ASSIGMENT NO 2

Project Report

BUSSINESS POLICY AND STRATEGY (887)

STRATEGIC ANALYSIS

Submitted To:

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DEPARTMENT OF ADMINISTRATIVE SCIENCES
ALAMA IQBAL OPEN UNIVERSITY
ISLAMABAD

In The Name Of Allah.

Most Gracious, Most Merciful
And He (Allah) Taught Adam
The Names Of All Things
And He (Allah) Taught Man
That Which He Knew Not
Al-Quran

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 ACKNOWLEDGEMENT

First; I would like to thank Allah Almighty for providing me an opportunity and patience to
complete my internship.

Then I would like to appreciate, Assistant Manager in PIA who shared his knowledge with me.
That helped me in understanding of the management theory and practice and tends that make the
job more motivating

Finally, I pay my deepest gratitude with deepest sense of respect to my parents whose love and
affection kept me steadfast and enabled me to attain the targets and goals of academic life.

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 DEDICATION

I DEDICATE THIS HUMBLE EFFORT TO MY PARENTS, WHO’S LOVE AND

AFFECTION FOR ME IS JUST BLESSING.

&

TO THE DEPARTMENT OF BUSINESS ADMINISTRATION , ALAMA IQBAL OPEN

UNIVERSITY, ISLAMABAD. THAT REALLY HELPED IN DEVELOPING MY
CAREER AND PERSONALITY.

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 Table of Contents:
ACKNOWLEDGEMENT .............................................................................................................. 3
DEDICATION ................................................................................................................................ 4
Table of Contents: ........................................................................................................................... 5
An Abstract ..................................................................................................................................... 6
Introduction ..................................................................................................................................... 7
Practical Study of the Organization ................................................................................................ 8
Company in a Glance ...................................................................................................................... 9
PESTELD Analysis ...................................................................................................................... 12
Porter’s five forces analysis .......................................................................................................... 17
Value Chain Analysis ................................................................................................................... 18
Data Collection Method ................................................................................................................ 21
SWOT Analysis ............................................................................................................................ 22
Recommendations ......................................................................................................................... 25
Conclusion .................................................................................................................................... 27
References ..................................................................................................................................... 28

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 An Abstract
Pakistan International Airline is the only blue chip multinational organization of the country and
is serving the nation since 1955. The airline is national flag carrier of the country and has got
many responsibilities to abide which its competitors don’t have to. The airline has seen many
peaks in its financial history and has also achieved many milestones.

This report will cover a strategic analysis of the present situation of the airline and will elaborate
the present financial condition. The policies and the practices followed in the airline will be
evaluated under the SWOT and PESTLED analysis and consequently, the report will follow the
recommendations for improvement. Finally, the report will end in a short conclusion.

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 Introduction
Strategic Analysis
An objective analysis and understanding of your markets and your costs and capabilities forms
the bedrock for the strategy development process. From this analysis and by applying creativity
will come a number of options and opportunities that can be used to build and implement a solid
strategic plan for new or existing markets. Setting a strategy requires knowledge in three areas.

Customers: Existing customers and potential customers and markets. What do they do? What
would help them do what they do better? What are their needs? Where are the most profitable
customers?

Competencies: Skills, knowledge and relationships. What do you do well? What abilities could
you draw on? What costs do you have to carry? Where do you make money?

Competition: The whole competitive environment from regulation to real life competition. What
is the basis of competition? Where are the threats? Where is their pressure and where is the
market easy?

Analysis of the three areas is interrelated. Who you choose as your target audience will have
implications for what capabilities you need, which will have an impact on what competitive
pressures are around which will influence who you choose as your target audience.

We take each of these areas in turn.

Analysis of target markets

Analysis of competencies
Analysis of competition and environment

Some companies will have all this knowledge to hand easily and readily. Others will require
information and analysis to be carried out in order to bring together the knowledge together into
one place.

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 Practical Study of the Organization
We here discuss Strategic Analysis of PIA which is in practice now days in Pakistan.

Overview
Pakistan International Airlines, Pakistan s national flagship airline, has been a pioneer since its
inception in 1955. PIA was the first Pakistani airline from a non-communist country to fly into
the People s Republic of China and, in 1962 PIA set out to break the record for the fastest flight
between London and Karachi.
PIA continues to soar, ever committed to innovation and rich customer experience. With a fleet
of young airplanes, a crew dedicated to providing the highest standards of in-house service, and
stellar management, POA is a flight that is going places. However, recently, the profitability of
PIA has been witnessing a downside.
Year 2008 did not bring any significant improvement in the financial performance of PIA. The
problems of the past years recurred and compounded to give the company a higher net loss for
the year. The company is in a dire situation to salvage itself from further crises. A brief recap of
year 2007 reveals that during the year, the company experienced a series of financial, operational
and marketing problems. In the early part of the year, imposition of operating restrictions by EU
caused considerable disruption in the PIA schedule as well as significant curtailment in capacity.
With the airline brand severely dented, PIA lost market share as well as growth in business,
which made the situation still more difficult. The unprecedented hike in oil prices adversely
impacted PIA s bottom line. PIA, the late starter was unable to hedge the risk against the high oil
prices and thus had to absorb the burden of expensive fuel. Apart from the fuel cost, increases in
pay to certain categories of personnel and depreciation of the rupee vis-a-vis the US dollar
towards the end of the year also adversely affected the financial results.
The airline could not remain immune to ever-increasing competition due to an over supplied
capacity environment including entry of new operators in certain key markets. PIA managed to
increase the yields despite competition. However, this improvement was offset by reduced level
of traffic. PIA s revenues, thus, remained static for the year. The cash position of the company
remained under strain throughout the year and was managed by short/medium term borrowings
from the market based on GOP guarantees. However, a positive development during the last
quarter of 2007 was the withdrawal of EU operating restrictions, as PIA was able to satisfactorily
address the issues highlighted by the EU Air Safety Committee.

Company Snapshot
1) Company Name: Pakistan International Airlines
2) Nature of Business: Airline Service
3) Ticker: PIAC
4) Net Premium Comparison
a. Net Premium CY 07 PRs 70,480,734,000
b. Net Premium CY 08 PRs 89,201,257.000
5) Share Price (Average) PRs 3.17while closing for 2009 was PRs 2.61
6) Market Capitalization: 6,703,472,884

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 7) Total Loss for 2009 was PRs 5822 million (as of 31st December 2009)

Fleet
Company as of December 2009 had 40 planes in it’s fleet

Company in a Glance
Vision
PIAC has a vision to be a world class airline, meeting customer expectations through excellent
services, on-time performance, innovative products and absolute safety

Mission Statement analysis

PIAC’s mission statement is as follows
“Employee teams will contribute towards making PIA a global airline of choice through

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 1. Offering quality customer services and innovative products
2. Using state-of-the-art technologies
3. Ensuring cost effective measures in procurement and operations
4. Developing safety culture

This mission statement addresses following core points of nine point mission statement analysis
1. Product and or service
2. Technology
3. Philosophy
4. Self-concept
5. Concern for people
6. Concern for survival growth and profitability

Business Status
PIAC is capitalized (publicized) and it’s the only airline in Pakistan to be in stock market.
Though its full privatization is announced by the GOP but it was never implemented due to
Union power. Currently 89.1% shares of PIA are with government.
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.

Offered Services
Following services are offered by PIAC which are strategically very important for organizations
market demand.
1) News Paper and magazines are provided to all customers. The bi monthly “Hamsafar” is
quiet popular which was introduced in 1980 and still continues
2) Frequent flyer program allows passengers to receive free tickets, excess baggage
vouchers, cabin upgrades, and rewards and special deals. Awards +Plus offers three tiers
of membership to frequent flyers - Emerald, Sapphire and Diamond. A+ mile can be
earned by flying PIA, and by using the products of PIA's partners.
3) Livery has been with PIAC since its creation. It regularly changes the look of the planes
the average aircraft look remains for 3 years approximately. This gives it a new feel to
travel in PIA plane. Especially the four tail design has been quiet popular with
customers, as it signifies the four provinces of Pakistan.
4) Cargo service is strategically very important even though it was launched in 1970s but in
2003, PIA launched a full courier service and introduced "PIA Speedex". The services
were started in Karachi, Lahore and Islamabad, expanding in a year to twelve cities.
Today, the airline offers over seventy locations within Pakistan with shipments collected
and delivered from customer homes. From 2004 to September 2007 PIA Cargo operated
two Airbus A300 Freighter aircraft through MNG Airlines under wetlease/ACMI to Haan

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 and Luton, initially these also operated to Amsterdam, Basel and Cologne. If used
properly this can become a winning strike for PIAC.

5) PIA maintained its operations to three Continents of North America. Europe and Asia
while serving 42 destinations around the world. Contributing from all major routes
improved from last year’s level with Pakistan region contributing 26% followed by UK
24%, Middle East 23% America 14%, Europe 8% and Far East 6% only. Pakistan
International Airlines Corporation, through its subsidiaries, provides passenger and cargo
air transport services. It also offers engineering, baggage, charter, mail and telephone,
and handling and related services. In addition, the company operates as a promoter and
investor in projects related to construction, development, and operation of hotels, motels,
and restaurants; and manages an airport hotel at Karachi. It operates in the United States,
Canada, Europe, the Middle East, Africa, and Asia. They can be better understood by the
following pie chart

Brand marketing through sponsorships

PIAC has been using brand marketing quiet efficiently through various sponsorships as described
follows. Their use in strategy formulation will be discussed ahead.

1) Pakistan International Airlines (PIA) supports a first-class cricket team that plays in the
ABN AMRO Patron's Trophy in Pakistan. PIA is also sponsoring the Pakistani team for
the A1 Grand Prix.

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 2) PIA also promotes the Shandur Polo Gala that takes place every year in the Chitral and
Gilgit regions of northern Pakistan during the summer period.
3) PIA is one of the official sponsors of the "Destination Pakistan 2007" festivals.
4) PIA also has its own Boy Scouts Association (PIA-BSA) working in partnership with
Pakistan Boy Scouts Association. After the earthquake, PIA-BSA was working in
partnership with other charity organisations to provide relief help.
5) PIA Planetariums located in Karachi and Lahore are owned by PIA, which enable the
public to see static aircraft as well as astronomy shows.
6) PIA Horticulture, set up in 1996, provides flowers for display in PIA's offices and for a
range of events, winning several awards and accolades at flower exhibitions across the
country.
7) PIA also supports non-profit organisations within Pakistan such as; Al-Shifa Trust,
Zindagi Trust, The Citizens Foundation and Sind Institute of Urology and
Transplantation (SIUT).

PESTELD Analysis
1) Political Analysis
Political factors and regulations are most crucial in case of PIAC, the reason it being held by
government in major share. Politically Pakistan is a destabilized country, dictatorship and loose
democracy are some of the main threats PIA is facing from political factors. Some of the
important factors that can have an effect on PIAC are discussed below
1. GOP vs. Judiciary war has proved to be disastrous for our nation and it is expected to go
further in near future. This may be a change maker in government. A change in
government for PIAC means change of business owners. This can be a bad effect on
PIAC. If it happens.
2. Political distress in our neighboring country like Afghanistan has an adverse effect on
our international airline industry.
3. Government’s policy to continue support in “war against terror” has increased
insecurity level in Pakistan which means fewer visitors come to our country and hence
les revenue for PIAC, as its main reliance is on customer revenue.
4. Government has already announced it is going to privatize PIAC if this happens in near
future things may look bright.

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 5. As this is a political government hence higher officials and management are basically
supporters of this particular government, if there is a midterm election which would
mean a change in government this also mean change in higher management.
6. Defense ministry has already announced its intent on allowing small route planes to
travel within cities, this can decrease the customer reach for PIAC.
7. As the above Pie chart shows one of the biggest market of PIAC is Europe and UK (32%)
hence current intent of EU to implement standard of euro 2 emission for all flights
crossing Europe may make most of PIAC aircrafts useless.
8. Government’s current release of educational barrier for parliamentarians means less
educated owners for PIAC hence decreasing its chances for profitability
9. Government’s latest act of outsourcing non-core business issues like catering handling
and engineering units as separate companies has proved to be profitable for
organization.

2) Economic analysis
PIAC is mostly dependent on customer revenue; hence economic condition of its target market is
very important in its profitability and strategy formulation some of the key developments
important to our organization strategically are discussed below.
10. Global crunch has struck hardest on two nations UK and America, as most of the
economy of countries like Spain and Switzerland are highly dependent on UK and
America’s economy hence they are also badly affected. Now considering the fact that
58% of flights by PIAC are for America, UK and Europe. Means sudden loss in customer
base. Hence decreasing revenues.
11. Pakistan’s per capita income has decreased and is expected to decrease even more in
coming years hence decreasing consumer’s buying power.
12. Interest rate in Pakistan is very high hence making it hard for investors to invest in PIAC.
13. Pakistan’s stock market is graded at B3 level that means a market risk premium of 14.25,
hence decreasing the involvement of capital from stocks.
14. Inflation has decreased from record high 25.3% average in August 2008 to 8.87% in
October 2009 and expected inflation this year is expected to go to 11% as revised by
IMF after deliver 7.6billion in reserves, which will in turn decrease the buying power of
PIAC customer; this is to talk about core inflation. This can have both good and bad
effects. The bad part is local travellers would decrease and may go to cheaper travelling
with Air Blue. The good part is this will increase the customer travelling to international
destinations.
15. The non-food inflation stood at 19.3 percent, against 5.9 percent in the corresponding
period of last year. The non-food inflation is also high because of hike in transport
group, fuel and lighting group and house rent index. The downward adjustment of
petroleum prices in the month of November is neutralized by frequent hikes in

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 electricity and gas prices. Hence the decrease in petrol price is ineffective for PIAC
customers.
16. Population below poverty line is expected to go below 23% as measured for 2001 it was
35% of population according to CIA world fact book. This means an increase in customer
demand and base.
17. The World Bank (WB) and International Finance Corporation’s flagship report ‘Ease of
Doing Business 2010’ ranked Pakistan 85 among 181 countries around the globe, that is
very low as compared to other countries, hence decreasing good financers coming to
Pakistan.
18. Measured by purchasing power, Pakistan had a 30 million strong middle class in 2005,
which according to a latest survey of standard chartered has increased to 35 million,
they are the core customers of PIAC hence this indicator is a positive one for us. If we
look at upper and upper middle class, it has grown from 6.8 million in 2002 to 17 million
in 2010. Hence this also is a good indication if seen with the fact that not many
international airlines are present and working from Pakistan.

3) Social analysis
Socially Pakistan is very diverse and dynamic even though there are many social and cultural
changes going on in our country these days as always some of those changes important to PIAC
are discussed below
19. There is an explosive elevation in youth’s education level, hence the understandability
of services and businesses has grown this in coming years would affect all businesses
including PIAC. As the customer becomes more educated he demands that extra mile
from its service provider. Aviation falls in service sector hence satisfaction of customers
is core competitive advantage.
20. Due to instability in Pakistan more and more people are immigrating to better countries
hence PIAC being among three carriers and being monopoly in international travel to
Pakistan can benefit from this
21. There is an ever growing number of people for Hajj and Umrah, in last couple of years
PIAC has lost in this easy ground as well increasing prices when the petrol prices are
lowering purchasing power of customers is decreasing is a fatal move for this type of
opportunity. The estimates show an increase of 15% per year in people wanting to go to
religious travels. This may be viewed as an opportunity for PIAC, if dealt with properly.
22. Pakistan’s Major population is now in 25-45 years limit hence this being the biggest
chunk should be considered most important in strategy formulation. Some of the good
things about this is PIAC’s periodic change of look that may be used as an appeal in this
respect.
23. As described above major population of Pakistan is in 25-45 years limit. The age of
brand development hence this can also be viewed as an opportunity to develop strong

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 brand loyalty for the prospective customers. As in coming years more and more people
above this age would perish and new ones would enter.
24. If we observe the level of checking for PIAC customers on international airports, it is
fairly visible that travelling on PIAC means an hour wasted in extensive search and
verifications. People are more and more connected as compared to yesterday hence this
type of news for educated people means bad for the business.
25. Pakistan’s youth is more attracted to entertainment during flight as compared to the
previous generation which preferred noisy floor and dirty toilets. Now people demand
healthy and tolerable environment.

4) Technological analysis
In aviation industry technology is what runs the business, this means technology is of key
importance in customer retention. Some of the technological changes coming and having effect
on PIAC are discussed below.
26. An American firm “Viper Jet” has recently devised a two seater plane for youth
equipped with all the gadgets and navigation function along with auto pilot and is
available in international market for 12.3 million, that’s like buying a new car for your
son. This if viewed with the political factor number 6 increases a threat for PIAC in
domestic market in future.
27. GOP is considering reviving Railways, introducing more modern tracks. If this is done
then the sole profit taker of PIAC the cargo service called “Speedex” will face a threat.
28. Air blue is currently buying 6 new air busses for its international fleet this will also
become a serious threat to PIAC.
29. PIAC currently has planes from Boeing, which is considered as a fuel guzzler when
compared with air bus used by air blue.
30. Most of the successful international airlines have gained success through introducing
rebate on internet purchases in order to cut down charges on employed agents. This is
absent here, though online ticket purchasing is present but they lack giving rebate on
those tickets.
31. America is now developing air highways for its domestic users this means PIAC has to
purchase new planes to coup with this advancement as well.
32. Introduction of new holographic calling may lead to lower number of people returning
to homeland to meet their relatives.
33. In order to meet current trend of people toward emission Laminar Flow is considered a
Key to reducing emissions in future aircraft, this technology is due in coming six-seven
months.
34. Distributed-aperture electro-optical systems that combine with helmet-mounted
displays to allow a pilot to “look through” the airframe, in any direction, to enhance

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 situational awareness when maneuvering navigating at low altitude will advance this
year and is considered to be a good solution for safety measure

5) Environmental Analysis
Environment plays an important role in shaping businesses some of the key factors that may
affect PIAC are discussed below
35. The eruption of volcano in Iceland has every one in surprise and has made PIAC’s flights
to be delayed, some new advancement in engine is required to make it able to go
through that type of ash
36. There has been an increasing distress over global warming and this is clearly shown as
discussed above by EU’s intent to restrict the air to emission standards.
37. UK being the top market of PIAC, the environment in UK is rapidly changing for last few
years, last winter they hit their lowest degree in 25 years, same was the case with Spain,
which observed lest temperature recorded in 32 years. This year is expected same and
hence providing PIAC another delay in flights.
38. PIAC high reliability on Boeing has proven to be costly not only to PIA but also to
environment as more fuel and more heat is put into our atmosphere.

6) Legal Analysis
Pakistan is changing rapidly on legal grounds; some of the factors in this change having an
impact on strategy of PIAC are discussed below.
39. CAA is expected to legalize personal travelling in air by general public hence proving to
be a problem
40. IATA has already warned PIAC on two occasions for its technical failures during flight
and once during takeoff, one more failure and according to the law PIAC will be facing
fines for its behavior.
41. Introduction and empowerment of Judiciary has given way to “Musabqati commission”
which is now closely watching PIAC’s moves.
42. PIAAC is charging 30% on rescheduling and refunding for tickets within 48 hours of flight
departure and 50% after departure for both discounted and full fare tickets this is in
clear violation of competition commission ordinance Section 3(1), read with section
3(3)(a). And may cause issues in future.

7) Demographic Analysis
PIA has segmented its target market according to demography hence its immensely important to
understand demographical changes in Pakistan before planning for a business here. Some of the
key factors regarding demography are as follows
43. Demographic segmentation of PIAC is based on income segmentation, according to the
world fact book of CIA the number of people coming to middle class increased hence
making an opportunity for PIAC

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 44. PIAC also has occupational segmentation with his customers. As the “ war against terror
is increasing threat to our country and safety, the number of tourist coming to Pakistan
are decreasing
45. According to a latest survey the percentage of women in Pakistan is 51% which is slightly
higher as compared to men. Hence making an opportunity for PIAC.

Porter’s five forces analysis

Bargaining Power of customers
Bargaining power of customers is low in our case due to following reasons:

46. PIAC has a monopoly in Pakistan

47. There are only three service providers including PIAC that’s very low competition when
compared to other countries
48. Due to current terrorist threats, most of world’s leading airlines have stopped operating
from Pakistan.
49. There is only one substitute for air travel that is by sea and most people do not prefer
that as it’s pretty time taking
50. PIAC does not distinguish between full fare and discounted fare tickets unlike
competitors giving more bargaining power to customers on behalf of its competitors.,
PIAC charges 50% for rescheduling and refunding after departure of flight which is not in
any sense comparable to Air Blue and Shaheen Air charging 2000PRs. This also is a
drawback for customers.

Bargaining Power of Suppliers

Bargaining power of suppliers is high in case of PIAC due to following reasons:

1. There are only two suppliers of public air travel, Boeing and Airbus.
2. The agents working for PIAC are large in number as compared to other airlines but not
many are interested in replacing them
3. Oil companies are already giving fuel on debt to PIAC hence making them strong and
reducing our bargaining power against it
4. The operation is mainly dependent on CAA for airports and defense department which
set ground rules for every procedure.

Threat of Substitute Products

The threat of substitute products is very little as people are not used to travel by sea and there is
no other substitute

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Threat of New Entrants
Threat of new entrant is low based on following reasons:

1. PIAC has complete monopoly in major international routes

2. This is a business which requires high starting capital, and slower returns
3. Market in Pakistan is very limited
4. Market in Pakistan in terms of travellers is already saturated to some extent
5. Pakistan ranks on 139th position out of 190 countries based on buying power of people
hence making it less attractive for these tertiary level services.
6. Emirate airways which had suspended their flights to Pakistan have again continued it
for twice weekly to and from Peshawar, this is to account that in 2006, 07 and 08
emirates total market share in Pakistan was third highest in country when PIAC was
leading. Market share was 10.3%. Hence the renewal of this service is a threat to PIAC.

Competitive rivalry in the industry

Competitive rivalry is overall less when seen the whole industry there is a little hint when
comparing PIAC with Air Blue.

Value Chain Analysis

PIAC’s value chain analysis now would give us the idea what are the effects of current strategic
position of this organization. To simplify and to understand properly we would divide this
section in two parts

1. Primary Activities
2. Secondary activities

Their description is given below

Primary activities
Activities which are directly involved in delivering service of PIAC are as follows

Inbound logistics
Inbound logistics of PIAC are as follows:

PIAC takes fuel from international suppliers and due to its current debt situation it’s
limited to take only fuel it can afford, it has also taken sovereign guarantee of GOP in
more than one situations so it is most likely a guarantee may not be useful in near
future
PIAC has its fleet of 40 airplanes which is something to boast about in Pakistan market.

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 Maintenance of these planes as well as ground checking operations (checking of planes
before takeoff) are owned by PIAC itself and very well trained and well equipped
In terms of engine renewal and checking facility PIAC has following ground realities the
department name is PK-MRO. It has capability to have maintenance as follows.
Boeing 747-300 RR RB211 (A, C, and D base checks)
Boeing 747-200 CF6/JT9D (A, C and MBC/inter D)
Boeing 777 GE90 (A and C)
Boeing 737-300 CFM56 (A and C)
Airbus A300B4/B2 GE CF6 (A, C, QBC, MBC, and D base check)
Airbus A310-300 GE CF6 PW4152 (A, C, MBC, and D base check)
ATR 42-500 PW127 (A and C)
Having fully functional maintenance facility “PK-MRO” has saved company $20Million in
2009 for not offloading engines to KLM.
PIA takes planes mainly from Boeing and currently the fleet is fully capable.
Finances to run the company comes from GOP and Profit from operations.

Operations
Following are main operational activities for delivering the service:

Now introduced automated dispatch of post flight report

Have departure control system (Sabre) on 14 airports and in 2009 extended it to 7 new
destinations
Enhanced flight monitoring system in comparison to domestic competitors adding to
flight processing
Currently installed graphical user interface of check in system at major domestic airports
(KHI, LHR and ISD) hence improving check in response and shorter passenger queues at
check in
Centralized load control setup named “SABRE steady state” or “Load Manager” hence
load sheets of all domestic and international stations can now be prepared in KHI
decreasing processing time (time of service).
CLC (central Load control is now working in 16 out of 36 stations this load sheet
preparation is done by most domestic competitors by handling agents at certain cost.
Superior flight system as discussed above has resulted in better resource utilization and
improved flight punctuality (flight delays decreased from 337 in 2008 to 208 in 2009)
This has also resulted in improvement of baggage revenue which has been 80 million
greater than the target revenue of PRs 1 billion.
PIAC has the most advanced simplified and standardized maintenance program.

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To insure smooth sailing of operation introduced “Lean Six SIGMA” for best practices
and techniques in industry.
Reduction in material expenses according to 2009 financial report due to these
operational practices
To drive down operational cost from 2010 June PIAC would use new Boeing 777 by
agreement with Thales. It has the capability of full flight simulator. It also has reduced
carbon foot prints of device due to this agreement PIAC has been certified by “European
Aviation Safety Agency (EASA)-part 145” in accordance with its new rules
During Hajj operations PIAC engineering provides one spare B747 at Jeddah for any
unforeseen delay hence improving technical reliability which was in 2009 shown at
99.5%
In 2009 for distinguished passenger handling and operational techniques Saudi
Authorities awarded a shield to PIAC.
To improve the practice during Hajj operation now direct flight are sent from major
cities hence improving time taken for service.
Due to good operational practices PIAC once in 4 years became profitable in operational
level as revenue in 2009 went up by 6.4% year on year, yield increased 7.0% in 2009

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 Data Collection Method

The data collection method used in this report is Secondary data, which is collected through
Newspaper, Reports, Magazine and Internet to analyze the market polices of consumer goods
and services
These sources provided some very valuable data, which enable me to formulate and more ahead
with this Project.

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 SWOT Analysis

SWOT Analysis is a powerful technique for understanding your Strengths and Weaknesses, and

for looking at the Opportunities and Threats that face

SWOT ANALYSIS:

Strength:

PIAC has following strengths in doing business in Pakistan:

a. Monopoly in Pakistan market

b. Huge financial advantage being 89.1% shares with GOP
c. Younger planes as compared to competition
d. Reach to international destinations
e. Brand advantage
f. Experience curve advantage
g. Broader target market
h. Point to point frequency

Weakness:
PIAC has following weaknesses:

i. Corruption is at level high and lack of accountability

j. High amount of debt
k. Dysfunctional and inefficient organizational structure
l. Uncooperative and non-professional crew
m. Hold of union (Union has higher than average power)
n. Inefficient use of resources (Human and Technological)
o. High influence of Government officials on rules and regulations
p. Offer free travelling to most of government officials, supporters, MPAs,
MNAs, and other government guests. (lack of business professionalism in
revenue generation)
q. Overstaffing in last 10-12 years
r. Low rewards and appraisal
s. High fares when compared with domestic competitors

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 t. Low salary of engineers and high salary of pilots (discrimination effect)

Opportunities:
PIAC has following opportunities:

u. Lowered oil prices

v. Ability to have maximum route and fleet reach
w. Demand for low cost airlines is growing due to global crisis
x. Shifting customer trend to national airline due to racism in various countries
y. Industry recovery for airlines is predicted in couple of years
z. Better recruitment policy
aa. Speed ex which is domestic can be international
bb. Better training programs

Threats:
PIAC would face following threats:

a. High interest rate in Pakistan

b. 5 major accidents involving PIA’s planes
c. Technical failures have started growing in planes increasing customer distrust
for safety
d. Strong competition by Air Blue
e. Dollar to PRs rate is increasing (money is devaluing)
f. EU is expected to restrict planes from entering air without Euro2 standard
emission system.
g. Government may capitalize this sector; in this case their biggest advantage of
holding monopoly would end.
h. Fluctuating fuel prices
i. Terrorism
j. Time taken by embassy to accept visa
k. Open sky policy and single euro sky policy
l. High debt can affect its resource purchasing

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 Recommendations

The following specific steps can help to go a long way toward supporting to organization.

Employee satisfaction or dissatisfaction measures

If PIA believes that dissatisfaction or absenteeism is affecting the productivity level of
employees, then the root cause of such factors is identified. If a genuine reason emerges, the
employee is assisted in rectifying the situation; if not, then the employee might get a letter of
warning.
Employees at PIA can express dissatisfaction through the ‘Suggestion Boxes’ located at various
sites of PIA. Furthermore, quarterly employee co-ordination meetings are held where all
employees can share their views with their bosses and subordinates.

Violation of Code of Conduct (COC)

If the code of conduct is violated in PIA, a ‘Show Cause Letter’ is issued while in severe cases
the employee is suspended until a proper investigation takes place.

Recruitment and hiring procedures

An entire Recruitment and Selection Division is functioning in the HR & Administration
Department. Decisions are taken by the top management of PIA regarding the attributes required
for hiring. An assessment form, based on certain characteristics such as personality, skills and
qualifications, is used to evaluate a candidate. The verdict of the management is forwarded to the
recruitment division which then initiates the procedure of recruitment and selection.
After difficult circumstances the Human Resource Department is now fully functional and
policies and procedures are now in place. New recruitments with clearly defined levels of skill
and competence in all areas are being made. New inductions both on the management side and
specifically the operational side of cockpit crew, cabin crew and ground engineers will continue
at regular intervals so that the shortages experienced in these areas are fully taken care. The
policy is to promote people from within the airline at all levels. However, where PIA does not
find the relevant competencies they hire people from outside which is based on market salaries.
Salaries of all the employees including operational crew have been considerably enhanced in an
effort to align PIA salaries with regional airlines over a period of time.

Communication pros and cons

The organizational structure of PIA is centralized, therefore decision-making is a time-
consuming process and delays occur in downward communication. Though, it is believed that
the current Chairman is inclined towards a decentralized system, the effectiveness of such an
approach in PIA remains to be seen.
Effective communication is essential in all organizations and it becomes even more essential in
an organization like PIA due to its large size and expanded network. It is necessary that people
from various departments communicate between each other to have an overall uniformity.
Previously fax was widely used to transmit information, however, with the technological

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advancement e-mails are used for this purpose. Another mode of communication is through
letters.

Exit Interviews
At PIA, exit interviews depend on the immediate supervisors and Departmental Heads. Some of
them are keen on the idea, others are not: there is no clear policy for exit interviews.
During downsizing employees are offered different packages such as a ‘Golden Hand Shake’ in
which employees are paid a lump sum amount for their services. This is done to maintain a
healthy relationship between the management and the employees and also to make employees
feel that they are being taken care of in the organization.

Team work’s role

In an airline industry almost all tasks are performed through team work and PIA is not any
different. From ticket reservation to the landing of the plane team work is the decisive factor.
Employees work in various teams such as ground staff, cabin crew, flight attendants, office staff
etc. All these teams have different sets of tasks to perform but cohesion among these teams is
necessary to run the day to day operations. Considering the diverse nature of employees PIA has,
it is difficult to make team work efficient so it is major challenge for them.

Influence of Groups on decision making

The sheer size of the organization leads to the formulation of various formal and informal groups
at PIA. The informal groups influence the overall decision making process to some extent due to
the nature of the workplace. These informal groups are formed because many employees have
been there in the organization for several years and they share common interests.
One more important factor is the highly politicized environment of the organization which
allows and pampers such groups from top level management.

Power and Politics

In PIA employees are less empowered which means all the power rests with the top level
management and they can exercise it at their will. Also their power cannot be challenged by the
employees and compliance to the decisions being made by them is essential. We can also say
that in PIA that legitimate power is exercised. This also leads to high employee dissatisfaction
because in order to be influential one needs to have personal contacts. This is the reason
employees focus more on networking rather than concentrating on their jobs. We were not able
to get an insight on the various political issues in the organization but it is a common observation
that illegitimate political behavior is a common practice. It is present in the form of nepotism,
intentionally damaging the image of other employees.

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 Conclusion

I propose the retrenchment strategy or turnaround strategy by the help of rightsizing.

And the main goal is to go through a temporary belt-tightening, which will allow the firm to
pursue a growth strategy at some future point

Professional Core
• Qualified professionals,
technicians, managers
• They own the
organizational knowledge;
hard to replace
• Task culture
• Number of people
decrease

Flexible Labor Force Contractual Fringe

• Part-time and temporary • Takes on increasingly larger
workers (fast growing) proportion of work
• Role culture • Example: advertising,
• Employees’ treatment Research, computing, catering
influences their output are done outside the
organization by agencies
• pay for output, not for input

A Profit Making and Prosperous Organization

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 References

The data has been collected from various sources to accomplish the project report. For this
purpose, PIA regional office has been visited frequently and much of the help has also been
taken from official website of the corporation. Following are the main sources from where the
information has been gathered:

PIA Regional Office Rawalpindi

www.piac.com.pk
www.wikipedia.com

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