Contents

Executive summary...............................................................................................1
Introduction...........................................................................................................2
Findings.................................................................................................................3
Analysis.................................................................................................................5
Conclusion and Recommendations........................................................................7
BIBLIOGRAPHY.......................................................................................................8

Executive summary

Aero Asia International was launched in 1993. It operated on domestic and international
routes, mainly serving the Middle East region. At the height of its operations Aero Asia was
the second largest carrier after the state owned Pakistan International Airlines (PIA) and
carried over 1 million people annually. Aero Asia was a low cost airline compared to PIA and
its ticket prices were comparable to those of Shaheen Air, the other private Pakistani carrier.
Gradually the quality standards of Aero Asia deteriorated over time and less people preferred
to travel by it. In 2006 Aero Asia was sold by the Tabani Group of companies who had
owned the airline since its inception to a United Kingdom (U.K) based company, called the
Regal Group. There were also major safety issues with the Aero Asia aircraft fleet and owing
to these reasons eventually it was barred from flying in May 2007 by the Civil Aviation
Authority (CAA) of Pakistan. The ban was indefinite and was to stay in place until the safety
standards were met. There have been plans by the Regal Group to re-launch Aero Asia soon.
A major chunk of the market share of Aero Asia has been taken over by the relatively new
entrant to the market, AirBlue which was launched in 2004. When AirBlue was launched it
offered low cost tickets along with a high standard of service quality. The re-launch of Aero
Asia will have to come with a strong marketing campaign which will aim to shed the poor
quality standards of the airline and will have to focus on portraying Aero Asia as an airline
that offers high service quality and competitive ticket prices. The management will have to
focus on maintaining the high standards which the people will expect and will need to come
up with innovative ideas like e-ticketing that attract and facilitate customers. Re-launching
Aeor Asia will be a major task but it can be done by focusing on the right things.

Introduction

Aero Asia International, commonly known only as Aero Asia, was a private airline based in
Karachi, Pakistan. It operated domestic and international services. Its main base was Jinnah
International Airport, Karachi. Since May 2007, the airline has been suspended from flying
due to issues related to the safety of operations and passenger convenience. Since then the

2
owners and the top management of the company have been sourcing expertise, systems and
aircraft to facilitate a lifting of the suspension in accordance with the 2007 Draft National
Aviation Policy issued by the Pakistan Civil Aviation Authority.1 Aero Asia was in business
for nearly 14 years, its domestic routes included flights to Islamabad, Faislabad, Karachi,
Lahore, Multan, Peshawar, Sukkur and its international routes included flights to Abu Dhabi,
Al Ain, Doha, Dubai and Muscat. Aero Asia is not the only Pakistani airline to cease
operations, in the past Bhoja Air and Hajveri Air also went out of business.

At first glance the story of Aero Asia seems to be like that of any other private sector
company that went out of business, but a closer look at the story reveals many interesting
details for the reason of its fall. Aero Asia is a company that had a major market share when
it was operating in its hay days, but then came the downfall which caused it to exit the market
altogether.

This study based on research and survey method, is basically to explore the reasons for the
downfall of Aero Asia and present the possibility and viability of re-launching Aero Asia as a
successful airline in the domestic as well as international market. When launched, Aero Asia
will have to face stiff completion from the three airlines currently operating in Pakistan,
namely Pakistan International Airlines (PIA), AirBlue and Shaheen Air International
(Shaheen Air).

Findings

Aero Asia was formed in 1993.2 It started operations on 4 May 1993 and was owned by the
Tabani Group of companies. Aero Asia made a promising start, employing ex-PIA

1 Wikipedia, "Aero Asia International," http://en.wikipedia.org/w/index.php?

title=Aero_Asia_International&oldid=322136918

2 Paul Fiddian, “Suspension for Pakistan’s Aero Asia Airline,” Airport International,
http://www.airport-int.com/news/suspension-for-pakistans-aero-asia-airline.html

3
management with a serious growth plan. Operations were started with leased aircraft from the
VIP fleet of Romania operated by Romanian Airlines, a sister company of the Romanian
Airforce. Later, Aero Asia obtained four more aircraft on lease purchase option from Tarom,
the national airline of Romania.3

In its initial years, Aero Asia was fully committed to training its locally-hired staff, following
the example of PIA and in line with requirements of the local civil aviation authority. A small
training school was also founded, for training of cabin crew.4 In 1994 Aero Asia started the
recruitment of batch of trainees for aircraft maintenance, announcing that a fully-functional
aircraft maintenance facility was planned. Senior retired staffs from the PIA training centre
were employed and approval of the training school from the local civil aviation authority was
sought.5 Aero Asia started its international operation on a route to Bishkek, in Central Asia.
Later, Aero Asia started flying to the Gulf Emirate of Sharjah.6 Aero Asia operated a fleet of
three to five Yakovlev Yak-42D on main trunk routes in Pakistan. These were mainly
Karachi, Islamabad and Lahore. However, as demand rose through the years, the airline
replaced its YAK-42Ds with Boeing 737-200Adv and Douglas DC-9s.7 At the start of 2006,
Aero Asia and Askari Bank MasterCard announced their strategic alliance to offer their card
members special discounts.8

In 2006, Aero Asia was acquired by the Regal Group-a UK based food manufacturers but
with a global presence. The Group belongs to people of Pakistani, Kashmiri descent, with
headquarters in Karachi and Yorkshire. The brand has a presence in Pakistan, United States,
and United Kingdom. The airline is currently in the process of being re branded and
restructured.

3 All Experts, “Aero Asia International,”

http://en.allexperts.com/e/a/ae/aero_asia_international.htm

4 Wikipedia, "Aero Asia International," http://en.wikipedia.org/w/index.php?

title=Aero_Asia_International&oldid=322136918

5 Ibid.

6 Airline Route Maps,

http://www.airlineroutemaps.com/West_Asia/Aero_Asia_pakistan.shtml

7 Plane Spotters, “Aero Asia International - Details and Fleet History,”

http://www.planespotters.net/Airline/Aero-Asia-International

8 Wikipedia, "Aero Asia International," http://en.wikipedia.org/w/index.php?

title=Aero_Asia_International&oldid=322136918

4
In May 2007 the Civil Aviation Authority (CAA) of Pakistan suspended the operations of
Aero Asia due to issues related to the safety of operations and passenger convenience. 9 The
problems had been highlighted to the management of Aero Asia time and again but the
situation, instead of improving, deteriorated.

When Aero Asia was in business, it had a major share of the Airline market in Pakistan. After
PIA, Aero Asia was the second largest Pakistani carrier on the domestic routes. According to
provisional aviation statistics for the year 2006-07 Airblue carried 1.4 million passengers in
2006-07, up around 7.7 per cent from previous year’s 1.3 million it carried between different
cities of Pakistan. The PIA, faced with accumulated losses of more than Rs35 billion, lost
domestic market share by 5.7 per cent as it carried five million passengers compared to 5.3
million during the period under review.10 Majority of the market gap that Aero Asia left was
targeted and filled by AirBlue as it marketed itself in a better way to the customers of Aero
Asia.

The consumers still remember and can relate to Aero Asia as an airline that has ceased to
exist as shown by Fig.1. Our sample group primarily consisted of people from middle and
upper middle class. These people have and will use air travel as a means of travel in the
future. As shown by Fig.2, there exists a high growth market for air travel. Fig.3 shows that
this market is currently led by PIA, followed by AirBlue and Shaheen Air comes at the end.
Despite the fact that Aero Asia has been out of business for nearly three years, there a few
number of people who have travelled by Aero Asia as shown by Fig.4. Price of the ticket is
more ranks to be less important to people when travelling by air, as compared the service
quality of the airline is more important, Fig.5 shows this. Fig.6 tells us that majority of the
consumers think that Shaheen Air offers the lowest air fare, followed by AirBlue, while PIA
is considered to be the most expensive. On the same not Fig.7 compares the service quality of
the three airlines. AirBlue takes the lead, while PIA is not far behind and Shaheen Air being
ranked the last. (See Annexure for Figures)

9 Reuters, “Pakistan's Aero Asia Suspended,”

http://news.airwise.com/story/view/1178801264.html

10 Saad Hasan, “Airblue growth beats PIA on domestic routes,” The Daily News, January
8, 2008, http://www.thenews.com.pk/daily_detail.asp?id=89912

5
Analysis

When Aero Asia started operations in May 1993, it was hailed as a breakthrough in the
Pakistani Airline industry. The reason for Aero Asia's rise to fame was that it was the only
domestic private sector airline of Pakistan at that time as Hajvairy Airlines; another domestic
private sector airline had ceased to exist in 1993 after staying for only two years in
operations. Aero Asia was in a head-on battle with the Pakistani state owned airline, PIA not
only for domestic but also international routes in the gulf region. Aero Asia was successful in
capturing a share of the market from PIA by offering better service quality and competitive
ticket prices.

If we apply the Porter five force analyses to the airline industry in Pakistan, we get a better
understanding of the aviation industry. Aero Asia being launched will face major competition
from the airlines already existing in the industry, which are PIA, AirBlue and Shaheen Air.
These airlines would also be the substitutes that the consumers can use instead of Aero Asia.
The suppliers won’t be playing a major factor as Aero Asia already has the aircraft needed for
the operations. The buyers or the market that would be targeted would be the same for all the
airlines in the industry as they are offering the same services. Aero Asia does not face any
barrier to entry into the market as it already has the licence from the Civil Aviation Authority
(CAA) and there would be no immediate threat of a new entry in the industry as the CAA
does not issue new licences very frequently and easily. This shows that the main area that
Aero Asia would need to focus if re-launched would be its competition with the other airlines
that are already in the market.

Aero Asia carried more than one million passengers in fiscal year 2004-05 but the number
shrank to 756,308 in the following year and dropped to 278,900 in 2006-07. In contrast,
Airblue, which started with only 22,320 passengers in 2003-04, carried 1.4 million
passengers in 2006-07.11 This drastic fall in the number of passengers travelling by Aero Asia
has been linked to the fall in quality standards of the airline along with a decrease in the
number of operational flights that were reduced due to safety concerns. This also shows that
the consumers in the Pakistani market are not very loyal to the brand when it comes to
choosing the airline they travel with and any airline with a slight competitive edge can win

11 Saad Hasan, “Airblue growth beats PIA on domestic routes,” The Daily News, January
8, 2008, http://www.thenews.com.pk/daily_detail.asp?id=89912

6
over customers from the competitors. At the time of launch AirBlue focused on superior
service quality standards and highly completive prices. AirBlue also came up services that
did not exist in Pakistan previously, like e-ticketing and major discounts on early booking of
flights. This combination of commitment towards growth, customer satisfaction and
innovation has help AirBlue in capturing a major share of the air line industry in Pakistan. As
PIA and Shaheen Air did not focus on these things, they were not successful in capturing the
market share that was up for grabs when Aero Asia left. After realizing the tough competition
from AirBlue, PIA and Shaheen Air have been trying to catch up to the service quality
standards and innovative services like e-ticketing that AirBlue brought to the market.

7
Conclusion and Recommendations

As our analysis shows that the aviation industry is a cut throat business and to stay in the
running, a company needs to focus on a lot of things. As Aero Asia could not meet the
demands of the changing market, it had to close its operations. On the other hand, AirBlue a
new entrant to market was quickly able to grab a large market share due to its focus customer
satisfaction and innovative ideas. PIA and Shaheen Air also lost their customers to AirBlue
due to not being able to keep up with the changing trends.

Despite the fact that Aero Asia has been out of business for nearly three years, the consumers
still recall Aero Asia as a major player in the Pakistani aviation market. Though one might
think that there would be a negative stigma attached with Aero Asia due to the fall in quality
of service in the years preceding its exit, but very few people remember that now. This strong
brand recall gives us the opportunity to re-launch Aero Asia in the domestic market. This
advantage of the known brand name would save time and money at the time of the re-launch
and more resources can be focused towards making the air line a success. Aero Asia’s first
and foremost priority would have to be competitive ticket prices and quality standards that
are better than the other players in the market. Aero Asia would have to focus on the pre
flight details, such as the flight information, ticket booking etc by having a user friendly
website and a 24hour customer support call centre. One area where Aero Asia can really
shine is by keeping its flights on time and informing the customers about any delays/changes
in their flight schedule. Flight delays and lack of information about them is one major factor
that irritates the consumers. The in flight experience also counts a lot towards the overall air
travel experience. Here training the cabin crew properly is vitally important as most people
cite unfriendly cabin crew for a bad flying experience. The lack of proper training of the
cabin crew has been a long standing major issue with PIA and Shaheen Air, and this is the
area where AirBlue excelled. After flight services also need be paid special attention as they
complete the flying experience of the customer. Aero Asia should resume/enhance its
strategic alliance with Askari Bank MasterCard that offered the card members special
discounts. An effective marketing camping would have to be designed that focuses on the
market segment that uses air travel. The campaign would pay special attention to making the
image of Aero Asia from a low class airline to one that provides excellent quality at
competitive prices.

8
BIBLIOGRAPHY

Airline Route Maps, http://www.airlineroutemaps.com/West_Asia/Aero_Asia_pakistan.shtml

(accessed December 3, 2009).

All Expert contributors, "Aero Asia International," About Media

http://en.allexperts.com/e/a/ae/aero_asia_international.htm (accessed December 2, 2009).

Fiddian, Paul, “Suspension for Pakistan’s Aero Asia Airline,” Airport International,
http://www.airport-int.com/news/suspension-for-pakistans-aero-asia-airline.html (accessed December
3, 2009).

Hasan, Saad. “Airblue growth beats PIA on domestic routes,” The Daily News, January 8, 2008,
http://www.thenews.com.pk/daily_detail.asp?id=89912 (accessed December 2, 2009).

Plane Spotters, “Aero Asia International - Details and Fleet History”

http://www.planespotters.net/Airline/Aero-Asia-International (accessed December 3, 2009).

Reuters, “Pakistan's Aero Asia Suspended,” Reuters News Service,

http://news.airwise.com/story/view/1178801264.html (accessed December 3, 2009).

Wikipedia contributors, "Aero Asia International," Wikipedia, The Free Encyclopedia,

http://en.wikipedia.org/w/index.php?title=Aero_Asia_International&oldid=322136918 (accessed
December 2, 2009).

ANNEXURE 01

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QUESTION.1: Do you know about Aero Asia?

Yes
No

QUESTION 2: How often do you travel by air?

Never
Seldom
Often
Frequen
t

QUESTION 3: Which Airline do you travel by?

PIA
AirBlue
shaheen

Question 4: Have you ever travelled by Aero Asia?

Yes
No

QUESTION 5: What do you rate higher when traveling by Air?

Service 26
price 23

Question 6: Which airline do you think has the lowest prices?

10
PIA 8
AirBlue 14
Shahee
n 28

QUESTION.7: Which airline do you think has the best quality of service?

PIA 15
AirBlue 22
Shahee
n 3

11