Case study:

Introduction of organization
Pakistan International Airlines (also referred to as PIA), is the
national flag carrier of Pakistan and the national airline operating
passenger and cargo services around the world. Its main hubs are
Jinnah International Airport, Karachi, the Allama Iqbal International
Airport, Lahore and the Islamabad International Airport,
Islamabad/Rawalpindi.
It also serves regional airports, including Peshawar International
Airport, Peshawar, Faisalabad International Airport, Faisalabad and
Multan International Airport, Multan that connect to the main hubs
and have flights to the Middle East.
Pakistan International Airlines PIA can trace its beginnings to the
days when Pakistan still was not a nation. In 1946, Muhammed Ali
Jinnah, also known as Quaid-e-Azam, realized the need for an airline
network for the forming country. He called upon the help of an
experienced industrialist Mirza Ahmad Ispahani. Orient Airways,
registered in Calcutta, was formed on October 23 1946, In February
1947, three DC-3 airplanes were bought from a company in Texas,
and in May of that year, the airline was granted a license to fly.
Services were started in June from Calcutta to Akyab and Rangoon.
This was the first post war airline flight by a South Asian registered
airline company.
Two months after this service began, Pakistan as a nation was
formed. Orient Airways began relief flights to the new nation, and
soon after, it moved operations to Karachi, where it began the
important route from Karachi to Dhaka. In addition, their initial
domestic route in Pakistan was established, from Karachi to Lahore
to Peshawar, and from Karachi to Quetta to Lahore.
The government of Pakistan, realizing the operation was failing
economically, asked the airline to merge into a new national airline
that the government was planning. On March 11 of 1955, Orient
Airways merged with the Government's proposed airline, becoming
Pakistan International Airlines Corporation. During the same year
the airline opened its first international service, under the PIA name,
from Karachi to London Heathrow Airport in London, United
Kingdom, via Cairo International Airport in Cairo, Egypt and
Leonardo Da Vinci International Airport in Fiumicino, Italy using
Lockheed Constellations. The DC-3s continued operating the
domestic services in Pakistan.

The most important element of any airline service is the aircraft

itself. Currently PIA has 43 aircraft in its fleet. These aircraft are:

Types of Aircraft In Service

Airbus A310-300 12
Airbus A321-200 -
ATR 42-500 7
Boeing 737-300 7
Boeing 747-200 2
Boeing 747-367 6
Boeing 777-240ER 4
Boeing 777-240LR 2
Boeing 777-340ER 3
Total 43

Pakistan Aviation Industry:

Air Transportation is a fast growing industry, highly capital

intensive, highly sensitive to business cycles, facing increasingly
deregulated environment and hence highly competitive background.
The transportation sector holds a very important position in the
economy of Pakistan. Currently it contributes almost 10% in the
GDP.
The aviation sector was deregulated just 11 years ago. This
encouraged many airlines that stopped their operation many years
back due to Millions of Civil Aviation Authority dues. Bhoja, Hajvery
and Raji were closed down, but they have been granted license
again.
Air Blue and Royal airlines have initiated their operations also and
they are the second already operating in Karachi-Dubai cargo
flights.
One market which is not served by the Private Airlines includes all
flights to those domestic which are not profitable. It is required by
the government that PIA offers its services in not so profitable
areas, which is a liability of PIA being a semi private organization.
PIA calls it “loss making sector”.

Private airlines have stunned the aviation industry as they charge

below cost fares. At the moment when fuel prices are touching all-
time high levels in the international market, cut-throat competition
among private airlines has placed a million-dollar question about the
feasibility of these airlines.

PIA operates in two major markets; Domestic and International.

Pakistan International Airlines has the lion’s share in the domestic
market. As it is the oldest and the pioneers it has the better fleet as
compared to its competitors who are comparatively newer in this
segment. Besides this, Pakistan International Airlines has a huge
network of flights through out the country. The number of flights
remains the same during on-season and off-season.

Internationally also, Pakistan International Airlines is encountered

with a severe and strong challenge with many renowned
international names. Pakistan International Airlines faces
competition with not only international airlines but also with local
airlines on the various routes to the Middle East and the Gulf.

Current Airlines of Pakistan:

• Pakistan International Airlines

• Aero Asia
• Air Blue
• Shaheen Air International

Cargo Airlines of Pakistan:

• Pakistan International Cargo

• DHL Cargo Pakistan
• Royal Air Cargo
• Star Air
• TCS Couriers
MARKET SIZE AND MARKET GROWTH:

The total market size for the year 2006-2007 was 14.199 million
passengers as compared to 14.615 million passengers for the year
2005-2006, therefore resulting to an in decrease.

Defining the Problem

Problem is the PIA is getting losses for many years. No serious effort
is done to get out it from losses. During the last year Pakistan
International Airlines (PIA) has stained a loss of PKR13.4 billion
($207.5 million). Operationally, it was also blacklisted by the
European Union during the year, which hit its bottom line along with
its prestige.
Losses for the year have widened slightly from a loss of PKR12.76
billion recorded in 2006.
A fall of 0.2% in full-year revenue, to PKR70.48 billion, was mitigated
by a fall in expenses by 5.2% to PKR66.22 billion. However, non-
operating costs, related to increased borrowing, went up nearly
50%. Operating loss also came down to PKR5.94 billion from
PKR8.45 billion in 2006. Pakistan International Airline is currently
ranked amongst the top 20 airlines of Asia. It has the capacity of
becoming on top of the list. But due to certain reasons its market
share has been decreasing both in the domestic as well as in the
international market. Although it is still occupying a strong position
in the domestic circuit being the national flag carrier but the current
position is threatening for the national flag carrier. During the last
four years the company has beard the accumulated loss in excess of
30 billion rupees, while its total debt is almost reaching 1 billion $.
The expenses of the company are increasing but the profits are
decreasing. All the shareholders’ money is gone and the company is
facing the worst financial situation. PIA has lost its market share in
domestic airline market, which has dropped to 69 % in the FY
2007/08. Things on international front were also not so different for
PIA, as national airline’s market share in the international market
dropped from 48 to 43 %. Profitability of PIA is decreasing. The
share price of PIA closed at Rs 5.25 on June 14, 2008, exhibiting
capital loss of approximately 14% since last month. On May 2, 2008
the price per share for the company was Rs 6.03. The company
beard the lost of 13.39 billion Rs. In 2007, about 12 billion Rs. in
2006 and 4 billion Rs. in 2005. Pakistan International Airlines is
currently facing a loss of approximately 40 million Rs. per day.

Method of Investigation
We get the data from primary and secondary sources. Secondary
data is collected from research on internet by various search
engines such as Google, yahoo, msn, answers etc. We also get
information from the PIA’swebsite.for the purpose of getting the
primary data we develop questionnaires ad visit of the organization.
Where we take the personal interviews of employees of different
level. We construct two questionnaires. These questionnaires are
designed according to the needs of the research. One questionnaire
is filled from the customers and another is filled from the employees
of the organization. For the purpose filling the questionnaire the
customer are select randomly.
Problem Description:
According to our research the company is having the problem in the
following areas. The problems for Pakistan International Airlines
include:
• Over recruitment:
Pakistan International Airlines is a large organization with 18,043
employees. Its fleet comprises of 43 planes. It operating planes
are just 33. It means round about 525 employees per plane. The
industry average is being between 150-250 people. This
describes the position of the company clearly. This drives the
cost of the company further.
• De-motivated employees:
Pakistan International Airlines is a company which is constantly
going in loss. Higher number of employees and the company
already going in loss de-motivates the employees. The
employees do not feel secure themselves in the company and try
to move to other successful organizations. Also certain issues
such as centralized decision making and salary issues also de-
motivate the employees taking their attention away from their
job.
• Nepotism and Political involvement during recruitment
and selection:
Pakistan International Airlines being the government organization
has the strong influence of the politicians and government
officials. Reports say that Mr. Tariq Kirmani was appointed
chairmen PIA due to being a friend of Prime minister. Similarly
Mr. Kirmani appointed his own friend Director MIS at a heavy
salary. Selection and recruitment is not done on merit. Current
deputy managing director is another example of this who was a
pilot by profession and now deputy managing director still flies
some hours a week to keep his license on.
• Lack of experience relating to aviation industry for the
top management:
Look at the background of former three chairmen of PIA. Mr.
Tariq Kirmani was from PSO, Mr. Zafar Khan was from PTCL and
Mr. Ahmad Saeed was from Service industry having no
experience of aviation industry. What could they contribute to
the organization with no such knowledge?
• Lapses in the management:
The PIA’s management is ineffective to resolve and plan at the
right time. Planes with damaged Nose Randome are grounded for
consistent 9 days. For an Airline with cargo aircraft and a
frequency of eight weekly flights to USA, such an inordinate
delay in procuring Nose Radome is amazing to say the least. New
flights to America are thought to start but with American aviation
industry there is no talk. Strikes by engineers happen due to the
mismanagement and cause a great loss to the company. Million
of rupees worth cargo off loading from A VVIP flight is another
example of this.

• Low scale advertisements and awareness:

A common Pakistani may even not know about Pakistan
International Airlines. No advertisements and awareness to the
organization’s brands in such a modern era of marketing. Cricket
stars and sportsmen are hired on heavy salaries but with no
profit to the organization. Pakistan International already being an
ethnic airline is just confining itself to its own country. No such
efforts to enhance the brighter and soft image of the nation as
well as airline are made.
• Government’s and Civil Aviation authority’ policies:
Pakistan International Airlines has to pay a big amount as an
expense on its borrowings from banks. Already being in such a
big crisis, the company is getting no support in this regard like
WAPDA is getting. Also civil aviation authority of Pakistan’
policies are hampering PIA a great deal. Pakistan International
Airlines being a national carrier has to go to those routes which
are going in loss. Routes such as, Swat, Bahawalpur, Dalbandin
etc are called socioeconomic routes and PIA has to get to those
routes despite of great loss. On these airports, airport staff is
greater numbers as compared to passengers. The money which
is received as for providing services to passengers is taxed by
the government at a very high rate.
• Rising fuel prices in the World:
There is been consistent rise in fuel prices in the international
market. Fuel prices have impacted on almost every airline in the
world. This has affected Pakistan international Airlines more than
any other airline due to its aged fleet. New planes are fuel
efficient as compared to old ones. In an airline normally 30-35%
of expenses account for fuel expenses but in Pakistan
International Airlines this number goes to 45-50%. Due to these
factors PIA has to charge more fare to customers that’s
dissatisfies the customers.
• Global impact of 9/11 on aviation industry:
After the 9/11 attacks air traffic has been decreased all over the
world. It has affected Pakistan international Airlines also.
Passengers are more inclined towards traveling to other
countries such as European countries. Air traffic in Asia,
especially in south Asia has decreased.
• Aged fleet:
Pakistan International Airlines fleet has total 43 planes. Out of
those 43, only 33 are operating at the moment. The average age
of the fleet is 13 years which has become 13 years with the
induction of 4 new planes. Previously it was 14. Due to aged fleet
the fuel is consumed more and maintenance expenses are
increase. Thus theses factors result in increment in expenses.
Due to the aged fleet and maintenance problem PIA has to pay
higher amount in terms of insurance cost.
• Maintenance problems:
 Beside having a large number of engineers, there is always been
a question mark on PIA’s fleet maintenance. Last year European
Union banned 20 out of 42 planes were banned from operating in
Europe. This results a 4 billion Rs. loss to the company just from
Europe’s segment to the company. This ban was imposed just
due to the lack of proper maintenance.
• Corruption at its peak:
Corruption is a sin that has hollowed Pakistani society bases. Like
all other departments of our country corruption is at its peak in
Pakistan International Airlines. Sale of Roosevelt hotel in Dubai is
a clear example of it. The hotel was valued about 1 billion but it
was sold only in 40 millions. The sale of PIA’s kitchen centre in
Karachi is another example of this. There a profit making unit of
the company was sold. It was generating great revenues for the
company but was sold confidentially.
• Less technology advanced as compared to its
competitors:
PIA is competing with the airlines from all over the country
especially with the Middle East airlines which are coming in with
heavy investment. Its competitors such as Emirates and Qatar
airways have great capital. Theses Middle East organizations are
putting in newer and newer technology and acquiring greater
manpower. PIA being already in a financial crunch faces a tough
task.
• Poor image:
With already going in financial loss, 9/11 impact on the
industry and above all incapability of Pakistan International
Airlines’ management has badly damaged the image of the
Airline. Due to all such problems the fares of PIA are higher but
service is not up to that class. This also gives a bad image to the
passengers.

• Lack of training facilities:

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

Data analysis
We filled the questionnaire from low level of management of PIA.
Through this questionnaire following facts and figures are disclosed
to us. 60% of low level management think that they are not part of
decision making. The second question shows that only 20%
employees are not happy with the salary package. Response of
question six indicates that 60% employees are satisfied and 40%
are partly satisfied with the facilities provide in the department.
Majority of the employees are satisfied with quality of training
program. Repair cost is the major cause of loss to PIA in the opinion
of employees. 80% employees are satisfied with code of
conduct.60% employees admit the political influence on working of
PIA. Majority of employee suggest that proper training is needed to
make the organization successful. 60% of the employees are not
happy with high transfer rate.
On the other hand data collecting from customers reveal the
following facts. 50% of customers are not happy with the services of
PIA. Non punctuality of departure and arrival of flights also
displeased the customers. Many customers angry with ticket getting
process.
By taking a view of profit and loss account of PIA that indicate many
of the expenses increases at a very high rate which causes loss to
PIA. These expenses are fuel cost that increases due to rapid rise in
oil prices in recent years. Repairing expenses also becoming the
major of cost that is very as compared to others companies of same
business. Due to war against terrorism in Afghanistan is also badly
affected the revenue of PIA. Due to this war the insurance expenses
also increases. And it also causes to decrease the number
passengers. As the value of rupee decreases which causes a loss to
company.

Recommendations and suggestions:

• Needed better functioning of human resource and
administration department
• Management is needed to perform it responsibility
professionally. Reducing costs and trying to achieve more
market share by combining the organization.
• Marketing department must deliver in order to create a strong
figure for the organization. It must be responsible for creating
more sales and getting more market share. Providing
awareness about the good characteristics of the organization.
Getting information on related field and report to the top
officials.
• Coping with fuel rising prices in a way as most successful
airlines are doing
 • Modernizing the airline’s fleet is badly needed as well proper
maintenance of the fleet is required.
• Must take advantage of the increment in the air transportation
especially towards Middle East countries and India.
• Better and modern functioning of training and development
department
• Need for accountability.

Implementation of program:
Human resources and administration department:
Pakistan International Airlines is a huge company with over 18, 000
employees. A human resources and administration department is
working but it is needed to be work efficiently and according to the
standards. If it would have been working properly then there would
not been 525 ratio of employees per plane.
Jobs must be designed by this department. Each and every position
must be clearly defined. From the chairman to a sales agent and
even further down everyone must be clear about his responsibilities.
He should be held responsible for his job. International standards for
recruitment must be adopted. Right number of persons must be
appointed for a specific job. Proper advertisements for each and
every job must be done. So that as many talented candidates can
come in front. PIA’s manpower should be combination of youth and
experience. Both the age groups shall be included in order to gain
profitability.
Rewards and incentives must be attached with the performance.
Similarly there should be a check if an employee is not fulfilling his
or her responsibilities. Job security must be done so that employees
feel secure within the organization and remain loyal and committed
to it, work for its benefits. Employee participation in the decision
making must be enhanced.
For the top level management such as chairman or managing
director people having aviation industry experience must be hired.
There should be no political or government influence during
recruitment or selection. Merit must be considered at first.

Management issues:
There should be no compromise on discipline. Discipline should be
the key factor for the organization. Policies must be clearly defined.
Goals and objectives should be determined for the organization as a
whole and individually as well. Management must assure that each
and every person is committed to his job and the organization is
going towards the achievement of its targets. Management should
ensure the punctuality of flight, in flights services and their standard
must be world class. Safety and maintenance issues for the planes
must be strongly checked. Management’s perspective should be to
increase the profitability and ensure the good image of Pakistan.
Security and safety of cargo must be ensured. It must be
management’s responsibility to ensure services to the passengers
both in plane and at airport as well. The management must talk to
the government on roué rationalization. Only those routes must be
held which are profiting or which can provide profits in the future.
The management needs to bring all the available resources in use
and bring the modern facilities, softwares and information to the
organization or at least report the need to top level decision makers.
Management should be done by objectives, both short term and
long term. Short term objectives to increase the profit and market
share by reducing the costs and expenses. Long term objectives
must be image building, providing state or the art equipment and
fleet to the organization and creating corporate culture and value in
the organization.

Marketing department:
Pakistan International Airlines marketing department has two
divisions. It is passengers division and cargo division.
Passenger sales division must be held responsible to boost sales by
introducing different types of packages. It must also have the
responsibility for handling customer queries and complaints.

Effective campaigning of the special interests tourists’ packages for

Pakistan to increase the travel to Pakistan must be done. Soft and
brighter image of Pakistan and PIA must be enhanced.

Cargo division must be responsible for supplying both perishable

and non-perishable goods in the global market place.
The major objectives of this division should be:
• To develop Strategic alliances with other carriers so as to increase
the capacity on the high yield sectors.
• Annually enhancing the cargo reservation services, terminal
services and warehousing services at domestic and international
stations to be competitive other carriers in the industry.
• Revisions of cargo fares and offerings on annual basis to optimize
the full potential of cargo space on all the sectors
Marketing planning should be done in such a way:
• It must gather effective information regarding marketing and sales
activities of various airlines.
• Must Adopt and access the emerging softwares / programs which
are needed to remain competitive in the industry.
• Annual assignment of realistic sales targets must be given to each
sales area
• Effective evaluation of the sales targets on monthly basis must be
done to take corrective measures for fulfillment of the sales targets.
• The organization must provide a lot of activities in-flight to ensure
that the passengers are entertained during their journey. These
activities include movies, music, and in-flight duty free shops.
•The pricing objective of PIA should be to maximize profits. It is
considered an airline which charges high prices as compared to its
competitors. So it must provide services to the passengers
comparable to its price. Prices and services must be settled in
accordance with the industry.
PIA being huge organization must use a lot of promotional methods
to persuade people to use its services. These must include
advertising (newspaper, internet), through its own magazine,
personal selling, sales promotion, and public relations.
Advertising is an impersonal form of communication which should
be used by PIA in many ways, such as TV ads, print ads.
PIA can also use internet for its promotion. The passengers must
provide online booking facility, online checking facility and up to
date flight schedule.
PIA is treated much of an ethnic airline rather than being a
commercial airline. Its image must be advertised and portrayed in
such a way so that every group and segment of passengers can
travel on it.

How to cope with rising fuel prices:

Most of the world airlines are having a great problem in handling
rising fuel prices in the international market. PIA is already in a
financial crunch and such situation where there is a price rise every
day faces a difficult situation. PIA can adopt the policy of hedging
like many other airlines which are going in profit. It can borrow
money from banks with the help of government (as having full
support of the government) and hedge the fuel for certain periods.
Another way to cope rising fuel prices is to insure the fuel or to sign
future contract with jet fuel providing companies such as Shell.
By maintaining the fleet in a good condition with the passage of
time can also save the fuel to great deal.

Modernization of fleet:
A big reason for the decrease of market share and profits is due to
the aged fleet of Pakistan International Airlines. PIA is competing
with the rich and wealthy airline companies from the Middle East.
Average age of PIA’s fleet is 13 now with the induction of 4 new
planes, while its competitors have average age fleet between 7-8
years. PIA must modernize its fleet. At the moment it has 43 planes
out of which only 33 are operating while rest of them are not in
operating condition. PIA must modernize and expand it fleet number
to 55 in the coming two years. Fuel efficient planes must be bought.
It will not only enhance the brighter image but also will bring great
financial benefits by reducing maintenance cost and fuel
consumption. The modern fleet will be well equipped with all the
modern facilities.

Explore more market:

India can be a great market for Pakistan international Airlines. It is a
huge market and needed to increase its flight to India. Similarly the
frequency of flights can be raised to profit making routes. According
to IATA average annual growth in passengers will be 5.8% for Asia
pacific and 6.8% for Middle East from 2007-2011. PIA can take
advantage of this situation and by providing greater services it can
get more market share.
Training and development department:
Training and development must function properly. It must prepare
the employees for the upcoming challenges and threats in the
industry. Both the airline’s staff and other employees of the
organization must be well equipped with the latest techniques and
skils used in the airline industry. Engineering department plays a
vital role in this regard. A lot of money can be saved if engineers
and technicians are well equipped. No need to go abroad for
maintenance and over hauling of the planes.
Accountability:
There should be proper check and balance in the organization.
Everyone should be held responsible for its responsibilities. There
should be proper audit of each and every department of the
organization. If found any mishap, the responsible people must be
punished.

Finance:
• Government of Pakistan holds 83% of the shares of PIA.13 %
or more shares can be sold through IPO’s so that more finance
will come into the company. Also private investors’ interest
will rise. Both the government and private interest will give a
new look to the company. The way of thinking will be changed
entirely.
• Pakistan international can lease its some of the international
routes which are going in loss (such as American routes) and
it is thinking to close these stations. Similarly it can arrange
an agreement with domestic airlines.
Benefits
 By purchasing new fleets the repairing cost decreases and
attracts the customers that cause to decrease the cost and
increase the revenue of PIA. Fleet modernization will bring
more security, safety, less maintenance expenses and will
project a brighter image of the airline.
 By applying the modern techniques of management,
management will focus on its objectives and goal in an
efficient and productive manner which will reduce the
expenses and focus on the achieving the profit
 By properly marketing itself PIA will present a better image to
the world. By clearly describing facilities and projecting its
image it will help in growing market share
 Training and development of employees will prepare the
employees for current tasks and for future challenges.
 By removal of old employees it creates an opportunity for
fresh energetic candidates to show their performance. It also
causes to reduce the cost because their salaries have been
increases very high.
  By the publication of magazine the awareness of the people
about PIA increases. It increases the number of passenger that
increases the revenue.
 Timely decisions are possible by decentralizing the decision
making power.
 Strict control on inventory stock will reduced the cost.
 By appointing employees on permanent basis the sense of
ownership will increases. When employees secure about
future they can focus on their work more efficiently.
 By giving the importance to the suggestion of lower level
management and their participation in decision making, they
wok with responsibility and tried their best for the
organization.
 Reducing the HR budget by clearly defining the job and
designing the jobs. So right number of people and required
number of people will work. A proper performance and reward
system will induce employees to work effectively, efficiently
and remain loyal to the organization

Financial performance
During the first quarter of 2007, the airline achieved a 5% growth in
overall revenue mainly supported by 7.6% increase in passenger
revenue which was partially lowered by a 10% reduction in cargo
revenue. The revenue growth was reduced due to the EU ban from
early March which meant only the Boeing 777 were able to operate
into Europe. This caused many of the European services to be put
on hold until the aircraft that were considered to be inefficient to be
brought up to EU standards so they can continue flying. Even with
the fuel cost remaining at the 2006 level due to stable oil prices in
the first quarter 2007, the operating and financing cost increased in
proportion. The impact of 2006 salary hike, increased cost of leased
aircraft and higher maintenance cost of PIA fleet increased the
overall operating expenses by 19%. Consequently, the airline
suffered an operating loss of Rs 2.5 billion in the first quarter.

Privatization
PIA is owned by the government of Pakistan. The privatization of PIA
has been announced but was never implemented by the
government. Though PIA reported a total turnover of $1 billion in
2005, profitability was affected due to doubling of global fuel prices
since 2000. The high oil prices have increased yearly losses. In first
six months of 2006, PIA has lost $100 million dollars (Rs. 6 billion).
Another source of PIA's inefficiency has been the over-staffing of
employees over the past 10-20 years that has crippled the
organization’s finances. Another reason for losses in PIA is that the
higher officials of PIA tend to go abroad with their families on the
expense of PIA. Back door discussions with potential buyers
continue without any positive result. Following the global trend,
several steps towards outsourcing of non-core business have been
initiated. Catering units (starting with Karachi Flight Kitchen),
Ground Handling (starting with Ramp Services) and Engineering, are
to be gradually carved out of the airline and operated as
independent companies.

Achievements and Recognitions

• First airline from an Asian country to fly the Super

Constellation.
• First Asian airline to operate a jet aircraft.
• First Asian airline to be granted maintenance approval by the
US Federal Aviation Administration (FAA) and the Air
Registration Board, predecessor of the British Civil Aviation
Authority (CAA).
• First non-communist airline to fly to the People's Republic of
China, and operate a service between Asia and Europe via
Moscow.
• First airline in Asia to induct the new technology Boeing 737-
300 aircraft.
• An IBM 1401, the first computer in Pakistan, was installed in
PIA.
• First airline in the world to operate scheduled helicopter
services.
• First airline to show in-flight movies on international routes.
• PIA set up Pakistan's first planetarium at Karachi.
• The first airline in South Asia to introduce auto-ticketing
facility.
• The first airline in the world to fly to Tashkent, capital of the
newly independent state of Uzbekistan.
• First airline in the world to start Air Safari with jet aircraft.
• First Asian airline to start flights to Oslo, the capital city of
Norway.
• First airline in the world to induct Boeing 777-200LR, the
world's longest range commercial airliner.
• First airline in the world to take delivery of the Boeing 777-
200LR Worldlier (Longer Range Variant).
• Pakistan International Airlines Flight Services Department was
awarded the ISO 9001:2000 certification award during May
2006.
• First airline in the south east region to offer seat reservations
through mobile communications.
• First airline in Pakistan to operate a flight with an all female
crew at command and serving in the cabin.
 • PIA was briefly featured in the Adam Sandler movie 'Anger
Management.'

SWOT Analysis of Pakistan International Airlines:

Strengths:

• Domestic and International Reputation

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

Weaknesses:

• Centralized decision making

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

Opportunities:

• New product innovations

• Improving quality by new techniques and resources
• 2007-2011 great increase in world air transportation

Threats:

• Unstable Government policies

• Inflation
• Increasing competition
• Increasing fuel prices.

References
http://www.piac.com.pk/
http://en.wikipedia.org/wiki/Pakistan_International_Airlines
http://www.answers.com/topic/pakistan-international-airlines?
cat=biz-fin
http://news.bbc.co.uk/1/hi/business/1561315.stm

Comparison between PIA and Emirates:

The Airline Industry is the vital part of the world economy. It plays a
key role in the development of tourism and other related facilities,
by facilitating international trade and economic relations between
countries and by stimulating exchange people and ideas. Pakistan
International Airlines (PIA) is the national flag carrier of the Islamic
Republic of Pakistan which has grown since its birth in 1955 from a
small national service to a true international airline. Its operations
have extended from transportation services to cargo services and
courier services. In the domestic sector, PIA has extended its
networks to areas where other airlines do no fly to. Comparing the
overall passenger load factor of domestic sector to international
airlines, such as Emirates, it has faced severe competition due to
higher unit cost than that of competitors and overall recent
recession.

Recent recession due to rising oil prices, international aviation

industry regulations and some internal factors such as human
resource issues of over recruitment, de-motivated employees,
mismanagement of resources both in case of manpower and other
resources, aged fleet, corruption and lack of accountability PIA is
facing a deep financial crisis.

Internationally, three main strategies are being followed including

the expansion of global route networks; customer/marketing-
orientated strategies aimed at improving service quality and
securing brand loyalty; and cost control strategies (Hamill, 2002).
Maintaining a distinctive competitive advantage in any of these
areas is becoming more difficult as similar strategies are being
followed by all leading airlines (Hamill, 2002).

This report comprises of two sections. First section of the report

focuses on the causes of loss to PIA and a statistical analysis of why
PIA has been titled as “white elephant”. Secondly, a comparison will
be made between PIA and well known airline, Emirates, which has
placed the biggest order in civil aviation history in less than two
decades after its foundation. It has defied with a massive 74 per
cent increase in net profits to $429 million in the financial year
ending April 2004 (Sull, D et al. 2005). Whereas PIA has ‘suffered
Rs76.54 billion accumulated losses till June 30, 2009 due to
depreciation in Pakistani rupees value, high fuel prices, debt
servicing on fleet loans and increase in financial cost of domestic
loans’ (The Nation, 2009).

Poor management is an important cause for the existing situation of

the organization. Employees are not in control of management so
employees do what they want and so do managers. Some policies
from management is also costing the organization, for instance,
Emirates Airline use only two employees per plane whereas in PIA
there are five Employees per plane that means PIA is overcrowded
which is definitely unnecessary, and by paying these additional
employees it is costing a lot to the PIA. The other reason is misuse
of funds; most of the funds were used for lavishness by
managements instead of using it on the fleet to make it
considerable for the international standards.

Losses for the year have widened slightly from a loss of PKR12.76
billion recorded in 2006.
A fall of 0.2% in full-year revenue, to PKR70.48 billion, was mitigated
by a fall in expenses by 5.2% to PKR66.22 billion. However, non-
operating costs, related to increased borrowing, went up nearly
50%. Operating loss also came down to PKR5.94 billion from
PKR8.45 billion in 2006. Pakistan International Airline is currently
ranked amongst the top 20 airlines of Asia. It has the capacity of
becoming on top of the list. But due to certain reasons its market
share has been decreasing both in the domestic as well as in the
international market. Although it is still occupying a strong position
in the domestic circuit being the national flag carrier but the current
position is threatening for the national flag carrier. During the last
four years the company has beard the accumulated loss in excess of
30 billion rupees, while its total debt is almost reaching 1 billion $.
The expenses of the company are increasing but the profits are
decreasing. All the shareholders’ money is gone and the company is
facing the worst financial situation. PIA has lost its market share in
domestic airline market, which has dropped to 69 % in the FY
2007/08. Things on international front were also not so different for
PIA, as national airline’s market share in the international market
dropped from 48 to 43 %. Profitability of PIA is decreasing. The
share price of PIA closed at Rs 5.25 on June 14, 2008, exhibiting
capital loss of approximately 14% since last month. On May 2, 2008
the price per share for the company was Rs 6.03. The company
beard the lost of 13.39 billion Rs. In 2007, about 12 billion Rs. in
2006 and 4 billion Rs. in 2005. Pakistan International Airlines is
currently facing a loss of approximately 40 million Rs. per day.

Problem Description: According to research the company is having

the problem in the following areas.
• Over recruitment: Pakistan International Airlines is a large
organization with 18,043 employees. Its fleet comprises of 43
planes. It operating planes are just 33. It means round about 525
employees per plane. The industry average is being between 150-
250 people. This describes the position of the company clearly. This
drives the cost of the company further.
• De-motivated employees: Pakistan International Airlines is a
company which is constantly going in loss. Higher number of
employees and the company already going in loss de-motivates the
employees. The employees do not feel secure themselves in the
company and try to move to other successful organizations. Also
certain issues such as centralized decision making and salary issues
also de-motivate the employees taking their attention away from
their job.
• Nepotism and Political involvement during recruitment and
selection: Pakistan International Airlines being the government
organization has the strong influence of the politicians and
government officials. Reports say that Mr. Tariq Kirmani was
appointed chairmen PIA due to being a friend of Prime minister.
Similarly Mr. Kirmani appointed his own friend Director MIS at a
heavy salary. Selection and recruitment is not done on merit.
Current deputy managing director is another example of this who
was a pilot by profession and now deputy managing director still
flies some hours a week to keep his license on.
• Lack of experience relating to aviation industry for the top
management: Look at the background of former three chairmen of
PIA. Mr. Tariq Kirmani was from PSO, Mr. Zafar Khan was from PTCL
and Mr. Ahmad Saeed was from Service industry having no
experience of aviation industry. What could they contribute to the
organization with no such knowledge?
• Lapses in the management: The PIA’s management is
ineffective to resolve and plan at the right time. Planes with
damaged Nose Randome are grounded for consistent 9 days. For an
Airline with cargo aircraft and a frequency of eight weekly flights to
USA, such an inordinate delay in procuring Nose Radome is amazing
to say the least. New flights to America are thought to start but with
American aviation industry there is no talk. Strikes by engineers
happen due to the mismanagement and cause a great loss to the
company. Million of rupees worth cargo off loading from A VVIP flight
is another example of this.
• Low scale advertisements and awareness: A common
Pakistani may even not know about Pakistan International Airlines.
No advertisements and awareness to the organization’s brands in
such a modern era of marketing. Cricket stars and sportsmen are
hired on heavy salaries but with no profit to the organization.
Pakistan International already being an ethnic airline is just
confining itself to its own country. No such efforts to enhance the
brighter and soft image of the nation as well as airline are made.
• Government’s and Civil Aviation authority’ policies:
Pakistan International Airlines has to pay a big amount as an
expense on its borrowings from banks. Already being in such a big
crisis, the company is getting no support in this regard like WAPDA
is getting. Also civil aviation authority of Pakistan’ policies are
hampering PIA a great deal. Pakistan International Airlines being a
national carrier has to go to those routes which are going in loss.
Routes such as, Swat, Bahawalpur, Dalbandin etc are called
socioeconomic routes and PIA has to get to those routes despite of
great loss. On these airports, airport staff is greater numbers as
compared to passengers. The money which is received as for
providing services to passengers is taxed by the government at a
very high rate. • Rising fuel prices in the World: There is been
consistent rise in fuel prices in the international market. Fuel prices
have impacted on almost every airline in the world. This has
affected Pakistan international Airlines more than any other airline
due to its aged fleet. New planes are fuel efficient as compared to
old ones. In an airline normally 30-35% of expenses account for fuel
expenses but in Pakistan International Airlines this number goes to
45-50%. Due to these factors PIA has to charge more fare to
customers that’s dissatisfies the customers.
• Global impact of 9/11 on aviation industry: After the 9/11
attacks air traffic has been decreased all over the world. It has
affected Pakistan international Airlines also. Passengers are more
inclined towards traveling to other countries such as European
countries. Air traffic in Asia, especially in south Asia has decreased.
• Aged fleet: Pakistan International Airlines fleet has total 43
planes. Out of those 43, only 33 are operating at the moment. The
average age of the fleet is 13 years which has become 13 years with
the induction of 4 new planes. Previously it was 14. Due to aged
fleet the fuel is consumed more and maintenance expenses are
increase. Thus theses factors result in increment in expenses. Due
to the aged fleet and maintenance problem PIA has to pay higher
amount in terms of insurance cost.
• Maintenance problems: Beside having a large number of
engineers, there is always been a question mark on PIA’s fleet
maintenance. Last year European Union banned 20 out of 42 planes
were banned from operating in Europe. This results a 4 billion Rs.
loss to the company just from Europe’s segment to the company.
This ban was imposed just due to the lack of proper maintenance.
• Corruption at its peak: Corruption is a sin that has hollowed
Pakistani society bases. Like all other departments of our country
corruption is at its peak in Pakistan International Airlines. Sale of
Roosevelt hotel in Dubai is a clear example of it. The hotel was
valued about 1 billion but it was sold only in 40 millions. The sale of
PIA’s kitchen centre in Karachi is another example of this. There a
profit making unit of the company was sold. It was generating great
revenues for the company but was sold confidentially.
• Less technology advanced as compared to its competitors: PIA
is competing with the airlines from all over the country especially
with the Middle East airlines which are coming in with heavy
investment. Its competitors such as Emirates and Qatar airways
have great capital. Theses Middle East organizations are putting in
newer and newer technology and acquiring greater manpower. PIA
being already in a financial crunch faces a tough task.
• Poor image: With already going in financial loss, 9/11 impact on
the industry and above all incapability of Pakistan International
Airlines’ management has badly damaged the image of the Airline.
Due to all such problems the fares of PIA are higher but service is
not up to that class. This also gives a bad image to the passengers.
• Lack of training facilities: Although PIA is running a training
and development department in Karachi but it is in sufficient to feed
such a big organization with almost 18000 employees. Special skills
such as engineering, technicians are lacking.

Leadership Analysis: Emirates Airlines

1. Introduction

Each and every organisation is trying to use strategies that

would sustain or enhance their competitive advantage in the
market, and Emirate Airline is never an exemption. Accordingly, the
corporate strategy and management of a business describes the
process of directing and leading the business operations within the
company by exhausting their available resources extensively in
order to attain the organizational objectives. This includes business
plan conceptualization and monitoring the implementation of the
efficiency and effectiveness of the strategy. The company considers
unique strategic management to identify and enumerate the aims of
the company so as to come up with sound business practices to gain
profit and satisfy the needs and demands of the target market
(2004).

Aside from these, Emirates Airline is trying to be competitive

and marketable through their leaders and the leadership styles that
they are implementing and using. Primarily, the main goal of this
paper is to analyse the strategies of Emirates Airline in order to
sustain their competitive advantage. Moreover, this paper will also
analyse the leadership style used within the company. This paper
will also discuss the organizational behaviour, its internal and
external environment through the use of different marketing tools
such as SWOT analysis and Pest Analysis.

Background of the company

Emirates Airline was founded on May 25, 1985 by the

government of Dubai and was supported by which is the founder of
Germania (German Airline). The airline industry has started its
operations with flights to Mumbai and Karachi and then followed by
Delhin in September. Today the industry is considered to be a
subsidiary of The Emirates Groups which is headquartered in Dubai,
UAE. The company has been provided with different recognitions
and in 2007 Emirates was noted to be the eight-largest airline in the
global market in terms of international passengers being carried and
also noted to be the fifth-largest in the global market in accordance
with the scheduled international passenger-kilometers flown.
Emirates are also known for being one of the only five airline
industries that operates in the entire wide-body aircraft feel.

It can be sent that since Emirates started its business

operations, they are able to gain competitive position and
advantage in the market place. Today’s leaders of Emirates are
considered to be the most influential and essential people in the
company as they are the one who make everything possible for the
industry. Sheik and other leaders of the company have been able to
show their innate ability to lead the company efficiently and
effectively.

The success of the company can also be attributed with their

marketing and business strategies which are able to compete and
stay competitive in the airline market.

PEST Analysis

Political Aspects

Emirates Airline has been protected by the regulations and

policies formulated by the Dubai government and other countries
where they are operating. Sine Dubai government is the sole owner
of the industry the company has been able to adhere to the policies
given by each government to make sure that the company will be
able to conduct business operations successfully and effectively.
Furthermore, the company also formulates their own protection
strategies against any governmental restrictions and limitations.

Economic Aspect

Being one of the world’s largest and competitive industry in

terms of airline and aviation, EMIRATES AIRLINE, is said to have a
stable and successful economic stability. In spite of many dangers
that they encounter in different parts of the world, the management
of EMIRATES AIRLINE sees to it that they would be able to surpass
such struggles and strives to have a better economic condition.

Social Aspect

EMIRATES AIRLINE is being affected by the situation of the

society in which they are operating. Along with this, EMIRATES
AIRLINE tries harder to make sure that each society is given equal
chances to take advantage of the resources given by the
organisation. The company adheres to having good reputation and
relations in the society that they belong ( 2004).

Technological Aspect

The emergence of information technology and internet

affects how EMIRATES AIRLINE has been operating in the past years.
The company adopts different IT/IS systems and used internet to
reach their customer all over the world and to know the latest
trends in the global business. Aside from these, the company also
uses facilities which helps them improved their productions and
operations.

Legal Aspects
 The policies and regulations provided by the government,
both local and international allow the company to be more cautious
in their business actions. To avoid problems in line with their
business practice, the company sees to it that all their actions are
legal and aspired to highest standards.

Environmental Aspects

Environmental protection is one of the most essential

aspects to be considered by many businesses. If an organisation will
not be able to consider the environment in their actions, there is a
possibility of facing problems within the society. In this regard,
EMIRATES AIRLINE develops environmental protection strategies to
adhere to this worldwide need. In addition, the company are always
trying to join in environmental protection campaign by sponsoring
some organisations having this type of advocacy.

Ratio Analysis

Emirates airline has been abele to record a profit annually

since its inception, except the second and the Airline’s progress has
never fallen or down below 20% per year. The company has good
financial ratio and they are able to have a net profit of Dhs5 billion
(US$1.37 billion) for their financial year which has lasted 31 March
2008, and it shows a 62% increase over the previous year.

For the year 2004-2005, the company has been able to pay
an increased dividend to the Dubai government. In their financial
year 2007-2008, the airline industry has carried 21.2 million
passengers and 1.3 million tons of cargo making them one of the
largest airline industries in the market.

SWOT Analysis

This part of the paper will analyse the strategic position of

Emirates Airline through the use of SWOT analysis. Based on the
given case, the strategic position of the Emirates Airline specifically
their airline and aviation position has been challenged because of
the changing situations of the airline market. Rival industries of the
company has been able to announced the establishment of the their
business approach in the global market which offers diversified
airline industries to cater to the needs of the passengers, cargo and
shipment services. The announcement of this company affects the
strategic position of the entire Emirates Airline. In order to make
sure that the company will not be left behind, Emirates Airline has
been able to involve themselves into the expansion to technological
developments.

Through the use of SWOT analysis, the strategic position of

Emirates Airline in 2006 will be analyzed.

Strengths. As a competitive and globally recognised airline

industry, Emirates Airline has been able to have strategic position in
the global market. In fact, when Emirates Airline streamlined their
business, it already had the advantage of size. With several
consecutive years of multibillion profits, the company has outshined
its major rival companies to become a model firm. Also, Emirates
Airline’s decision to focus on diversified market and by considering
and entering the cargo shipping and their customer service was a
courageous one, but it has led to its current position as one of the
top global brands. The firm has likewise been characterized by
many analysts to have an ability to adapt to changing market
conditions in order to maximize profit. Listening to and identifying
with consumers has allowed Emirates Airline to construct a
corporate culture that bears little resemblance to the Emirates
Airline of the past.

The ability to continuously renew and improve their service

in the airline and aviation while effectively managing the needs of
their target audience is the key to maintaining Emirates Airline’s
leader status and the key for succeeding in having strategic
position.

Weaknesses. Not all of diversification and approach have

been successful and this can be considered as one of the flaws or
weaknesses of the company. Analysts have accused the company of
focusing too much on their high-end acquisitions and diversification
in spite of the risky effects of such decisions.
 Opportunities. The basis for long-term competitiveness is the
ability to develop continuously new generations of more advanced
airline and aviation services. Therefore one of the company’s
opportunities is to tap into more markets as a result of the
innovations being introduced in the aviation. Localized capabilities
enabling or even enhancing such co-operation will always make a
difference when it comes to first-mover advantages.

The opportunity to penetrate new growth markets where

internet adoption still has room to go, Leveraging Emirates Airline’s
infrastructure business to get first choice and stronger position
against rivals is also an opportunity. They also have the opportunity
to get ahead of their rival companies, and this should be the case,
since the said market is a potential sizeable source of income. The
trend of considering the internet market also shows cases new
opportunities for the company.

Threats. Rival companies are major threats to the business.

Emirates Airline, in contrast, started out in other lines of business
and entered and airline capabilities of the company. The firm’s
inability to keep up with innovations, or recognize its demand,
creates a threat for them, a risk that they could be displaced by
other industry leaders. The legal and political environment in the
countries where they operate in could potentially affect the business
negatively. Their apparent complacence could be used by their rival
companies to their advantage, and take Emirates Airline by surprise,
with the latter realizing too late that they are not the industry leader
anymore.

Organizational Culture

Diversity in the workplace and the management has long

been an issue debated among work organizations. It can be said
that in an organisation, there will exist strong positive culture or
negative culture. In this regard, strong positive culture can be said
to enhance or sustain the competitive advantage of the firm in
various ways. For instance, in the case of Emirates Airlines, it can be
said that the company has been able to show a strong positive
culture specifically in terms of their cultural differences, the
management of Emirates Airlines are able to promotes the sharing
of a common goal among their employee, hence, make the
organisation and its team work efficient together. As they work
together, they are able to focus on the needs of the entire
organisation which is to sustain their competitive advantage. Since
members of the company works together, their actions are more
coordinated.

With organizational culture, both the managers and the

employees are extremely involved in a constant joint effort to
enhance the quality of the firm’s products or services at every level.
This then involves an impact similar to that of a chain reaction in
which, the united goal of the organization to improve its services
will eventually enhance their customers’ satisfaction and minimize
the firm’s total costs. In addition, organizational culture increases
the employees’ sense of pride and self-worth. Hence, organizational
culture positively influences the organizational behavior, which
makes work teams perform more efficiently (, 2001).

Change Management

Changes in different organisations are vital since it allows

the company to adjust and cope with the constant changes in the
global market. In this regard, the leader of Emirate has announced
major changes in the company. The leaders of the airline industry
have mentioned that their changes will include the expansion of
their airline services and using more improved information
technology system. These changes have led to an increase within
the community of the airline industry which enables them to have
more employees which represents different countries. In addition,
the leader has also considered the changes in terms of establishing
management approach (2005). This change resulted in a broader,
extremely competitive business portfolio to meet the needs of the
customers in a rapidly converging airline industry.

Emirates as known to operate in a full wide body aircraft

fleet from different aircraft families such as Boeing 777, Airbus
A340, Airbus A330 and Airbus A380. To be able to keep their policy
in sustaining a young fleet, the company has been able to renew its
fleet consistently. In July 2008, the industry received its first Airbus
A380 and in August on the current year, Emirates has been able to
become the second airline to fly the Airbus A380. They are able to
use A380 three times each week between Dubai and the NY JFK
Airport. Starting on February 2009, the company is planning to use
it on Dubai-Sydney-Auckland service which will be followed by the
Dubai-Melbourne-Auckland airline services later in the year 2009 as
part of the change management plan.

Recommendation

It can be said that airline industries in the global market has a

strong competition, hence, it is recommended that companies like
Emirates Airline should be able to sustain their competitive
advantage and position in the Dubai and the global market. In doing
so, the company must be able to adhere to the needs of their
customers for them to remain loyal to avail the services offered by
the company. It is recommended that Emirates Airline must be able
to apply prioritized quality in customer services. The assurance of
quality service may yield to customer satisfaction, loyalty, employee
satisfaction and more importantly profit growth. In order to cope
with the present business challenges, several businesses have
implemented different strategies that will enhance their respective
customer services. Consumer studies, trainings and application of
information technology are some examples of the most commonly
used strategies for customer services. In line with the findings of
this research study, it is recommended that Emirates Airline
should continuously update and upgrade their service deliveries in
order to meet and satisfy the demands of their customers.

Conclusion

It can be said that successful strategy demands company to

choose the market in which their unique capabilities will gain
competitive advantage, However, the adaptive and incremental
contexts of strategic management means that the company’s
starting-point leads the firm to what it is now. Corporate strategies
of the Emirates Airlines have been able to use strategic
management to stay in the competition in the global market. It can
be said that the strategy as well as the leadership styles used by the
leaders of Emirates Airlines have been the major cause of their
competitive position in the airline market.

The corporate strategy of Emirates Airlines has been able to

guide the company from the challenges and opportunities which
appear in the market environment. To be able to sustain the
competitive advantage, Emirates Airlines must also consider the
innovation of their strategy to adapt to the needs of their target
market all over the world. To the extent possible, the Emirates
Airlines should be able to base their actions on planning for their
new business strategy which includes the consideration of
innovative and technology advanced oriented approach to ensure
that they will be able to surpass their weaknesses and sustain their
competitive advantage. In addition, the leaders of the company
should continue their style to motivate their employees and become
a major asset for the success of the company.

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