan, separated by 1100
miles, a swift and efficient mode of transport was imperative.
Where is the company standing? PIA's growth continues unabated and

the airline now operates globally, covering the entire domestic landscape
and international destinations spread over 4 continents.
Impressive statistics for a comparatively young airline, since its inception
in 1955, PIA has indeed, come a long way.
Where is the company heading in future? PIA is heading

tremendously towards a bright future in a positive manner.

i. Organizational Hierarchy

LOCATION OF A OFFICE
HEAD OFFICE – KARACHI
PIA BUILDING
JINNAH INTERNATIONAL AIRPORT
KARACHI - 72500
REGIONAL OFFICE – LAHORE

PIA BUILDING
NEAR WAPDA HOUSE, MALL ROAD
LAHORE – 44000

PIA Booking Office Location
City Contact details

Sidco Centre, Stretchen Road,
Phone 9206721 - 15 lines
KARACHI
Fax # 5680050
Cargo Phone 5689631 - 20 lines
PIA Cargo Booking Office, Shafi Court, Club Road
Phone 5689631
KARACHI
Fax 5677106
Cargo Phone 2904/2908/2140
Quaid e Azam International Airport
KARACHI
Phone 9043721/9042011/111-222-742
PIA Building, 49 Blue Area, Islamabad
Phone 9209911
ISLAMABAD
Fax 9209966
Cargo Phone 5591071 Ext. 385/9209969 Ext. 285
PIA Building, Khalifa Shujauddin Road, Lahore
Phone 9036999
LAHORE Fax 9202321
Cargo Phone 9202325
Cargo Fax 9202307
Opp. Sethi Masjid, Mansehra Road
Phone 0992-9310254/9310256
ABBOTTABAD
Fax 0992-9310255
Noor Mansion, Noor Mehal Road

BAHAWALPUR Phone 882303/885989
Fax 0621-882305
13 Defence Officer's Colony Bannu Cantt.
BANNU
Phone 9270121/9270122
Polo Ground, Chitral
CHITRAL Phone 2863/2963/2563
Cargo Phone 2863/2963/2563

London Road, Dalbandin
DALBANDIN Phone 210519
Cargo Phone 25519
11 Khan Market, Block No. 15, Quaid e Azam Road
DERA GHAZI KHAN Phone 62146/64172
Fax 62546
Circular Road
Phone 9280246/9280248
DERA ISMAIL KHAN
Fax 9280247
Cargo Phone 9280249
26 New Civil Lines, The Mall.
Phone 634131/634132/634133 / 111-786-786
FAISALABAD
Fax 677875
Cargo Phone 626001/626214/626215
Airport Road, Gwadar
Phone 2222
GWADAR
Cargo Phone 2222
PIA Booking Office, GSR Plaza, Gilgit

GILGIT Phone 3390
Cargo Phone 3390
PIA Booking Office, Civic Center, Thandi Sarak.
Phone 9200566
HYDERABAD
Cargo Phone 9200080
Email hdduupk@piac.com.pk
Station Road, Jacobabad
JACOBABAD Phone 3686/512996
Cargo Phone 3686
Main Bazar
JIWANI Phone 289
Cargo Phone 289
PIA Booking Office, G.T. Road, Kharian
KHARIAN Phone 2904/2908/2140
Cargo Phone 2904/2908/2140
Khurk Road, Khuzdar
KHUZDAR Phone 412225/412580
Cargo Phone 412225/412580
PIA Booking Office, Mianwali
MIANWALI Phone 32887
Cargo Phone 32887
65 Abdali Road.
Phone 9200937/9200938/111-786-786
MULTAN
Fax 9200071
Cargo Phone 9200069/9200626
PIA Booking office, Chattar, Muzaffarabad
MUZAFFARABAD Phone 6299
Cargo Phone 6299
Kutchery Road, Nawabshah
Phone 4613/4614
NAWABSHAH
Fax 0241-4615
Cargo Phone 4614
Aziz Market, Ormara
ORMARA Phone 510/547
Cargo Phone 510/547
Tull Road, Parachinar
PARACHINAR Phone 2461/2099
PASNI Aslam Shah Market, Pasni
Phone 210501

Cargo Phone 210501
PIA Building, Arbab Road, Peshawar, Cantt

PESHAWAR Phone 271178/270214
17 Hali Road, Quetta, Cantt
Phone 820901/820861
QUETTA
Fax 820871
Iqbal Complex
Phone 5032 / 75432
RAHIM YAR KHAN
Cargo Phone 5032 / 71132
PIA Booking Office, Rawalkot

RAWALAKOT
Phone 3156
5, The Mall, Rawalpindi.
Phone 9272211/111-786-786
RAWALPINDI
Fax 9272244
Cargo Phone 5567011
S.G.T.C. Ltd. Sui
SUI Phone 071-83092
Cargo Phone 071-83092
Faizabad Road
Phone 0936-711092 /711137
SAIDU SHARIF Fax 711148
Cargo Phone 812053
Cargo Fax 710651
SIALKOT Jinnah Islamia College Road, Sialkot
Phone 583701-5
Cargo Phone 583709
SHIKARPUR Address Station Road, Shikarpur
Phone 512800
Cargo Phone 512809-114
SKARDU Khusho Bahg, Skardu
Phone 2941/3325
SUKKUR Address Khan Plaza, Minara Road, Sukkur
Phone 071 - 9310494
Fax 071 - 9310491
Cargo Phone 22125
Email skzuupk@piac.com.pk
TURBAT Commisionery Road, Turbat
Phone 413355
Cargo Phone 412322
ZHOB 11-A Market Road, Zhob
Phone 2875/3366
Cargo Phone 2875

Jinnah International Airport Karachi
Allama Iqbal International Airport Lahore

PIA Domestic Network
PIA International Network

Total Number of Employees
There are total 18,500 employees working in Pakistan International

Airport (PIA) which includes Board of Directors, Corporate secretary, Head
of Internal Audit, Executive Management and Auditors under different
departments.
Nature of Business
The nature of Pakistan international airlines is transport & services though

air, and by road
Type of Ownership
They are semi- government organization. That is 80% government & 20 &
private.
Board of Directors
1. CH. AHMAD MUKHTAR – Minister of Defence & Chairman PIA

2. SYED NASEER AHMAD
3. MALIK NAZIR AHMAD
4. MR. JAVED AKHTER
5. LT. GEN (RETD.) SYED AKTER ALI – Federal secretary Defence
6. CAPT. MOHAMMAD AIJAZ HAROON – Managing Director PIA
7. PROF. MIAN IJAZ UL HASAN

8. MR. MUBASHIR IFTIKHAR
9. MR. HUSAIN LAWAI
10. MR. SHAUKAT ALI RANA
11. MR. SALMAN SADDIQ UE – Federal Secretary Finance
Corporate Secretary
1. MR. MUHAMMAD SHUAIB
Head of Internal Audit
1. MR. S FAZAL AHMAD
Executive Management
1. CAPT. MOHAMMAD AIJAZ HAROON – Managing Director PIA

2. MR. ARIF MAJEED – CHEIF FINANCIAL OFFICER
3. MR. IMRAN AHMAD KHAN – Director – procurement, logistics and
Food services
4. MR. M HANIF PATHAN – Director – HR, Administration & coordination
5. MR. SHAHNAWAZ REHMAN – Director – Corporate Planning
6. MR. SALAHUDIN – Director – Marketing
7. AVM MUHAMMAD KAMAL ALAM SIDDIQUE – Director – Precision
Engineering Complex
8. CAPT. SHUJA NAQVI – Director Flight Operations
9. MR. SHAHID SARWAR – Director – Information Technology
10. MR. MUHAMMAD ZIYAD A SYED – Director – Finance
11. MR. DILAWAR FAREED BEG – Director – Training & Development
12. MR. MAQSOOD AHMAD – Director – Engineering & Maintenance
13. MR. S KAMRAN HASAN – Director
Auditors
1. MESSRS. ANJUM, MR. ASIF, MR. SHAHID, MR. RAHMAN

2. MESSRS FORD, RHODES, SIDAT, HYDER & CO.

Vision
&
Mission

Vision
“PIA’s vision is to be a World class airline, meeting
customer expectations through excellent services, on-
time performance, innovative products and absolute
safety”
Mission
Employee team will contribute towards making PIA a global

airline of choice through:
 Offering quality customer service & innovative product.

 Using state-of-the-Art Technologies
 Ensuring cost effective measures in procurement and
operations
 Developing safety culture

Goals
&
Objectives

GOALS & OBJECTIVES
According to PIAC Act 1956, following are the main objectives of PIA
Corporation.
 To provide and further develop safe, efficient, adequate, economical

and properly coordinated domestic as well as international air
transport system.
 To operate any air transport service or any flight by aircraft for a

commercial or other purpose, and to carry all forms of aerial work.
 To acquire, own, run, manage or participate in the running

management of, any hotel or business connected therewith.
 To provide for the instruction and training in matters connected with

aircraft or flight by aircraft of persons employed or desirous if being
employed either by the corporation or by other person.
 To promote any organization outside Pakistan for the purpose of

engaging in any activity of a kind which the corporation has power
to carry out.

 To acquire, hold or dispose of any property, whether movable or
immovable, or any transport undertaking.
 To repair, overhaul, reconstruct assemble or recondition aircraft,

vehicles or other machine parts, accessories owned by the
corporation or by any other person.
External Assessment

STEPEL ANALYSIS
Social Factors
 Ethnic traffic is present on PIA

 Language barriers are not present
 Act of patriotism
 High traffic on social event or Tehwars like Eid, Basant,
Independence Day etc
Technological Factors
 Supply chain is not present

 Logistics issues are there
 Sales teams are not updated
 No coordination of departments
Economics Factors
 Increase fuel prices increase tickets prices

 Inflations creates problems
 Market slump

 Decreasing in middle class
Political Factors
 Political instability
 Political pressure
• Flying at low cost
• Bilateral promises
• Non profit routes
Environmental Factors
 Fuel emission
 Green fuel
Legal Factors
 Liquor can’t be served

 Firing of employee (court issues)
Porter’s Model
PORTER’S FIVE FORCES MODEL

Macro
environment
Political Economic
factors factors
BARGAINING
BARGAINING THREAT
THREAT OF
OF A A
POWER
POWER OF
OF NEW
NEW
BUYERS: ↑
BUYERS: ↑ ENTRANT:
ENTRANT: ↓↓
PIA
Intensity
Intensity of
of
competitive
competitive
rivalry: ↑
rivalry: ↑
BARGAININ
BARGAININ
G
G POWER
POWER
OF
OF
THREATS
THREATS SUPPLIER: ↓↓
SUPPLIER:
OF
OF
SUBSTITUT
SUBSTITUT
EE
PRODUCTS
PRODUCTS
:: ↑↑
PAKISTAN INTERNATIONAL
Social Forces AIRLINE Page 30
Technology
( High)
THREAT OF A NEW ENTRANT: High Low
Barriers to entry 
Capital requirements are 
There is high threat of potential entrants to the in this business.

Even there are no barriers to entry but when we look towards
the capital requirement these is very high and its risky business
INTENSITY OF COMPETITIVE
High Low
RIVALRY: ↑
Number of competitors is 
Industry growth rate is 
Fixed cost are 
Storage costs are 
Product differentiation is 
Switching costs are 

There is high threat of existing rivalry. This is because exit
barriers are high, fixed and storage costs are high and product
differentiation is low. Another factor that strengthens the threat
of existing rivalry is that the corporate stakes are high
THREATS OF SUBSTITUTE
High Low
PRODUCTS: ↑
Profitability of industry producing

substitute is
Rate of improvement in price-
performance relationship of 
substitute product is
The
There is a huge threat of substitute products. There are many

other companies such as air Arabia by Sharja, some by Saudia
like Marhaba, Thai air ways low cost carriers and many more
BARGAINING POWER OF
High low
SUPPLIER: ↓
Importance of customer to the

supplier is
Differentiation of the supplier

product and services is
Concentration relative to buyer

industry is
Switching cost of the buyer are 
The bargaining power of supplier is only high when we talk

about the prices of fuel which is highly important for an air
industry otherwise the remaining ingredients are not effecting
this industry as highly as to some other business
BARGAINING POWER OF BUYER High low

Product differentiation of supplier is 
Switching cost are  
Product differentiation are 
The power of buyer is very high. They buy tickets form there
near available point and they also buy ticket of air line which
cost less to them.
BCG MATRIX FOR PIA
Business
growth
rate
Pakistan
air lines

This is a strategy tool that guides resource allocation decision
on the basis of market share and growth rate of SBUs. The
B.C.G matrix divides organizations into four different
categories. These are as follows:
 Cash Cows: Which have high market share but low

opportunity for growth
 Stars: Which have high market share and high opportunity for
growth
 Question marks: Which have high opportunity for growth and
low market share
 Dogs: Which have low market share and low opportunity for
growth.
Based on these assumptions, Pakistan air lines have been

classified as a cash cows because it does have a high market
share which is 67 percent in the air line industry domestically
and 30 percent internationally and low business growth
opportunity.
SWOT ANALYSIS
Strengths
 Point to point frequency (Lahore to London)

 High quality services
 People oriented Organization (No language problem)
 Govt. sponsored organization
 Perfect timings
 Abroad Pakistanis prefer PIA (patriotism)
 Healthy internal environment
Weaknesses
 Less international traffic

 Liquor is not served so less traffic
 Weak rewards & appraisal
 Less effort in the field of marketing
 High Fares
 Over staffing (over burdened employees)

 Lack of professionalism
 Low salary of engineers
Opportunities
 Traffic ethnic
 Better recruitment policy
 Big markets available that are un served
 Speed ex, courier service domestically can be internationally
 Low cost carriers
 Better training programs
 Have an opportunity to grow and expand throughout the country
Threats
 All domestic and international carrier

 Fluctuating petrol prices
 Government changing
 Barriers to investment for abroad due to country conditions
 Time taken by embassy to accept visa
 Terrorism
 Busy flight schedule
 Open sky policy
 High amount of loan
EFE Matrix
Weight Weighte
Key External Factors Rating
s d Score
Opportunities
1. Traffic ethnic 0.13 4 0.52
2. Big markets available that are un served 0.09 3 0.27
3. Speed ex, courier service domestically can be internationally 0.05 2 0.10
4. Low cost carriers 0.04 2 0.08
5. Have an opportunity to grow and expand throughout the
0.09 4 0.36
country
Threats
6. All domestic and international carrier 0.08 4 0.32
7. Fluctuating petrol prices 0.03 3 0.09
8. Government changing 0.05 2 0.10
9. Barriers to investment for abroad due to country conditions 0.07 2 0.14
10. Time taken by embassy to accept visa 0.08 2 0.16
11. Restricted vise system 0.07 2 0.14

12. Visa rejection cases 0.10 3 0.30
13. Economic slump 0.12 3 0.36
Total 1.00 2.80
Competitive Profile Matrix
PIA Aero Asia Shaheen

Weight
Critical Success Factors Rating Score Rating Score Rating Score
s
Service Quality 0.13 3 0.39 1 0.13 2 0.26
Market Share 0.15 3 0.45 1 0.15 1 0.15
Advertisement 0.07 2 0.14 1 0.07 1 0.07
Customer Expectation 0.20 2 0.40 2 0.40 1 0.20
Safety 0.15 3 0.45 3 0.45 2 0.30
Reliability 0.10 3 0.30 2 0.20 1 0.10
Social Responsibility 0.09 3 0.27 2 0.18 2 0.18
Patriotism 0.10 4 0.40 3 0.30 3 0.30
Total 1.00 2.80 1.88 1.56
SPACE MATRIX
Strategic Position & Action Evaluation (SPACE) Matrix is another management
tool used to help analyze a company. It can also used to determine what sort of
strategy the company should undertake. The SPACE Matrix is broken down into
four quadrants as being aggressive, conservative, defensive, and competitive.
Additionally, the SPACE Matrix analysis functions upon two internal strategic
dimensions which are financial strength (FS) and competitive advantage (CA).
Besides, the SPACE Matrix methodology also studies two business’ external
strategic dimensions such as environmental stability (ES) and industry strength
(IS). The CA (values from -1 to -6) and IS (values from +1 to +6) are representing
by the X-axis of the Cartesian graph whereas the FS (values from +1 to +6) and
ES (values from -1 to -6) are representing by Y-axis. After drawing these SPACE
matrix graph, the overall strategic positioning of a company can be determined.
SPACE MATRIX FOR PIA
Internal strategic position External strategic position

Y-axis Financial Strength (FS) Environmental Stability
(score: +6 best, +1 worst)] (score: -1 best, -6 worst)
+1: Return on Investment -5: Barriers to Entry
+1: Leverages -2: Inflation rates
+3: Liquidity -3: Technology Changes

Total y-axis
score: +2: Working Capital -2: Competitive Pressure
+3.20 -1.60 = +1: Cash Flow -4: Demand Variability

+1.60
Average: +1.60 Average: -3.20
X-axis Competitive Advantage (CA) Industry Strength (IS) (score:

(score: -1 best, -6 worst) +6 best, +1 worst)
Total x-axis
score -2: Market share +5: Growth Potential
-2: Service Quality +2: Financial Stability
-2.40 + 3.75 = -2: Customer Loyalty & reputation +5: Ease of Entry into Markets
+2.00 -5: Management Experience +3: Technologies Know-how
-1: Direct Flights
Average: -2.40 Average: +3.75
PIA’S SPACE MATRIX GRAPH

Conservativ Aggressiv
e e
+
6
+
4
+
(2.00,
2
1.60)
+ + + + + +
-6 -5 -4 -3 -2 -1
1 2 3 4 5 6
-2
-4
-6 Competitive
Defensive
According to the graph above, we noticed that PIA falls into the aggressive
quadrant of the SPACE Matrix. It is located at the coordinates of 2.00 for x-
component and a y –component of 1.60. It shows that PIA has a strong
competitive position in the market with rapid growth. It is also indicates that PIA
should adopt an aggressive strategy. It needs to use its internal strengths to
develop a market penetration and market development strategy. Other possible
strategies include product development, integration with other Airlines and also
concentric diversification.

SPACE MATRIX CONCLUSIONS
• PIA’s high reputation helps in attracting customers’ loyalty
• Compete in an unstable environment
• PIA should develop new market to various area of Pakistan as well as

overseas
• They should expand its services and products for better improvement
• Eliminate inefficiencies and improves services quality. It can be done by

doing market research to investigate unfavorable performance. Then,
make full use of the resources to improve it.
• Seek Integration Opportunities such as merger in different areas
• Hire potential employee either from competitors or from other sources to

get bigger improvement
• Seek new and good management staffs to get a better company direction
CORE COMPETENCIES
&
KEY SUCCESS FACTORS

CORE COMPETENCIES & KEY SUCCESS FACTORS

 CUSTOMER EXPECTATION
 CONVENIENCE, CARE, AFFORDABILITY
 SERVICES
Personalized, Courteous, Passionate
 INNOVATION
New Ideas, Products, Value Added Services
 COHESIVENESS
Respect for Individuals, Team work & Effective Communication
 INTEGRITY
Business Ethics, Accountability & Transparency
 RELIABILITY
Loyalty & Consistence
 SAFETY
Passengers, Employees, Environment
 SOCIAL RESPONSIBILITY
Welfare, Health & Education

Corporate culture
CORPORATE CULTURE

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.
PIA is proud of its human resource as they in many ways initiate & actively
participates in welfare missions. PIA is gifted with teams of professionals
who pursue excellence and deliver confidence. With a Leadership that
understands the true meaning of Social Accountability, PIA has been able
to realize vision of social accountability.

Strategies
Undertaken

STRATEGIES UNDERTAKEN AT THE
Corporate level strategy

According to the PIA management, policies and strategies are made by
corporate level people either related with any department of PIA. The
Managing Director (MD) and Chief Financial Officer (CFO) make the
strategies on long term basis and make plans about PIA’s future. They
identify company’s overall vision, mission & objectives and develop
synergies at the corporate level. These strategies are made at the Head
Office, so no single employee is aware of, what is being done or not. They
keep these strategies confidential and secret. They are centralized at
corporate level.
Business Unit Level Strategy

At this level, When PIA have to implement their strategies then they
involve Business level people and they belong to the related department
whose strategy is going to be implemented and discuss about developing
& sustaining the competitive advantage for the products and services
they have produced or offering. All Directors, General Managers are
involved in developing the business level strategies. At this level, they are
decentralized.
Functional Level Strategy

At the functional level, all the managers of different departments discuss
the issue relating to functional business processes and value chain. All the
departments like R&D, Marketing, Finance, HR, Operations are involved so
that it is decided that how the strategies will be executed efficiently &
effectively. Functional units of PIA are involved in higher level strategies
by providing input into the business unit level and corporate level
strategy, such as providing information on customer feedback or on
resources and capabilities on which the higher level strategies can be
based. Once the higher level strategy or strategic intent is developed, the
functional units translate them into discrete action plans that each
department or division must accomplish for the strategy to succeed.
MANAGEMENT STRATEGIES

HRM
• Proper recruitment process

• Training & development
• Specialized people are hired
• Head office in Karachi
• Proper organization structure
ADMINISTRATION
Head office is in Karachi so every single operation is done in head office
and offices in other cities, they are performing the duties as assigned by
the head office
DECISION MAKING
All the decisions are taken at higher level. CEO, Managing Director makes
decision and all the operations are done at head office Karachi. The
employees, manager in Lahore and Islamabad office don’t even have the
authority to take any decision. If there is some conflict or issue, they will
have to consult at head office and wait for their decision. So they have
CENTRAILZED decision making, which is not a positive sign in any
organization.
MOTIVATION AND INCENTIVES

PIA’s only motivation is in the form of handsome salary with respect to
their competitors and monetary bonuses and a yearly increment of salary
from 100% to 200% of salary for executives. But due to crisis, PIA is not
focusing on motivation and incentives which is affecting the employees
and the passion for the organization.
MARKET
MARKET
ANALYSIS

MARKET SEGMENTATION OF PIA

1. Demographic Segmentation of PIA:
 Income Segmentation
 Occupation Segmentation
2. Geographic Segmentation
 In this segmentation PIA focuses both on segments domestic and

international
3. Behavioral Segmentation
Occasion Segmentation
 Hajj’s Occasion.
 Eid’s Occasion.
 New Years’ Occasion.
 Loyalty Status
4. Psychographic Segmentation of PIA

Social Class
 Tourists
 Religious Travels
 Pakistani Expatriates
The existing market segmentation strategy of PIA is reasonable enough

because it covers all necessary parameters that are to be focused in doing
market segmentation for Airline Company.
TARGETING STRATEGY OF PIA

PIA’s Existing Target Audience
1. From the Demographic Segmentation, PIA is targeting the income

and occupation oriented people. The classification of both categories is
as follow.
 Income Segmentation
From income segmentation of PIA, those who falls under the
category of upper class and upper middle class
 Occupation Segmentation
From occupation Segmentation that PIA is taking in to account,
there are two main sub heads of working class and business class.
The working class includes all those who are working as an
employee inside and outside the country. In business class all those
people are included who are having business.
2. From Geographic Segmentation of PIA all the audience from the

domestic and international regions are included in domestic people
within the country are included and people residing outside
Pakistan.
3. From the Behavioral Segmentation PIA‘s target audience is

categories as follow.
Occasion Based Market Segmentation of PIA.

 Hajj’s Occasion
When Hajj operation in going all those people flying from different
cities of Pakistan to Saudi Arabia for the performance of Hajj.
 Eid’s Occasion
When Eid occasions are near people within the cities and outside
the country move to their homes for having Eid Occasion together
with family
 New Years’ Occasion

Now people prefer to have New Year with their family that’s why all
those people coming back to Pakistan from different countries or
moving outside Pakistan to different countries and also all those
people moving within the country are targeted over here.

 Loyalty Status
PIA gives different benefits to the fliers. But all those who travel a
lot get the benefit of frequent fliers which carries few discount rates
on the tickets. To such audience PIA not only gives the discount
facility but also the facility of pick and drop to them.
4. From the Psychographic Segmentation of PIA, the target

audience of PIA will be the following.
Social Class
In Social Class PIA targets the tourists, religious travelers and
Pakistani Expatriates.
 Tourists
All the tourists from different regions of the country or from different
countries come to Pakistan for tourism purpose or go outside the
country. Because PIA is having highest rate of linking the remotes
areas of Pakistan
 Religious Travels
All the religious travelers for example people going for Hajj etc are
targets over here.
 Pakistani Expatriates
As PIA is a national flag carrier airline that’s why people residing
outside the country feel a unique sort of feeling to get into the
National Airline. PIA is not just and Airline but also acts as the
ambassador of Pakistan in the whole world.

MARKETING MIX (7 P’s)
Marketing Mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market. There are literally dozens of
marketing mix tools. McCarthy popularized 7 factor classifications of these
tools called 7 P’s: Product, Price, Place, Promotion, people, process and
physical evidence.
So these 7 P’s of PIA are discussed as follows:
PRODUCT
A product is anything that be offered to a market for alteration,

acquisition, use, or consumption that might satisfy a want or need. Most
products we think of are physical products, but it also includes services.
PIAC is also providing services to the nation, which can be categorized as
follows:
• Seat service (for passengers) and

• Space service (for cargo)
The characteristics of the services provided by PIAC are depicted in the

following lines.
INTANGIBLITY
Services provided by PIA are intangible. Unlike physical product, they

cannot be seen, tested, felt, heard or smelled before they are bought.
Therefore, the buyer cannot see the result before the purchase. To reduce
uncertainly, the buyers will look for signs and evidence of the service
quality. They will draw interface about the quality of the service from
place, people, equipment, communication material, symbols and price
that they will see.
Therefore, PIA’s task is to manage the evidence, to tangibles the
intangibles.
INSEPARABILTY
Services are typically produced and consumed at the same time. If the
service is rendered by a person, then the person is a part of service. Since
the client is also present as the service is being produced.
VARIABILITY
Services are highly variable, as they depend on who provides them and
when and where they are provided. Service firm can take two steps
towards quality control. The first step is investing in good personnel
selection and training. PIA spends substantial sums to train their
employees in providing good service. Second step is monitoring customer

satisfaction system and PIA also do not properly monitor customer
satisfaction.
PERISH ABLITY
Services cannot be stored and they have no self life. When demand
fluctuates, service firms have difficult problems, like PIA has to apply
much more equipment because of peak period demand on a specific route
than it would, if demand, was even throughout the year.
PIA use following strategies for producing a better match between

demand and supply.
On the demand side

- Differential pricing to shift some demand from peak to off peak
periods
- Non peak demand can be cultivated
- Reservation system is one way to manage the demand level, and
PIA employ it extensively
On the supply side

- Peak time efficiency routines are introduced. Employees perform
only essential tasks during peak periods
- Shared services are developed by interline agreements.
PRICE
A profit organization faces the task of setting a price on their product /

service. Price is the amount of money that customers have to pay for the
service. How are prices set? PIA has to deal with pricing aspect in two
types of situation.
1. Pricing of passenger tickets

2. Pricing of Cargo Airways Bill
For two types of routes, domestic routes and international routes,

different pricing policies are used by PIA.
DOMESTIC ROUTES
Prices for domestic routes are fixed by government of Pakistan for PIA.
The cost plus method is used to set prices at domestic level. The PIA’s
management estimates the price by using following six steps procedure
and sent to the government for final approval:
1. Selecting the price objective

2. Determining Demand
3. Estimating costs
4. Analyzing competitor’s prices & offers

5. Selecting a pricing method
6. Selecting the final price
INTERNATIONAL ROUTES
The prices for international routes are set by International Air Travel
Association (IATA). The IATA does not allow any discount on any
international routes, ticket shows the full price for the route while airlines
charge discounted fare by cutting their prescribed share of profit.
However, PIA establishes the pricing strategies on different international

routes keeping in view the following points:
1. Demand for seat, greater demand tends to no discount

2. Competitor’s price
3. Cost of operation
4. Type of Aircraft used
On the other hand PIA has three categories of their pricing as below, they
also vary by season to season and at peak time.
 Higher prices
 Shoulder prices
 Low prices
COUNTRIES HIGHER PRICES SHOULDER LOW PRICES

RS. PRICES RS. RS.
UK 67,450 53,750 45,500
DUBAI 57,650 49,550 42,500

PLACE
Marketing channels can be viewed as sets of independent organizations

involved in the process of making a product or service available to use. A
distribution system is a key resource. PIA has partially owned distribution
system.
LEVEL OF CHANNEL
PIA uses two levels of channels, which are described as below:
ZERO LEVEL CHANNELS
It is also known as direct marketing channel. Here PIA sells the tickets
directly to final users, through its ticket counters. In Lahore, PIA has ticket
and booking office (see page 17-19) to sell directly to the customers. All
such offices of PIA are computerized and directly linked with the head
office at Karachi.
ONE LEVEL CHANNEL
Here travel agents, as intermediaries, are involved in selling of tickets to

the customers. Many travel agents are provided with the auto ticketing
and reservation system. There are two types of agents which are defined
as follows:
 IATA Agencies
There are 30 IATA approved travel agencies which deals with PIA.
These agencies can also be stocked and sell the tickets of other
airlines. Commission of these agents is as follows:
- International sector = 9%
- Domestic sector = 5%
 DISTRICT SALES AGENTS

These are the agents who exclusively deal with PIA’s ticket and
cannot deal in other airlines. Normally, these are located, where PIA
does not have sales point.
However, there is one in Lahore. The commission provided to General

Sales Agents is:
- International sector = 12 %
- Domestic Sector = 5 %

PROMOTION
PIA is not investing much in this area. They just use brochures,
newspapers and some TV commercial when peak season is not there.
Agents play an important role in promotion as they convince traveler to
travel through PIA. Some brochures are listed below:
BROCHURES
UMRAH MADE EASIER
PIA offers more flights to Jeddah in May,

June and July for Umrah
These additional flights will not only

provide more travel options to Umrah
Pilgrims but will also enable more people
to perform the holy ritual.
Pilgrims can now enjoy comfortable and

luxurious journey in Boeing-777s
PIA 'BUDGET FLIGHT' - ENJOY UP TO 39% DISCOUNT ON REGULAR FARES
PIA introduces Budget Flight between

Karachi, Lahore, and Islamabad.
Fly PIA's new ATR
Up to 10kg hand baggage allowed
No checked-in baggage
Condition apply

PIA FLEXIBLE FARES - PLAN AHEAD & PAY LESS
Book International or Domestic flights as

early as possible because the earlier you
buy, the cheaper you fly.
A variety of discounts in Business,

Economy Plus, & Economy Classes.
The benefit of even lower fares in the

lean travel period.
Flexible Fares are applicable on sectors

where Revenue Management is
implemented.
Conditions apply
FLY BUSINESS CLASS WITH A FREE TICKET
Buy three tickets and get one FREE
Buy one ticket and pay ONLY 50% for

your companion
The offer is available on International

routes only
This offer is not available on UK, USA &

Canada sectors

This facility is only valid for the sectors where RM is not
implemented
DISCOUNT TO STUDENTS ON INTERNATIONAL AND DOMESTIC

SECTORS
25% discount offered to students on

Domestic routes.
10% discount on International routes is

valid only on the routes where RM is not
implemented
Offer can be availed exclusively from PIA

Booking Offices or the PIA counters at the
airport.
The offer is available only for Economy

Class passengers
PIA SPEEDEX DELIVERS WITH SPEED, RELIABILITY, AND

AFFORDABILITY
PIA Speedex delivers documents and

parcels to your doorstep, with a vast
domestic network, cutting-edge
technology, and the highest standards
of customer service.
• PIA Speedex offers a range of flexible

delivery options to suit your budget and
your needs.
Same Day Speed

Overnight Speed
Second Day Speed
Seasonal Products (New)
CLICK 'N' FLY WITH PIA WEB TICKETING
Secure online credit card transaction
Convenient accessibility from home or

office
FREE PICK & DROP SERVICE
PIA now offers the free pick and drop service from
your door to airport.
This offer will be offer only for Business class.

MAGAZINE
PIA will give advertisement in

different magazines once after
two month with a coupon of 15%
off in the following magazines.
• Times Magazines
• Spider
• Aurora
1. Newspaper Advertisement

PIA will frequently give the advertisement in the most readable
newspapers, mentioned as below:
• Jung
• Dawn
• Business recorder
We have planned to enlighten our future plans to our cherished
customers in the upcoming month.
PEOPLE
An essential ingredient to any service provision is the use of appropriate

staff and people.
Essential if the organization wants to obtain a form of competitive
advantage. Consumers make judgments and deliver perceptions of the
service based on the employees they interact with. Staff should have the
appropriate interpersonal skills, aptititude, and service knowledge to
provide the service that consumers are paying for. Many British
organizations aim to apply for the Investors in People accreditation, which
tells consumers that staff is taken care off by the company and they are
trained to certain standards.
There are total 18,500 employees working in Pakistan International

Airport (PIA) which includes Board of Directors, Corporate secretary, Head
of Internal Audit, Executive Management and Auditors under different
departments.
.
RANK No Of
Employee
s
BOARD OF DIRECTORS 11
CEO 1
HEAD OF AUDITOR 1
PILOTS 78
CO PILOTS 189
ENGINEERS 243
MANAGERS 13
AUDITORS 2
CORPORATE SECURITY 1
OTHERS 17,961
PROCESS

In PIA the process is time when the customers buy the tickets and the
time of their landing to their destination. Ticketing offices are available for
customers at all there near destination. In Pakistan PIA have airports in
different cities. It’s up to the services receiver from where they want to
fly.
PHYSICAL EVIDENCE
It is the material part of a service. Strictly speaking there are no physical

attributes to a service, so a consumer tends to rely on material cues.
There are many examples of physical evidence, including some of the
following:
 Packaging.
 Internet/web pages.
 Paperwork (such as invoices, tickets and dispatch notes).
 Brochures.
 Furnishings.
 Signage (such as those on aircraft and vehicles).
 Uniforms.
 Business cards.
 The building itself (such as prestigious offices or scenic
headquarters).
 Mailboxes and many others . . . . . .
The existence of aircraft’s, ticket offices, environment, air buses, air ports
are the evidences for customers of PIA
Market Share
The market share of PIA as domestically and internationally is as
PIA Other
Unique Selling Preposition (USP’s)

Domestic 67% 33%
 POINT TO POINT FRQUENCY
They offer direct flights like
Lahore to London etc.
Internationa
30% 70%
l

FINANCIAL
Strategies

Balance Sheet

Balance Sheet

Profit and loss account

Statement of Cash Flow

Statement of Equity

COSTS / EXPENDITURES
COST OF SERVICES December 31 December 31

2008 2007
Rupees in ‘000 Rupees in ‘000
Salaries, Wages & Allowances 7,938,243 6,921,590
Welfare & Social security cost 83,531 68,723
Retirement benefits 853,456 375,208
Compensated absences 148,218 97,800
Legal & professional charges 6,850 7,879
Stores & spares consumed 1,547,138 2,188,619
Maintenance & overhaul 3,829,943 3,267,244
Flight equipment rental 1,032,138 3,124,857
Landing & handling 9,123,722 7,690,712
Passenger services 2,833,399 2,848,517
Crew layover 2,196,650 2,004,869
Provision for slow moving parts 286,466 334,519
Staff training 89,855 80,743
Utilities 5,170 4,909
Communication 66,930 65,016
Insurance 1,112,775 1,038,143
Rent, rate & taxes 362,134 318,927
Printing & stationary 96,597 132,361
Depreciation 7,809,239 5,395,614
Amortization 2,461 2,532
Others 283,005 272,554
39,707,920 36,241,336
DISTRIBUTION COSTS December 31 December 31

2008 2007
Distribution & advertising expenses 2,101,761 1,595,112
Legal & provisional charges 24,498 14,905
Repairs & Maintenance 87,046 73,566
Insurance 12,958 8,782
Rent, rate & taxes 329,766 276,196
Utilities 35,694 31,942
Depreciation 72,440 69,111
Others 114,505 93,886
5,389,632 4,448,674

ADMINISTRATIVE EXPENSES December 31 December 31
2008 2007
Legal & provisional charges 223,562 289,658
Repairs & Maintenance 289,066 242,155
Insurance 14,967 23,234
Rent, rate & taxes 371,005 371,650
Utilities 510,906 429,006
Auditors’ remuneration 10,828 10,631
Depreciation 133,431 152,470
Donations 2,899 3,288
Others 331,533 313,443
5,818,218 5,256,700
REVENUES

REVENUE - NET December 31 December 31
2008 2007
Passengers 79,817,592 62,002,315
Cargo 5,458,688 4,849,735
Excess baggage 875,530 865,657
Charter 183,806 163,806
Engineering services 936,578 718,733
Handling & related services 686,755 712,686
Mail 263,215 305,265
Room, Food & Beverages sales 9,205,365 7,546,179
Others 1,744,157 1,390,107
99,171,686 78,554,483
COMPLETE FINANCIAL ANALYSIS

As a cumulative result of our endeavors, PIA’s traffic performance in the
last quarter of 2008 has been quite promising. This, together with the
drop in oil prices and recent relative stability of Pakistani Rupee, has had
a salutary effect for the 4th quarter. The airline has moved closer to the
breakeven point in the 4th quarter of the current calendar year and they
are poised to eke out a modest profit in the coming year.
As you can see in the above table, the loss in 2008 was mainly caused by
two extraneous factors both of which were outside PIA’s internal control.
Firstly, the Pak Rupee lost its value against US dollar, contributing to a net
exchange loss of PKR 24.1 billion chiefly because of the accounting
requirement of having to book the exchange difference on the entire
amount of outstanding US dollar loans.
Secondly, the crude oil prices skyrocketed in 2008, reaching the highest
ever level of US $ 147 / barrel in July & contributing an increase of PKR
15.5 billion in the fuel expense over last year. In actual fact, the fuel
expense would have increased by PKR 18.4 billion owing to increase in
prices alone had it not been for savings realized through fuel efficiencies
and capacity/route rationalization during the course of year.
It is evident from the preceding points that based on a constant US$/PKR

parity of 2007 and constant oil prices of 2007, PIA’s loss would have been
less by around PKR 39.6 billion. Consider that the average price of crude

oil was on average US$ 73/barrel in 2007 and US$ 98/barrel in 2008 while
currently it is hovering around US $ 50/barrel, there is ample reason to
nurture realistic hopes of changing the color of PIA’s bottom line in 2009.
It is noteworthy that the 2008 net loss figure also includes PKR 2.0 billion
on account of exceptional / nonrecurring costs / provisions.
Ratios
 Liquidity

 EPS
 Turnover ratios
 ROI
Liquidity Ratio:
 Current ratio
 Acid test ratio
 Working capital
 Cash ratio
Pakistan International Airline
Liquidity
Cal. 2007 Cal. 2008
ratio
Current 13,251,331 15,039,282

0.25 0.21
ratio 52,049,542 71,707,905
15,039,282-
Quick 13,251,331-3,251,940
0.19 3,726,940 0.16
ratio 52,049,542
71,707,905
Working 15,039,282-
13,251,331-52,049,542 -38,798,211 -56,668,623
capital 71,707,905
Cash
1,975,459/52,049,542 0.038 789,555/71,707,905 0.011
ratio
PIA is in loss so we are not able to calculate the ratios. In which we need
net profit and sales of company.
OTHER STRATEGIES

Procurement
Is the acquisition of goods or services at the best possible total cost of

ownership, in the right quality and quantity, at the right time, in the right
place and from the right source for the direct benefit or use of
corporations, individuals, or even governments, generally via a contract.
Complex procurement could involve finding long term partners – or even
'co-destiny' suppliers that might fundamentally commit one organization
to another.
Pakistan International Airline procurement lists the various tenders, or

needs, for the divisions of Pakistan Airlines and subsidiaries of the
Pakistan Airlines Group
Commercial Supplies
PIA purchase in-flight amenities, in-flight equipment, in-flight sales/mail

order products, beverages, wines and spirits, uniforms and office supplies
and equipment. We welcome Companies that manufacture quality
products.
IT Products & Services
Information technology plays an important part in our airline systems,

and as such we welcome vendors who are able to provide quality IT
products and services to participate in our tenders .
Engineering Supplies
The Engineering Supplies Department of PIA is the Purchasing Authority

for procurement of aircraft parts, non-aircraft parts (e.g. simulator
spares) and services to support our aircraft maintenance and operations.
We invite companies that meet our product/service specifications to
participate in our tenders.
R&D
According to the Management of PIA, They don’t have R&D in their

process so; we are not adding the information regarding R&D.
PROBLEM SECTIONS

MAIN PROBLEMS ACCORDING TO MANAGEMENT
PIA is a large public organization like other organization PIA is also facing
some serious problems. Some of them are as followed:
POLITICAL INFERENCE
Executives are the people who can improve or fail any business. They
should know their basic jobs authorities and responsibilities. In PIA, major
problem is that there is high political inference in the appointment and
selection area. Managing director is appointed from outside the
organization. Nowadays, chairman of PIA is a PMA political person can’t
have as much knowledge of a commercial organization as prompted,
talented persons. These executives then select their favourite person for
new vacancies weather they have technical knowledge about job or not
so, this effects the overall efficiency and business of organization.
UNION INFERENCE
PIA employees have their unions. They use their power mostly for low
level appointments so the upper and lower appointments affect the rest of
proportion.
BUREAUCRATIC STRUTURE
Character of the organizations is more like on elite govt. Set up and less
like an efficient forward looking organization.
GOVERNEMENT HURDLES
As PIA is under 80% of government, so they are facing govt hurdles like:
 Operations on non economic rates
 Purchaser of insurance policies from Insurance Corporation
 PIA functioning under ministry of defence instead of ministry of

communication or aviation
 Most of govt. Departments delay payments.
 Govt. Department working at airport irritates the customers.

Employees sometime misuse the PIA transport
MAIN PROBLEMS ACCORDING TO OUR ANALYSIS

 Lack of coordination
 Lack of expertise
 Poor Management
 Centralized culture
 Out dated technology
 Weak HR department
 Lack of Check & Balance
 No delegation of authority
 Poor Strategic decisions
 Government interference
 Favouritism
 Non profitable routes
 Weak Marketing strategy
 Old Aged Fleets
 Refund process is not satisfactory
 Highest employee ratio per airplane
 Complaints of employees are not properly facilitated
SUB-PROBLEMS
 Sometimes, agency sale agents don’t realize airport taxes which

make complication in realization of revenue
 At some areas, jobs are not clearly defined which effect efficiency
and working relation of employees

 Rate of motivational campaigns for employees very low
 For refund, customers have to come to the office which create

problem for them
 Over booking and mishandling also creates trouble
 Misappropriation of work is one of the main problems like engineer

work as accountant. This is because of political inference
 Delay in computer up gradation also effect output.
STRATEGIC ALTERNATIVES
SOLUTIONS TO SOLVE THE PROBLEMS
POLITICAL INFERENCE
Executives are the people who can improve or fail any business. They
should know their basic jobs authorities and responsibilities. The elements
of nepotism and jobbery are present in PIA. There is element of
favouritism from the government side. As the company is in financial crisis
there is a need to privatize PIA along with this, financial crisis, jobbery and
nepotism should be reduced to favourable extent.
UNION INFERENCE
In PIA the salary packages are not designed in a way that satisfy the
whole organization, so as a result of this, the employees has created
labour unions, management unions etc in order that the corporate level
accept their proposals. They have less association with their work and
more towards anti organization activities.
GOVERNEMENT HURDLES
The government has created bundles of hurdles for PIA. Where ever a new
government rules, they promises to the people to provide jobs, in different
sectors. PIA being a government organization, government provides jobs
to those candidates who are actually not eligible for that post. So,
government influence on PIA should be reduced in order to provide strong
footing in transportation industry.

Other than these problems that are at managerial level there are
also many problems which require solutions.
 Lack of coordination
There is lack of coordination among employees. They don’t know a

single thing done at head Office and within the same office. They
just perform the tasks assigned to them by the Head office without
knowing what is happening in HO. So there is a need to coordination
between and HO and Employees in other offices.
 Lack of expertise
In PIA, they don’t have expert employees in each department,

whether it is HR, Marketing or Finance. The departments are running
by outdated staff. The element of favoutitism is also present in this
category. Because if you hire the staff just on the basis of
relationship rather than education it always create problem for an
organization, so smooth running of an organization experts are
always required.
 Poor Management
The management of PIA is very poor. The hiring of the fresh

graduates is not present in PIA which is the requirement of new age.
So, the organization must have contacts with business schools, so
that they get the updates about coming graduates and hire them
according to their requirement.
 Centralized culture
The culture of the organization is so much centralized. Employees

are working around a single point. They don’t have the authority to
take any decisions and that’s why they are not interested in the
progress or success or prosperity of the organization. So, there is a
need to extend their networks of decision making. So they feel their
self in actual a part of PIA.
 Out dated technology
In PIA, we didn’t found any latest technology whether we talk about

their airbuses they are not using any advance technology. And when

we talk about departments we cannot find MIS, SAP, AMS, etc. all
these mentioned system are necessary for a successful
organization. So, PIA should introduce these technologies for further
improvement.
 Weak HR department
In this era, strong & efficient HR is considered the backbone of any

organization. PIA has a very weak HR department. They just have
limited HR officers with limited authorities. They are busy in their
routine works and are not concerned more with HR system. So,
Head office should take notice and create strong HR department
 Lack of Check & Balance
As there is not coordination in the departments, so there is no

proper check & balance on the employees, staff, and on overall
functions of the PIA. So there must be a person or authority that has
the right of check & balance on the employees, and who can listen
the problems from the employees’ side & having authority to solve
them.
 No delegation of authority
There is no delegation of authority in PIA. It must be present for the

success of PIA.
 Poor Strategic decisions
The strategies are formulated at the HO and have centralized

decision making process, so we didn’t found any proper strategic
decisions happening in other offices. So, they must improve their
strategic decision by making decentralized environment.
 Government interference
As PIA is under 80% of government, so the government interference

is there which affects the performance in PIA. So, the government
interference must be reduced to make PIA stronger and better in
future.

 Favoritism
There is a lot of favoritism in PIA. Most of the employees are hired

by the orders of government and where government is involved,
favoritism exists. So, this is the duty of a CEO to exclude the
favoritism and give chance to deserving candidates.
 Non profitable routes
Whenever Government delegation’s visit to some other country they

make some agreements with that country that to start their services
in that country. Whether it is favorable for PIA or not such
agreements should not be made which are against the favor of PIA.
And do nothing but increases the worry of organization.
 Weak Marketing strategy
PIA should adopt good marketing policies so that it will bring higher
profit and maximum utilization of its available resources, Business
sector should be attracted to operate at full potential.
 Old Aged Fleets
PIA should upgrade its fleet as it’s causing the airline higher
operating cost and PIA is incurring loss .PIA should purchase new
Airplane with twin engines these will reduce the operating cost of
PIA.
 Refund process is not satisfactory
Airline should focus on the customer’s satisfaction, refund process

should be quick so that customer remains loyal to brand.
 Highest employee ratio per airplane
PIA should not induct new employees till the time they are needed
on the basis of my personal observation at Rawalpindi station I have

seen that a task which can be performed by person PIA had 3
employees for that.
 Complaints of employees are not properly facilitated
PIA should facilitate employees’ complaints so that whatever the

complain is, it must be facilitated so that the problems occurring to
employees be resolved soon.
IMPLEMENTATION PLAN 2009 - 2015

CONCLUSION
It has been concluded that PIA is in big crisis mainly due to the varying
structures, economic problems and leadership styles. As mentioned on
various accounts, PIA has a centralized structure that has caused higher
conflicts and poor management of employees as decisions are made by
the top level management without involving the employees. In addition,
this leads to complexities in employee tasks as it takes more time to
reach the information from top to bottom. Due to this bureaucratic nature
of PIA, inefficiencies have crept in and morale of the employees has
plummeted over the years.

Delegation of tasks is minimal at PIA. The current status of employees is
less control and authority over different tasks apart from their own
assigned tasks, so employees feel distant as far as other issues and
problems of the departments are concerned.
PIA have centralized hiring processes. However, PIA emphasizes on
experience but as it is under 80% government there is a lot of favouritism
while hiring any employee. Therefore, the organization has unskilled and
non-active employees who may lack in experience as well as in the
operations. This has decreased productivity of the employees and
consequently of the organization.
Relatively effective channels of expressing dissatisfaction are present at
PIA. The meetings and suggestion boxes at PIA are ineffective; employees
feel reluctant to voice their concerns in a meeting amid others and
complaints in the suggestion boxes take time to reach bosses and
therefore, action is postponed.
It has been observed that Pakistan International Airlines (PIA) fears
change. They fear that the system will become unstable, their security will
be lost, and they will not understand the new process, therefore, will not
know how to respond to the new situations. PIA turned its attention on
employees when it faced competition. Otherwise, it was concentrating
more on expansion and profitability: an outcome oriented approach.

At the end of the conclusion, we have some recommendations for PIA
which we hope will be implemented in the near future. We have included
questionnaire analysis which shows the overall performance and
reputation of PIA.
No doubt PIA, is still a strong Brand name in Pakistan but due to
some economic and other variable issues PIA is facing crisis
which is making PIA down. But we all hope that in the next few
years, PIA will show up with a positive change
RECOMMENDATIONS
PAKISTAN INTERNATIONAL AIRLINES
• DECENTRALIZATION
PIA should decentralize its structure that would lead to the easy
management, increased motivation, easy access to information and
resolution of the conflicts (as they would be resolved by the
immediate manager time span would then reduced). Since
employees issues regarding their behaviour would lessen, so it
would ultimately lead to more satisfied employees that would result
in enhanced productivity of the organization.

• EMPLOYEE EMPOWERMENT
PIA should make efforts towards empowering the employees that is

going to lead to more employee participation in the decision making
process and also result in more employee satisfaction and enhanced
motivation. Apart from this, employees would feel more
independent to discuss the issues explicitly without hesitation. This
would also enhance team work process at PIA as quality team and
cross-functional teams. The employees will work with more
commitment and dedication and every employee would work to
his/her fullest due to increased motivation. However, with
empowerment comes accountability, so it is suggested that while
they empower their employees, there should also be a “controlled
check’’ on them to ensure the correct usage of power delegated to
every employees within their circumscribed limits.
• OVERHEAD COSTS
PIA should also reduce its overhead costs that is it should manage
its resources: labour more effectively, so that with less input, more
output can be achieved and the saved resources can be utilized in
other areas such as introducing more training courses for the
employees so that the quality of the workforce could be increased.
Hiring the services of expertise can improve the efficiency of their
services, so by saving the overhead costs, they can utilize that
money for the expertise services. So by analyzing the various
segments of the organization and making the right corrections, it

can substantially improve the standards of Organizational
behaviour.
• TWO-WAY COMMUNICATION
The suggestions of the employees can prove to be very effective in

improving the operations as they are the ones who manage them.
Therefore, a top-down approach should be replaced with two-way
communications. In this way, the employees would feel motivated
and valued as they would be included in decision-making.
TOTAL QUALITY MANAGEMENT
Total quality management should be catered to within the work

groups and implementation of various skill enhancement programs
for quality and productivity improvements such as Six Sigma should
be provided to its executive employees.
STRATEGIC BUSINESS UNIT

PIA should make its different departments into Strategic Business
Unit. Every SBU should have a defined business strategy and a
manager with sales and profit responsibility. As PIA is a large
organization, so it must be convert into SBUs.
Different factors should be determined for the success of SBUs

which as follows:
 The degree of autonomy given to each SBU manager

 The degree to which an SBU shares functional programs and
facilities with other SBU's
 The manner in which the corporation evaluates and rewards the
performance of its SBU managers

QUESTIONNAIRE
ANALYSIS

Pakistan International Airline Questionnaire
PLEASE SHARE YOUR EXPERIENCE, VIEWS AND COMMENTS
WITH US
1. How often do you take airline travel?

Less than 1 month 2 month to 3 month
1 month to 2 month 3 month to 4 month
Or __________________________.
2. Which airline you always/usually select to travel (domestic)?

Pakistan International Airline “PIA”
Aero Asia
Shaheen Air International
Or Any Other ___________________________.
3. Is there any particular reason why you usually choose that Airline?
Service Price Other, please specify below
4. How did the selected airline price compare to your expectations?
1 (Excellent) 2 (Very Good) 3 (Good) 4 (Fair) 5 (Poor)

6 (Very Poor)
How did the selected airline Value for Price Paid compare to your expectations?
1 2 3 4 5
6

5. How would you rate the overall value of the selected airline?
1 2 3 4 5
6
6. What are good aspects of selected airline that attract you?
7. What are some aspects of selected airline that can be improved?
8. Do you think that all the above qualities exist in PIA, did you
agree? If no, so please specify it below.
9. How do you consider the price of PIA?

Very Expensive Expensive Average Low
Very low
10. When I have a problem with travel arrangements, the airline

shows sincere interest in solving it?
Yes No Never had experience
like this.

11. How will you compare PIA with different airlines in the following
services?
(Please fill the table according to 1 for Excellent, 2 for Very Good, 3 for
Good, 4 for Fair, 5 for Poor and 6 for Very Poor.)
Attributes PIA Aero Asia Shaheen Air

Destinations
Punctuality
Quality of Food
Hospitality/Customer Service
Economical
Technological Advancements
Services
Corporate Image
Safety of luggage
12. What are some important strategies that you would like to
recommend?
COMMENTS
Thank You So Much for Filling Questionnaire
Name: __________________________ Age: ___________ Sex: Male Female
Occupation: __________________________ Qualification: _________________

RESEARCH ANALYSIS
After conducting research from

different MBA students of our
University, the following results
have found which follows as
bellow: Selection Of Airline
Aero
Asia,
Selection of Airline 30%
According to research, 60% people

PIA, shahee
utilize the services of PIA, 30% 60% n
people utilize the services of Aero Airline.,
10%
Asia and only 10% people utilize
the services of shaheen
International Airline.
Reason for Selection of

Airline ReasonFor Selection
According to research, 50% Of Airline
people selected the service
others,
of airline taking into Price,
20%
50%
consideration the price, 30%
people selected the service
of airline taking into Service
30%
consideration the service,
and 10% people selected the
service of airline taking into
consideration on many
grounds which are related to
their desired destination.
Comparison of PIA with Different Airlines

After conducting the research students have rated the different airlines in the
following manner.

Destinations 6 5 4
Punctuality 5 6 4
Quality of Food 5 6 5

Hospitality/Customer Service 6 5 5
Economical 5 5 5
Technological Advancements 5 5 5
Services 5 5 4
Corporate Image 6 3 4
Total Points 43 40 36

A Management Project On PIA

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Business Policy

FINAL PROJECT REPORT

PAKISTAN INTERNATIONAL AIRLINE Page 2

All praise is to Almighty Allah for bestowing us with the wisdom

The main purpose of the project is the fulfillment of the

PIAC is the national airline of Pakistan. The information has been

As regards the preparation of this project, all the topics are

PAKISTAN INTERNATIONAL AIRLINE Page 4

We would like to offer our humble gratitude to Allah Almighty,

The topic of our project was the complete Strategic Analysis of

PAKISTAN INTERNATIONAL AIRLINE Page 5

MISSION / VISION STATEMENT 21

CORE COMPETENCIES ANALYSIS & KSF

PAKISTAN INTERNATIONAL AIRLINE Page 6

PAKISTAN INTERNATIONAL AIRLINE Page 7

Birth of a Nation, Birth of an Airline

PAKISTAN INTERNATIONAL AIRLINE Page 8

Orient Airways Takes to the Skies

Four Douglas DC-3s were purchased

The initial routes were Karachi-Lahore-

PAKISTAN INTERNATIONAL AIRLINE Page 9

A New National Flag Carrier for Pakistan

PIA’s First International Service

New Planes, New Directions, New

PAKISTAN INTERNATIONAL AIRLINE Page 10

Development, expansion, and growth were keywords that the new

PAKISTAN INTERNATIONAL AIRLINE Page 11

Style, Glamour, and Charisma

Safety Management System at PIA

PAKISTAN INTERNATIONAL AIRLINE Page 12

Ushering In a New Era of Growth and Development

PAKISTAN INTERNATIONAL AIRLINE Page 13

Where is the company standing? PIA's growth continues unabated and

Where is the company heading in future? PIA is heading

PAKISTAN INTERNATIONAL AIRLINE Page 14

PAKISTAN INTERNATIONAL AIRLINE Page 15

REGIONAL OFFICE – LAHORE

PAKISTAN INTERNATIONAL AIRLINE Page 16

City Contact details

Noor Mansion, Noor Mehal Road

PAKISTAN INTERNATIONAL AIRLINE Page 17

PIA Booking Office, GSR Plaza, Gilgit

PAKISTAN INTERNATIONAL AIRLINE Page 18

PIA Building, Arbab Road, Peshawar, Cantt

PIA Booking Office, Rawalkot

PAKISTAN INTERNATIONAL AIRLINE Page 19

Allama Iqbal International Airport Lahore

PAKISTAN INTERNATIONAL AIRLINE Page 20

PIA International Network

PAKISTAN INTERNATIONAL AIRLINE Page 21

There are total 18,500 employees working in Pakistan International

The nature of Pakistan international airlines is transport & services though

1. CH. AHMAD MUKHTAR – Minister of Defence & Chairman PIA

PAKISTAN INTERNATIONAL AIRLINE Page 22

1. MR. MUHAMMAD SHUAIB

Head of Internal Audit

1. MR. S FAZAL AHMAD

1. CAPT. MOHAMMAD AIJAZ HAROON – Managing Director PIA

1. MESSRS. ANJUM, MR. ASIF, MR. SHAHID, MR. RAHMAN

PAKISTAN INTERNATIONAL AIRLINE Page 23

PAKISTAN INTERNATIONAL AIRLINE Page 24

Employee team will contribute towards making PIA a global