Pakistan International

Airlines: Leading the Change

Jahanzeb Aamir
Saad Ali Khan
Muhammad Ali Shafqat
Ayesha Javed
MBA II Section A
Marketing 1

Business Policy
Prof. Fareed A. Fareedy

Pakistan International Airlines: Leading the Change

Introduction
The case discusses that PIA had the highest market share in the country but yet it undergoes
through a lot of challenges in the upcoming years, both internal and external to the organization.
PIA has been a target of political changes, changing policies, change in the management,
incompetent managers, short term debt, money leakages, lack of leadership, ineffective human
resource function and policies, growing competition and many other problems. The problems are
identified in the case.

Pakistan International Airlines

After the brief period of introduction in June, 1946; Quaid-e-Azam identified the need for an
airline for Pakistan. There were two main reasons for its existence which are as follows:
1. There was a need to reduce the distance of 1100 miles as Pakistan was divided into East
and West areas.
2. In order to show Pakistan as a separate nation, it required a national flag carrier.
Keeping in mind, Mr. M.A. Ispahani who was the leading industrialist set up national airlines
Oreint airlines on 23 October, 1946 and after this Pakistan international Airlines Corportation
(PIAC) was launched.

23 october, 1946
Oreint airlines

PIAC launched

10th January,
1955
PIA & Orient
airways

PIA launched

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Pakistan International Airlines: Leading the Change

On 10th January, 1955; PIAC and Orient airways formally amalgamated its assets and routes in
order to launch PIA. The benefits it included was to widen the domestic and international
network. In order to cover the main cities of both east and west Pakistan, PIA had its first flight
on 7th June, 1955 from Karachi-Dacca.
PIA was first Asian airline with jet aircraft Boeing 707-321. Among the Asian airlines, PIA was
ranked on 31st airlines and 16th largest airline of Asia. In late 1990s, government of Pakistan
wanted it to be privatize due to persistent losses bored by the airline but unions played there part
and PIA was not privatized. This made them outsource their non-core business and led 87%
shares with the government and 13% shares with the private parties.

Facts and Figures

PIA head office is in Jinnah International Airport located in Karachi. Its operations are global
linking 24 destinations and operating services to 73 destinations within Asia and international
destinations over four continents. PIA has three main airbases located in

Karachi Jinnah International Airport

Lahore Allama Iqbal International Airport
Islamabad Benazir Bhutto International Airport

Along with the three main airbases, PIA has five secondary airbases which are in Peshawar,
Quetta, Faislabad, Multan and Sialkot. PIA employees 18,500 employees. Moreover, it has
launched its cargo services in 1970s as speedex. Other organizational facts are as follows:

It has 3 hotels in different countries.

Hotel Roosevelt in New York was bought in 1999 for 36.5 million.
Hotel Scribe in Paris was bought for 27 million.
Minhal hotel in Riyadh 47% shares.
PIA has been incurring losses since 2002.
PIA trained Emirates staff in1985 for their startup.
In 2005 fuel prices esclared from 71.68-102.05.
In coming years fuel gorged to 40%.
On july 10, 2010 PIA Fokker crashed in Multan.
All Fokker planes were grounded.
Replaced with turboprop, that incurred $100 million debt.
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Pakistan International Airlines: Leading the Change

The slogan of PIA says Great people to fly with.

Vision

To be a world class airline exceeding customer expectations through dedicated employees

committed to excellence.
Mission

Employee teams will contribute towards making PIA a global airline of choice: Offering
quality customer services and innovative products, participating in global alliances, using stateor-the art technologies, ensuring cost-effectiveness measures in procurement and operations.
Therefore, the slogan, the vision and mission statements all are in line with their basic values
which includes; customer expectation, service, innovation, cohesiveness, integrity, reliability and
safety.

Competitor Analysis
AIRBLUE:

Background: On 20th May 2004, Air blue Limited, the newest airline in the private sector
was finally launched officially. Its head office was based in Islamabad. It was considered

the second largest airline with growing share of the domestic market.
Services: It was the first airline in Pakistan to introduce e-ticketing, wireless check in and
self-check-in booth facilities. It was a scheduled domestic and international airline
operating 30 daily services linking seven domestic destinations and international services

to Dubai and Manchester. Its number of fleet was 18.

Its passenger traffic increased about 61% over 2011-2012 and it flew 1.2 million
domestic traveler. Airblue won the best Pakistani airline award for 2012.

SHAHEEN AIWAYS:

Background: It started its operations in December, 1999. It is considered as the first

Pakistani private airline.
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Pakistan International Airlines: Leading the Change

It has five Airbus 320s. It is ranked second in terms of fleet, which are 19.
Recently, in 2012-2013, Shaheen carried 1.061 million passengers between Pakistani
cities and foreign destinations. Domestically it flew 675,556 domestic travelers. The

government of Pakistan assigned it the status of Second National Carrier of Pakistan.

It has also started its maintenance company Shaheen Engineering and Aircraft
Maintenance Services (SEAMS) and provides its services to all national as well as
international airlines.

Characters in Case
Mr. Tariq Kirmani

Chairman
Specialist of management
Stayed positive with the day to day problems PIA was facing
Introduced massive changes in favor of PIA loyal customers and committed employees
Worked on restructure, better fleet management including induction of right type of air

craft.
Left due to the political pressure.

Captain Aijaz Haroon

He was appointed as MD after Mr. Tariq

Revised the policies and introduced new which resulted in confusion and dissatisfaction

of employees.
He was removed by the employees due to constant strikes

Air chief Marshal Rao Qamar Suleman

Was appointed for the period of March 2012- September 2012

Corruption from top to bottom
Money leakeages at its peak
Resigned

Exhibit Analysis
Exhibit 5

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Pakistan International Airlines: Leading the Change

2004

Revenue
(Million
Rs.)
57,788

2005
2006
2007
2008
2009
2010
2011

Year

Profit/Loss
(Million
Rs.)
2,307

64,074

10.88%

-4,412

70,587
70,481
88,863
94,564
107,532
116,551

10.16%
-0.15%
26.08%
6.42%
13.71%
8.39%

-12,769
-13,339
-36,139
-5,822
-20,785
-26,767

%
change

%
change

Employees
(Ave)

291.24%
189.42%
4.46%
170.93%
-83.89%
257.01%
28.78%

19,634

Net
Profit
Margin
3.99%

19,263

-6.89%

3.33

18,282
18,149
18,036
17,944
18,019
18,014

-18.09%
-18.93%
-40.67%
-6.16%
-19.33%
-22.97%

3.86
3.88
4.93
5.27
5.97
6.47

Revenue/Employee
2.94

The above exhibit shows that from year 2004 2008 revenues have increased as the % change in
revenue has increased from 10.88% to 26.08%. While there was only one year in revenue has
decreased. Overall there was an increasing trend of revenues. Moreover, looking at the profit and
losses, PIA started to incur losses from 2005 which grew to 26,767 by the year 2011. The net
profit margin of the company was positive only in 2004, while after that company started to incur
losses to which the net profit margin till 2011 was negative, in addition to it the net profit margin
negatively increased till 2011. Furthermore, looking at the revenue to employee ratio, it show
that on average every year the employees where contributing to sales in the organization. The
increasing trend to this ratio justifies it.

Exhibit 6
Year

Passenger
Revenue

Passenger
Load
Factor

2005
2006
2007
2008
2009
2010
2011

5,499,000
5,732,000
5,415,000
5,617,000
5,535,000
5,538,000
5,953,000

70
69
67
71
70
74
72

Avg
Passengers
Distance
(Km)
2,638
2,639
2,527
2,479
2,510
2,827
2,634

No. Of
Revenue/Passenger
Passengers
184,660
182,091
169,309
176,009
175,700
209,198
189,648

29.78
31.48
31.98
31.91
31.50
26.47
31.39
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Pakistan International Airlines: Leading the Change

The above exhibit shows the revenue generated from passenger, their load factor which measures
the capacity utilization of the airline, and the average distance covered by passengers. From the
passenger load factor and average distance we have calculated the total number of passenger
travelling by PIA.
Now looking at the passenger revenue, there has been as increase in the overall revenue from
2005 2011, the percentage change is 7.64%. While looking at the number of passenger using
PIA the increase is 2.70% from 2005 2011. Moreover, looking at the revenue per passenger it
stay around 31 in majority of the year while it was the lowest in 2010.

Exhibit # 3
Rank
BOD
CEO
Head Auditors
Pilots
Co-Pilots
Engineers
Managers
Auditors
Corporate Securities
Others
Total

No. of Employees
11
1
1
78
189
243
13
2
1
17961
18500

The above exhibit shows the breakdown of total employees at PIA, this indicates that engineers
are 1.31% of total employees, while co-pilots are 1.02% of total employees. Others which
includes labor and lower management is 97.08% of the total employees at PIA. As you can see
that the top management is only a small chunk, so due to this high percentage of employees in
the lower management labor so this indicates that there was a strong union which would affect
the functioning of the organization.

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