Case Study

Submitted By:
Muhammad Abdullah 116 M QurbanRafiq121 MobeenMujahid 115 MBA G1 (5th semester)

Pakistan International Airline

2013

Pakistan international Airline

(A case study on the ups and downs of Pakistan international Airline)

Muhammad Abdullah Muhammad QurbanRafiq MubeenMujahid MBA 5th G-1

116 121 115

Department of Management Sciences The IslamiaUniversityof Bahawalpur

Abstract. PIAs Flight PK308 landed back on Monday after take-off from Karachi with over 390 passengers on board after its engine No. 3 experienced severe vibrations near Nawabshah, forcing the pilot to recall the flight.To reduce such type of incident in future PIA takes much steps. The arrangement with Turkish Airlines will benefit Pakistan International Airlines (PIA) and also hugely facilitate Pakistani passengers, the flagship carriers Managing Director Aijaz Haroon has said in an interview with The Express Tribune. PIA is exposed to a variety of financial risks which involves the analysis, evaluation, acceptance and management of some degree of risk or a combination thereof. The Corporations aim is to achieve an appropriate balance and minimize the adverse impact on financial performance Pioneering in adoption of Information Technology and introduction of computers in the country and fully promoting the sportsmen are just two of many initial contributions of the airline. A step ahead, now PIA has institutionalized the practice of good governance by establishing a Corporate Social Responsibility Committee. This high level and appropriately empowered committee comprises of one Director, six General Managers / Equivalents and one Deputy General Manager. Committee provides a platform to evaluate, update, and recommend best practices

1. Pakistan International Airline. Todays competitive environment demands that organizations achieve e ver higher levels of performance. Critical to improving performance is to know what and how to measure. Measurement therefore is a key element in any performance improvement effort and particularly to the development of long and short term decision making. There are a number of organizations striving and doing excessive research to identify the various factors which contribute to the success or poor performance of not only their own organizations but also other organizations in the industry for the purpose of benchmarking in case of their success and avoiding similar mistakes by halting the influence of such failure factors in case of their poor performance. The present study is therefore designed in this context to identify the factors which may contribute to the poor performance of organizations. A case study of Pakistan International Airlines has been chosen to study the reasons of poor performance of the organization during the past few years. It is now suffering losses but it has the capacity to earn profit and contribute towards the GDP of country. Pakistan International Airlines is the national flag carrier and was established in 1955.It not only provides transportation services, but its operations extend to providing cargo services and courier services also. Pakistan International Airlines serves two markets Domestic and International. In the domestic sector, it has outperformed itself by stretching its networks to areas where other airlines do not fly to. In the international market it faces severe competition, especially due to the fact that these International organizations are providing fares much lower than Pakistan International Airlines. Internationally also, Pakistan International Airlines is encountered with a severe and strong challenge with many renowned international names. 1.1. Financial Risk Management

PIA is exposed to a variety of financial risks which involves the analysis, evaluation, acceptance and management of some degree of risk or a combination thereof. The Corporations aim is to achieve an appropriate balance and minimize the adverse impact on financial performance. Risk management is carried out by Finance department under set out procedures and in consultation with other departments. Financial risks are managed by deployingquality human resources in key operational areas to ensureeffective monitoring of the airlines exposure in differentareas. 1.2. Fuel Prices Risk

PIA is exposed to volatility in the price of Jet fuel. The Corporation manages the risk through fuel hedging programme that operates under the guidelines set by the Board of Directors. During the year the Treasury department has been revamped and state of the art tools have been added to aid risk management process. For the first time regular fuel price bulletin has been started. Substantial savings were achieved due to in the money hedging during the second half of 2011. Geographical risks, dominated by developments surrounding Iran, have put upward pressure on oil prices, although the weak demand outlook has mitigated the impact to some extent. Oil price forecast, shows that fuel pass-on, fuel efficiency and fuel hedging measures are more important than ever. In this context the Corporation will continue with its fuel price risk management program and fuel price increase or decrease being passed on to passengers. Interest Rate Risk PIA manages the interest rate risk by targeting a balanced portfolio approach. PIAs loan book consists of a variety of loans i.e. against PIA assets, against GoP guarantee, PKR denominated and Forex denominated. The Corporations weighted average interest rate has been kept under 7% through these measures, despite the average KIBOR being above 11%. PIA executed facility documentation for a $100 millionShari'a compliant financing facility during December 2011 to take advantage of lower interest rates abroad. The deal received the prestigious Asian Deal of the year from Air finance Journal. The facility was arranged by Abu Dhabi Islamic Bank, Al Hilal Bank, Citibank N.A., and United Bank Limited as Mandated Lead Arrangers and Joint Book Runners. The three-year facility reflects investor confidence in the airline and its strategic importance to Pakistan. The facility represents the first syndicated commercial foreign currency financing for a Pakistani obligor since 2007. The transaction is also important for

the aviation sector as it uniquely broadens airline corporate credit to regional Islamic financiers

1.3.

Corporate Social Responsibility

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. Having an enhanced exposure to advanced world, PIA has been instrumental in bringing latest technology and ideas and sharing the same with other cores of society in the country, since its inception in 1955. Pioneering in adoption of Information Technology and introduction of computers in the country and fully promoting the sportsmen are just two of many initial contributions of the airline. A step ahead, now PIA has institutionalized the practice of good governance by establishing a Corporate Social Responsibility Committee. This high level and appropriately empowered committee comprises of one Director, six General Managers / Equivalents and one Deputy General Manager. Committee provides a platform to evaluate, update, and recommend best practices. CSR is woven into the fabric of daily operations at PIA. Following recent and routine activities supporting the community reflect PIAs belief in contributing for the betterment of society.

1.4.

Scouts Association

The PIA Boy Scouts Association is a provincial segment of the Pakistan Boy Scouts Association. Through its various community and educational programmes, it contributes to the education of young people and helps build a better world where individuals can play constructive roles in society.

2. Incident of PIA
KARACHI: PIAs Flight PK308 landed back on Monday after take-off from Karachi with over 390 passengers on board after its engine No. 3 experienced severe vibrations near Nawabshah, forcing the pilot to recall the flight. What makes this incident more worrisome is that this is the same aircraft that had a twoengine failure on July 30.

The Boeing 747-300, with registration AP BGG, had a two-engine failure on July 30 while on the take-off run at Karachi which was aborted after the same engine No. 3 developed severe vibrations with a warning and its temperature shot up above the limit of 800 degrees celsius. At the time, the cause was established to be a bird hit. But at almost the same time, engine No. 1 had a stall with engine oil pressure warning and engine parameters reported to be indicating zero rotation by the crew while the ATC had observed smoke coming out. An airline that is already reeling from heavy losses due to a go-slow protest by pilots is now facing another headache due to the poor condition of its aircraft. The bird hit was unfortunate. It is the responsibility of the Civil Aviation Authority to ensure that the runway, both the take-off and approach paths, are clear of any birds. Bird hazards today pose a great danger to aircraft operating out of Pakistan at almost all the major airfields like Karachi, Lahore and Islamabad. The only exception is Sialkot Airport, which is privately owned and operated. It has no bird hazard, because its owners have strictly forbidden private houses from being built near its periphery. Coming back to AP-BGG, this aircraft has a history of repeated engine defects. Aviation experts are perturbed over the alarming incidents of technical failures in PIA, which should raise alarm bells before a serious incident or accident occurs. On July 28, the day of the fatal A321 crash at Islamabad, this aircraft (AP-BGG) had severe vibrations on engine no 2 while flying from Karachi to Lahore at 36,000 feet. The engine was shut down and the aircraft landed back. On June 29, PK312 operated by the same aircraft had severe engine vibrations at 35,000 feet on engine no 3. On June 30, engine no 3 of another Boeing 747 AP-BFU had an engine stall during take-off roll which was aborted. It is a mind boggling list of alarming incidents which point out to poor maintenance and overhauling. The CAAs AID, which oversees engineering and maintenance of aircraft registered in Pakistan, seem to be sleeping or unaware of what is happening.

The Airblue crash should have resulted in more vigilance and strict regulatory controls, instead of the lax attitude being displayed by the regulators. It should have been embarrassing for the CAA that its investigators had to wait for Airbus team of engineers who helped them locate the flight data recorder and cockpit voice recorder within an hour of their arrival at the crash site, where the tail section debris was located. This newspaper had pointed out in its report that the flight data recorder will be found where the tail is, because that is where it is securely installed. There have been over eight engine failures on PIAs Boeing 747 fleet during the last two months, which is an unacceptably high failure rate.

3. Joint venture with Turkish Airline

KARACHI: The arrangement with Turkish Airlines will benefit Pakistan International Airlines (PIA) and also hugely facilitate Pakistani passengers, the flagship carriers Managing Director AijazHaroon has said in an interview with The Express Tribune. Haroon was defending his decision to sign an arrangement with Turkish Airlines because of which, the PIA will end up losing at least seven destinations, including five in Europe and two in the US. The MD has recently come under heavy criticism from within his own organisation. Unions, including the PIA Senior Staff Association, Pakistan Airline Pilots Association, Flight Engineers National Association, Society of Aircraft Engineers of Pakistan and Aircraft Technology Association of Pakistan, say that the deal spells disaster for PIA. The Air League of the PIA Employees also held a rally outside the Karachi Press Club on Thursday. A Civil Aviation Authority (CAA) official said that, under pressure from dissenting voices, the defence ministry has gotten involved and instructed the CAA to review and submit a report into the deal. In its report, the CAA has opposed the PIA-Turkish Airlines deal, saying that they were not consulted before the deal was signed. Giving details of the agreement, he said that a record of discussion, not a memorandum of understanding, has been signed between the two airlines. When it is implemented, passengers from any three destinations (Karachi, Lahore and Islamabad) in Pakistan will have

access to daily flights to 130 destinations in Europe, US, South America and Africa with only one stop in Istanbul, he said. Currently, PIA offers only 40 international destinations, which is miniscule compared to Turkish Airlines more than 130 spots. Without the new arrangement, a passenger flying to New York from Islamabad would first have to take a domestic flight to Lahore and reach his destination via Manchester. PIA will continue to maintain those 40 destinations. But I have also gained 130 destinations (of Turkish Airlines) against selling only seven destinations, he said. According to the arrangement, the PIA will hand over to Turkish Airlines its passengers from Pakistan to Frankfurt, Amsterdam, Milan, Barcelona, New York and Chicago after a stopover in Istanbul. Haroon said that by offering seven destinations, he had given away only five per cent of PIAs market share out of the 5.5 million passengers that the airline caters to annually. Now, I am going to share destinations with an airline whose market in that area is 25 million people. So they are five times my size in that area which is now available to me. So, even if I take five per cent from that share, itll be a tremendous amount, he argued. PIA will continue operating flights to UK, France, Norway, Denmark and other European stations directly. After this agreement the whole world will be open to you. Nothing will reduce. In fact, PIA will expand massively, he said. It is interesting to note that Turkish Airlines would discontinue its flights to Dhaka, Colombo and Kathmandu and transfer its passengers for eastern destinations to PIA. This is a great advantage. For example, a lot of people from Western Europe, especially Germany and Switzerland go to Kathmandu, but they never come on PIA. But now these passengers will be coming on board our airlines from Karachi, he said. The Air Service Agreement (ASA) has not yet been signed. Haroon said operations would begin on a temporary operating permit basis. The commencement of flights under the code sharing agreement would begin on March 28 and a month-long campaign by the PIA would begin mid-February. Both airlines will earn 15 per cent on a reciprocal basis. Suppose Turkish Airlines sells a ticket from Karachi to Berlin. So from Karachi to Istanbul, PIA will fly and on that Turkish

Airlines will get 15 per cent and Istanbul-Berlin would be Turkish Airlines complete share. But if PIA sells the ticket, then Karachi to Istanbul will be our complete share, while from the Istanbul-Berlin trip, well get 15 per cent, he said. He said that Turkish Airlines was competing with Emirates and other airlines but Turkey suited PIA more since it would earn more through the six-hour-long trip to Istanbul compared with just two hours to Dubai. He dismissed as baseless rumours the allegation that PIA was forced to go along with an arrangement with Turkish Airlines in the interest of promoting closer relations with Turkey whose president is known to be close to President Asif Ali Zardari. There was no pressure as such on PIA to go into this agreement. There are 21 flights, PIA is going to do 14, Turkish Airlines is going to do seven. So had there been pressure, it would have been the other way, he said. Haroon said that the agreement did not restrict PIA from operating direct flights anywhere in the world. He clarified that PIA was not banned from flying to the US as some people were claiming. We knew that when well say that PIA would no longer be operating in New York and Chicago (its only destinations in the US), people will start saying that PIA has been made out of bounds from the US, he said, adding that because of this reason the airline was looking into the option of flying to Houston. Were evaluating whether it is worth flying there. But this doesnt change the fact that there is no restriction on flying to the US, he said. Turkish Airlines offers four destinations in the US: Los Angeles, Washington, Chicago and New York. When asked why people within his organisation, especially pilots, are opposing the alliance, he said they were just unhappy because their extra allowances will be cut. When a pilot flies to New York, he gets 600 dollars over and above all other allowances because its a long range flight. So he knows that the 1,200 dollars he would get for flying two flights to New York per month would now be no longer coming into his pocket, he said. Also, he said, they wont be able to go to New York for free anymore along with their families to visit their child who studies there. They are selfish. They are just looking at how their allowances would be reduced. But I, on the other hand, am looking at the larger interest of the airline and its passengers, Haroon claimed.

He rejected the assertion that there would be widespread downsizing in PIA at its international centres because of this arrangement. There will be no retrenchment or downsizing of any sort, he said, adding that PIA might have to open up new offices, for example in Berlin, to tell passengers that if you want to go to Pakistan from there, you can go through PIA. Also, he stressed, the Chicago and New York offices will not be shut down. On the sector that PIA is not going to operate, I will get paid if I sell a ticket and I get net 15 per cent just by booking a flight. So what do you think Ill do? Will I reduce my sales team or will I enhance it? he asked. Haroon suspects that the lobby of Gulf Airlines is also behind the chorus against the alliance between PIA and Turkish Airlines. You know what killed PIA? It was these six carriers that came into Pakistan, he said referring to the Gulf Airlines, Emirates, Qatar Airways, Etihad, Gulf Air and Air Arabia. He said the stiff competition given by these airlines would hurt most when the new arrangement takes effect. I wouldnt be surprised if it is found out that this lobby is also greasing the palms of some of our union leaders, he said. Haroon said he wasnt worried about reports that the defence ministry is evaluating the agreement. They have to evaluate because it is their decision, not mine, he said, adding that once the two airlines informed their respective governments that theyve agreed on a commercial agreement, it is left to the governments to decide if they should proceed or not. About reports that PIA was incurring losses, he said the fact was that for the first time in PIAs history, we crossed the Rs100-billion mark in revenue figures last year. In 2007, it was around 70 (billion), Haroon, who joined PIA in 2008, said. His deputies say the unofficial figure stands at Rs108 billion. When asked whether Turkish Airlines would be able to cater to the comfort of passengers, many of whom complain that it isnt the best when it comes to that department, Haroon said: weve put a restriction on Turkish Airlines that on certain routes they will use only the 777, A340 or C40 aircraft. More importantly, he says, visa will be on arrival in Istanbul. For tourist visa, itll be airline sponsored just like one gets through Thai Airlines when you go to Thailand. W ell have our cabin crew on these flights; there will be Pakistani food on the menu; there is an engineering

alliance also and we have also asked for in-flight entertainment like Pakistani dramas, and PIA transit facility and lounge facilities in Istanbul, he said.

4. PIA Crisis:
Muhammad Daheem the Pakistan International Airlines is suffering from severe financial crisis. It is, in fact, passing through a critical phase because of poor management, lack of maintenance, nepotism, corruption and financial issues. There are complaints of terrible service, long delayed flights, emergency crash landings, cancellation of flights, shortage of planes, unclean toilets that smell from distance and non-serious attitude of the administration. These issues create frustration among the passengers. They feel fear and life risk while travelling through PIA. The Airlines is at the brink of disaster. It needs exemplary leadership, qualified and merit based staff and technically strong administration to improve its performance and save it from the clutches of the wolves.PIA has, in all, 39 aircrafts in its fleet comprising of 4 Boeing 777-200 ER, 3 Boeing 777-300ER, 2 Boeing 777-200 LR, 6 Boeing 737-300, 5 Boeing 747-300, 12 Airbus A310-300 and 7ATR 42-500. A number of aircrafts have been grounded due to shortage of spare parts or overhauling. These include Boeing 747s, Boisiseing 737s and Airbus A 310. It is generally believed that PIA high-ups are responsible for the inconvenience of the passengers. The whole system needs overhauling.PIA is facing serious problems. The major problems faced by PIA are increase in oil prices, overstaffing, devaluation of local currency, political interference and its weak financial position since the last decade. PIA has suffered huge loss of more than 64 billion rupees from 2005 to2008. It has also suffered huge losses in 2009 and 2010 particularly due to increase in the price of the fuel and devaluation of Pakistani rupee. It is, now, just like a white elephant. The bad governance, poor performance and corruption are the major causes of its failure. The Pakistan International Airlines is a big organization with more than 18000 employees. PIA was known all over the world for its excellent performance and superior quality. That was the golden period for PIA. But now it has lost his luster. Flight delays and cancellations have become the norm rather than the exception. Naturally this situation cannot be tolerated for unlimited period. PIA will have to overpower its weaknesses. It has failed to resolve issues of its organization. The average ratio of staff should not exceed 100per aircraft while PIA enjoys more than 400 employees per aircraft. It is overpopulated and needs to cut its coat according to its cloth. It needs some hard decisions by the administration to run the system smoothly. Pakistan International Airlines should give primary importance to the

safety of the passengers and make efforts to avoid any untoward situation. Several untoward incidents occurred in PIA in the last decade. It is necessary to tackle with such incidents seriously to minimize the losses.

4.1.

Background facts.

PIAs growth outlook healthy in 2006 KARACHI: Pakistan Inter-national Airline (PIA) showed a healthy growth and positive trend during the fiscal year 2006 in all indicators critical in evaluating an airlines performance. According to a press statement issued by the national airline Friday in Karachi, the data for FY2006 and its comparison with FY2005 and FY 2004 are audited figures which have also been approved by the board of PIA. While revenue growth has been 11% and 10% in FY2005 and FY2006 respectively, or in other words from Rs.57.7 billion to Rs.70.5 billion, all this gain was neutralized by the tremendous increase in fuel prices in the last two years. The situation was further aggravated by the increase in interest rates and interest payments because of the induction of new aircrafts like the Boeing 777s and the ATRs into the PIA fleet. PIA would have posted a massive Rs 4.12 billion in profit in the last two years, if fuel prices had remained constant at the FY2004 level. The volatile, unpredictable and almost indifferent nature of the hike in fuel prices was a severe blow to the entire airline industry which cumulatively cost it $46 billion extra in fuel cost in five years from 2001 to 2005. Most airlines are still recovering from this unavoidable burden. In PIA, this figure increased from 31% 2004 to 41% in 2005 going up to 47% in 2006 and this percentage is of the total revenues earned. This phenomenal increase is much higher then the industry average of 31%. In monetary terms, PIA spent Rs 34.1 billion on fuel in 2006 as compared with Rs 19.7 billion in 2004 and Rs 26.9 billion in 2005 showing an increase of 26.8%. Similarly, compared to 2005, the interest cost increased by an additional Rs 2 billion to Rs 4.8 billion, which again was a 71% increase over last year. In addition there was a substantial cost increases in aircraft chartered for meeting scheduled and hajj traffic, engineering and maintenance, aeronautical and flight handling, selling and distribution cost.

4.2.

Dawn News Reported:

ISLAMABAD: Supreme Court on Tuesday issued notices to all pertaining parties in the Pakistan International Airlines (PIA) financial corruption and mismanagement so motto notices case: A three-member bench led by Chief Justice Iftikhar Muhammad Chaudhry heard the case. Chief Justice Iftikhar inquired about the conditions of PIA and whether had they become like the conditions of Pakistan Steel Mills. PIAs counsel Raja Bashir informed the court that current management of PIA was attempting to improve the companys conditions. He also said that in the previous years, PIA had incurred a loss of PRs. 119 billion in total due to delays and other issues. Justice Sheikh Azmat Saeed said that no PIA flight departs on time. Chief Justice Iftikhar remarked that the PIA was the lone state-owned organization that runs on publics money. The court had taken so motto notice of this case but the petitions were also filed pertaining to the case. A letter by the Transparency International Pakistan was also read out at the hearing by Raja Bashir, which affirmed that PIAs conditions were indeed very bad. The report also stated that PIA violated Pakistan Procurement Regulatory Authority (PPRA) rules in their purchases; pilots and other staff constantly protested through strikes, causing great loss to the company. According to the letter, PIA has incurred losses amounting to Rs. 141 billion. Due to the non-availability of the petitioners, the court issued notices to all parties and adjourned the hearing until Dec 4.

4.3.

Failure and Causes:

The following causes of poor performance of Pakistan International Airlines have been identified through the data collected from the organization. These are the factors which are leading to the failure of PIA in terms of poor financial performance and decline in the goodwill of the organization. Lack of experience relating to aviation industry for the top management: This factor is one of the reasons of the poor performance of the organization as indicated by 61% of the informants who were accessed for the purpose of the primary data collection. Lapses in the management: The PIAs management is ineffective to resolve and plan at the right time. This is another cause of PIA losses as indicated by 51% of the informants who were approached for data collection. Low scale advertisements and

awareness: A common Pakistani may even not know about Pakistan International Airlines. No advertisements and awareness to the organizations 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 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. As 45% of the respondents revealed that lower marketing and selling efforts are causing poor performance of Pakistan International Airlines. Governments 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 Journal of Law, Policy an d Globalization International Airlines being a national carrier have to go to those routes which are going in loss. Routes such as, Swat, Bahawalpur 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. This is another factor as a reason for PIA losses. 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 customer thats diss atisfies the customers. This is one of the factors of loss to PIA as indicated by 51% of the respondents. 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 and therefore this was also considered as one of the reasons of bad performance of PIA . Aged fleet: Pakistan International Airlines fleet has total 43 planes. Out of those 43, only 33are 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 these 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. This was also found to be one of the factors contributing to losses of PIA. Maintenance problems: Besides

having a large number of engineers, there is always been a question mark on PIAs fleet 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. 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 competitor such as Emirates and Qatar airways has great capital. Theses Middle Eastern organizations are putting in newer and newer technology and acquiring greater manpower. PIA being already in a financial crunch faces a tough task and therefore it forms one of the factors of poor performance. 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. This bad image is adding to decreased customer base and hence causing loss to PIA. Lack of training facilities: Although PIA is running a training and development department in Karachi but it is insufficient 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. 5. Conclusion: The Pakistan International Airlines is suffering from severe financial crisis. It is, in fact, passing through a critical phase because of poor management, lack of maintenance, aged fleet, nepotism, corruption and financial issues. There are complaints of terrible service, long delayed flights, emergency crash landings, cancellation of flights, shortage of planes, unclean toilets that smell from a distance and non-serious attitude of the administration. These issues create frustration among the passengers. They feel fear and life risk while travelling through PIA. The Airlines is at the brink of disaster. It needs exemplary leadership, qualified and merit based staff and technically strong administration to improve its performance. PIA is facing serious problems. The major problems faced by PIA are increase in oil prices, overstaffing, devaluation of local currency, political interference and its weak financial position since the last decade. The bad governance, poor performance and corruption are the major causes of its failure. PIA has problem of maintenance and repairs. Unfortunately PIA is functioning with costs higher than returns. PIA claims that increase in oil prices and

devaluation of Pakistani currency are the major reasons behind its deficit. It needs remarkable effort and money to improve its ranking in the world airlines.

6. Exhibition

6.1.Financial Analysis (Categories of shareholder). Pakistan international airlines corporation categories of shareholders as at December 31, 2011.

Exibition.1 Share Holdings

Serial No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

From

To

Share Holders 12140 30752 4733 4741 803 217 153 102 52 30 27 28 44 15 13 7 12 45443 26 5 3 2 4 3 3

Ordinary "A" Ordinary "B" Class Rs .10/-each Class Rs .10/-each total share held. total share held. 800,000 425,000 460,678 500,000 500,500 562,932 567,504 608,000 630,067 647,100 700,000 732,098 867,500 1,000,000 1,020,740 1,100,000 1,157,500 2,508,575 1,451,004 1,470,000 1,765,000 1,800,000 2,204,000 2,300,000 2,410,150 -

1 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 105001 110001

100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 110000

26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

115001 120001 125001 130001 135001 140001 145001 150001 155001 160001 165001 175001 180001 185001 190001 195001 200001 205001 210001 215001 220001 225001 245001 255001 270001 295001 305001 315001 325001 350001 355001 370001 375001 385001

115000 120000 125000 130000 135000 140000 145000 150000 155000 160000 165000 170000 180000 185000 190000 195000 200000 205000 210000 215000 220000 225000 230000 250000 260000 275000 300000 310000 320000 330000 355000 360000 375000 380000

2 3 2 4 1 1 1 1 1 1 1 1 1 1 4 1 1 3 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2,497,778 3,000,000 3,241,466 3,916,884 4,029,000 5,010,500 8,844,200 9,212,000 9,670,146 13,374,500 15,750,000 16,876,347 21,000,000 2,756,000 1,765,000 1,765,000 1,765,000 2,300,000 2,410,150 2,497,778 3,000,000 3,241,466 3,916,884 4,029,000 5,010,500 8,844,200 9,212,000 9,670,146 13,374,500 15,750,000 16,876,347 21,000,000 231,855,493 2,435,208,439

1,462,515

6.2.

Exhibition.

UNCONSOLIDATED CASH FLOW STATEMENT

CASH FLOWS FROM OPERATING ACTIVITIES

2011 39 3,686,004 45997 -8481499 -566137 -461687 149238 -5628084

2010 12,509,338 20445 -8072865 -391460 -334648 609579 3121243

Cash generated from operations Profit on bank deposit received Finance cost paid Tax paid Staff retirement benefit paid Long term deposits and prepayments-nets Net cash (used in) / generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property plant and equipment Proceed from the sale of property, Plant and equipment. Purchase of intangibles proceed from held to maturity investments

-3650542 8149 -3214 7289 -

-1429852 10193

Net cash used in investing activities

-3638318

-1419659

1.1.

Exhibition.

6.3.

Exhibition.

6.4.

Exhibition. 6.4.1. Debt Management

Years Debt to Asset Ratio Debt to Equity Ration Long Term Debt to Equity Times Interest Earned

2005 0.86 5.98 3.95 0.63

2006 1 771.96 475.3 1.6

2007 1.09 -10.9 -6.52 -0.83

2008 1.23 -3.69 -2.15 -3.75

2009 1.13 -3.69 -2.28 -0.44

6.4.2. Profitability
Years Gross Profit Margin Profit Margin Return on Assets Return on Equity 2005 8.01 -6.89 -6 -42 2006 1 -18.08 -12 -9230 2007 6.04 -19.01 -11.28 112.56 2008 4.08 -40.22 -25.69 76.83 2009 16.85 -6.16 -3.64 11.87

6.4.3. Asset Management

Years Inventory Turnover Days Sales Outstanding Operating Cycle Total Asset Turnover 2005 15.68 29.34 45.02 0.88 2006 17.19 31.26 48.45 0.66 2007 16.61 25.6 42.21 0.59 2008 14.89 23.56 38.45 0.64 2009 17.91 30.79 48.7 0.59