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Executive SummaryY YY

1.Y IntroductionY YY

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1.2.YYVision StatementY YY

1.3.YYSubsidiariesY YY

1.4.YYOwnership composition of PIAY YY

1.5. YFleetY YY

1.6.YYCompetitorsY YY

2.YYYPIA StrategyY YY

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3.YYStrategic AnalysisY YY

3.1. PESTLE AnalysisY YY

3.1.1.Y PoliticalY YY

3.1.2.Y EconomicY YY

3.1.3.Y SocialY YY

3.1.4.Y TechnologicalY YY

3.1.5.Y LegalY YY

3.1.6.Y EnvironmentalY YY

3.2.Y Porter Generic StrategiesY YY

3.3.Y Five ForcesY YY

3.3.1.Y BuyersY YY

3.3.2.Y SuppliersY YY

3.3.3.Y Entry to the market YY

3.3.4.Y SubstitutesY YY


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3.3.5.Y RivalryY Y

3.4.Y SWOT AnalysisY Y

3.4.1.Y StrengthsY Y

3.4.2.Y WeaknessY Y

3.4.3.Y OpportunitiesY Y

3.4.4.Y ThreatsY Y

4.Y ConclusionY Y

Yè mestic Netw rk  PIAY Y

YReerencesY Y

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? ecutive Summary

Pakistan Internati nal Airlines C rp rati n (PIAC) was the nati nal lag carrier  the
Islamic Republic  Pakistan,  unded in 1955 thr ugh legislati n and subsequent merger 
private wned Orient Airline. PIA perated b th scheduled passenger and carg services.
The irm is 87% state wned, with the remaining 13% held by private invest rs internal t
Pakistan. PIA is the nly nati nal air line perating n b th d mestic and internati nal
r utes.
This rep rt is an analytical view n the strategy  PIA thr ugh applying strategic analysis
t ls. I have tried t applying PESTEL Analysis, P rter¶s Five F rces and SWOT analysis t
identiy market p siti n, strengths, weaknesses, perating structure and brand rec gniti n.
The dependencies  PIA have als discussed al ng with the impact  ec n mical situati n
 the c untry n its per rmance.
The rep rt als c vers the inluence  the g vernment in management and strategic decisi n
making  the rganizati n. It als c vers the c mpetitive advantages PIA enj ys and the
impact  inlati n rate, interest rates and increased il prices as well.
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1.Y Introduction

At the time   rmati n  Pakistan nly ne airline µOrient Airlines¶ was wned by
Muslims  the Sub C ntinent. The Orient Airline was established in 1946 by Mr. M. A.
Ispahani n the instructi ns  Qaid-e-Azam Muhammad Ali Jinnah. The Orient Airline
initially started its perati n r m Calcutta with a skelet n leet  just tw èC-3s, three crew
members, and twelve mechanics. Ater the  rmati n  Pakistan, Orient Airlines shited its
base r m Calcutta t Karachi. The birth  a new nati n generated ne  the largest
transers  p pulati n in the hist ry  mankind. The Orient Airline t k part in relie
perati ns and transp rtati n  pe ple r m èelhi t Karachi al ng with ther means 
transp rt ater partiti n.
PIA was  rmed in 1955 by the g vernment  Pakistan thr ugh PIAC Ordinance
1955 merging the nly private wned airline Orient Airlines perating in Pakistan ater
assessing that the Orient Airline c uld n t be expected t gr w and expand independently
due t limited res urces.

Initially the nati nal airline c ntinued its perati ns n the r utes the  rmer airline used t
serve but s n PIA started its Internati nal perati n. It was greatly criticized, as the public
c uld n t realize r justiy the need t perate an internati nal r ute when, in their pini n,
ther pr jects which are very imp rtant  r a devel ping c untry sh uld have been given a
higher pri rity. H wever, PIA's  cus was, and c ntinues t be, t serve the Pakistani
c mmunity at large. The pr visi n  transp rtati n t expatriates has remained ne  the
maj r pri rities  the nati nal airline. Ater ne year  its  rmati n PIA started t expand
its perati ns by increasing its leet, hiring m re Pil ts and establishing their wn repair and
maintenance centre. In the year 1959 G vernment  Pakistan changed its t p management
and app inted new M.è. and under his visi nary leadership, PIA 't k ' and within a sh rt
span  6 years, gained the imp rtance and status  ne  the w rld's r ntline carriers. In
aviati n circles, this peri d has ten been reerred t as the † olden years of PIA†www.piac.c m).

M re ver, Internati nal Airlines is the nly g vernment wned airline serving b th
passenger and carg nati nally and internati nally PIA earned substantial  reign exchange
thr ugh internati nal services, which it invested in the purchase  aircrat and spare parts, as
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leet expansi n was an imp rtant necessity  r the airline. In its initial ew years  perati n,
it struggled  r bec ming a inancially str ng instituti n  the c untry.

1.1. Mission Statement

³As a symb l  nati nal pride, we aspire t be a ch ice airline, perating pr itably n
m dern c mmercial c ncepts and capable  c mpeting with the best in the Internati nal as
well as è mestic markets´ (www.piac.c m.pk/missi n&vissi n)

1.2.Y Vision Statement

³T be iercely c mpetitive, c nsistently exceeding cust mer expectati ns and be the ch ice
empl yer that embraces m dern techn l gy in all spheres  its activities´
(www.piac.c m.pk/missi n&vissi n).

1.3.Y Subsidiaries

Al ng with passenger service and air carg , PIA perates the  ll wing subsidiary services.

1.Y Speedex c urier Service delivers d cuments and parcels  any size, t the d rstep
 its cust mers.
2.Y Engineering Service, an established aircrat maintenance and repair c mpany that
pr vides s luti ns t the aviati n industry.
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1.4.Y Ownership composition of PIA

The irm is 87% state wned, with the remaining 13% held by private invest rs internal t
Pakistan.

Ownership
  

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1.5.Y ¦leet
S.No Type No. of Crafts
1 Airbus A310-300 12
2 ATR 42-500 07
3 B eing 737-300 06
4 B eing 747-200 01
5 B eing 747-300 05
6 B eing 777-200 06
7 B eing 777-300ER 03
Total 40
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1.6.Y Competitors
At d mestic level, PIA had been the nly airline  r ver 40 years, but in 1993 Aer Asia
Internati nal Ltd. was b rn and up t 1996, it had captured little  the d mestic market.
Presently the Air Blue and Shaheen Airline are the str ng c mpetit rs  PIA at d mestic
level. PIA is struggling t st p the gr wing market share  Air Blue and Shaheen Airline by
ering l w are perati n in d mestic perati ns and by expending the d mestic new
destinati ns.
On the internati nal r utes there are several airline c mpetit rs  PIA, s me  them are
Emirates Airline, Luthansa, Japan Airlines, Thai Airways, Saudi Airlines, Iran Air,
Malaysian Airlines, èrag n airlines and many m re that use the Pakistani airp rts as transit
stati ns.

èomestic Market Share






 
"$

$%
 
& & Y$ 



"$ $% & & Y$ 
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2.Y PIA Strate y


PIA¶s bjective is t irmly establish itsel as Pakistan¶s leading scheduled passenger and
carg airline thr ugh c ntinued impr vements and expanded erings  its valuable service.
Its strategy t achieve this is:
wY C mpetitive ares.
wY Industry-leading cust mer service.
wY Frequent lights n nati nal and Internati nal r utes.
wY L w perating c sts, addressing aircrat and equipment, pers nnel pr ductivity,
cust mer service c sts and airp rt access ees.
wY Taking advantage  the In rmati n Techn l gy.
wY Taking advantage  ge graphic imp rtance and
wY C mmitment t saety and quality maintenance (www.piac.c m.pk)
The c mpany perates a p licy  ering the reas nable ares available r m the industry.
The c mpany has launched its electr nic air ticketing system which makes passengers m re
c m rtable and save their time. The system als helps the airline t reduce expenses incur
r m perati n  b king ices in dierent l cati ns and the c st  agents.
PIA has changed alm st all  its ld crats with new B eing aircrats which reduced the
huge c sts spend n maintenance  dierent types  ld crats.

2.1. Corporate Social Responsibility

PIA is driven by the highest standards  c rp rate g vernance and s cial resp nsibility. As a
public sect r rganizati n and a business leader, PIA believes in building str ng relati nships
with cust mers, partners, empl yees, and the c mmunities in which it perates. The
rganizati n's values are exempliied in a range  c rp rate initiatives designed t impact
p sitively n the lives  multiple stakeh lders. PIA practices active c rp rate citizenship
thr ugh s cial services, supp rt  r n n-pr it rganizati ns, medical services  r empl yees,
the pr m ti n  sp rts, and educati nal initiatives.
PIA has instituti nalized the practice  g d g vernance by establishing a C rp rate S cial
Resp nsibility C mmittee. (www.piac.c m)
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3.Y Strate ic Analysis


Macr envir nment and internal envir nment  a irm play very imp rtant r le in achieving
c mpetitive advantage by a irm. T identiy and examine the strengths and weaknesses
al ng with pp rtunities and threads and t analyze the strategies  PIA, I shall apply the
 ll wing strategic analysis t ls which we have already studied.
3.1. P?STL? Analysis
This t ll ks at macr envir nment  a irm. The macr envir nment aects the irms at
maj r level there re it is necessary t analyze the aect  p litical, ec n mic, s cial,
techn l gical, legal and envir nmental act rs n the irm.

3.1.1.Y Political
The p litics  S uth Asia and Middle East in general and p litics  Pakistan in particular
are very imp rtant  r PIA as its maj r destinati ns are l cated in these regi ns.
The p litical situati n in Pakistan is n t n rmal. In the hist ry  Pakistan hardly ne r tw
g vernments have c mpleted their tenures. P litical instability in the c untry is result 
intererence by n n p litical  rces. The requently changing p litical envir nment suer
irms perati ns especially the g vernment wn rganizati ns. The new g vernments change
the t p level management s n ater taking the charge  the g vernment and app int pe ple
with p litical backgr und n t p level  rganizati ns with ut testing the required
educati nal qualiicati n and relevant experience. PIA is the m st p litically aected
rganizati n as every new g vernment app inted their wn pe ple wh turned a pr itable
rganizati n int a l ss bearing ne which st pped its gr wth and started j urney t wards
decline.
Any change in g vernment regulati ns  a c untry aect the irms perating within
b undaries  that c untry. In 1993, with the deregulati n  aviati n industry in Pakistan
pened up pp rtunities, all wing airlines r m private sect r t c mpete with PIA n
d mestic and internati nal r utes. Since 1993, 4 private wned airlines have been established
t c mpete the nati nal airline at d mestic as well as internati nal r utes and the share 
PIA in d mestic r utes reduced t 48% r m 100% in these seventeen years alth ugh the
internati nal market share was n t aected t much.
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War n terr r is an ther p litical issue which seri usly aected the rganizati n¶s
pr itability. T urists and businessmen changed their minds and selected ther c untries  r
travel and invest and PIA l st a large number  their internati nal passengers resulting in
decreased seat reservati n and the rganizati n suered with c nsiderable l sses n
internati nal perati ns
3.1.2.Y ?conomic
The ec n mic c nditi n  Pakistan is in a critical p siti n. Ec n mic gr wth is very l w as
c mpare t ther c untries. The inlati n rate is very high. F reign investment is als
unsatisact ry. As PIA is perating r m Pakistan, its internati nal perati ns are aected by
exchange rates.
Oil prices are an issue  r all airlines. A huge am unt is being paid as uel c st. Increase in
il prices aected the inc me  PIA as well. Fuel is the main c mp nent  airline
perati ns. The il prices are increasing at a higher rate aecting the PIA¶s pr itability.
These all ec n mic drawbacks seri usly aect the per rmance  PIA.
3.1.3.YSocial

J    


  
 
 J  
   

                

     
         
     
             (Khan, Omar
2004). The s ciety  Pakistan is m derate in accepting changes. The s cial changes in
Pakistan are gradually taking place. èue t gl balizati n and advancement in in rmati n
techn l gy, the pe ple accept s cial changes ccurring thr ugh ut the gl be. There are tw
standards in ur s ciety, ne is the upper class s ciety and the ther is l wer level s ciety
which is in maj rity.

The maj rity preers t use alternate l w c st means  r traveling which aects the gr wth 
the rganizati n.
Pakistan is an agriculture base c untry and a huge p pulati n is inv lved in agricultural
activities and they d n t get t many pp rtunities  r travelling. The business class is very
limited in size s PIA has limited chances t expand its perati ns at d mestic level.
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3.1.4.YTechnolo ical
The internet has enabled PIA t keep c sts l w by all wing cust mers t b k thr ugh its
website rather than thr ugh an agent. H wever, the web is less attractive  r PIA expansi n
in east d mestic, as access t in rmati n techn l gy is limited t certain areas and acility
pr viding activities l wer the ther devel ping c untries in the regi n. This situati n is likely
t change in the l nger term.
PIA wh lly depends n ther agencies  r exchange  their lder crats t new nes. It als
requires a huge inancing system which is very diicult t it because  the ec n mic
c nditi n  the c untry as well as its wn inancial p siti n. PIA is unable t buy new
techn l gy as it c sts t much. F r this purp se the rganizati n appr aches t inancial
instituti n that pr vide unds n their wn c nditi ns which reduces the pr itability as the
rganizati n spends a huge am unt n paying interest.
3.1.5.YLe al
The inv lvement  g vernment in PIA is backed by legislati n. The g vernment uses these
p wers delegated by legislati n in their wn interest which aects the per rmance  the
airline.
An ther drawback is its centralized system which is a time c nsuming practice and the
imp rtant acti ns cann t be taken immediately. èelays due t this centralized system create
pr blems  r sm th perati n  the airline and it causes huge l sses and the rganizati n
als l ses available pp rtunities due t l ng decisi n making pr cess.
As PIA perates internati nally, the laws  dierent c untries als aect the rganizati n¶s
per rmance. The laws restrict the PIA¶s perati ns t s me destinati ns and it als pays
dierent taxes at internati nal airp rts imp sed by th se g vernments which reduce the
pr it margin  the rganizati n.
3.1.6.Y?nvironmental
The main envir nmental issue acing PIA is that  p licies  rmulated by legislati n ab ut
greenh use emissi ns. The airline industry aects the envir nment negatively by increasing
air p lluti n and n ise p lluti n. PIA uses regi nal airp rts t reduce the envir nmental
eects n busy airp rts situated in main cities  the c untry. Furtherm re PIA has als
intr duced waste disp sal plan which helps in reducing p lluti n in the c untry. PIA has
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acquired c mparatively l w n ise new m dels  B eing aircrats (737,747 & 777) t reduce
the n ise p lluti n.
3.2.Y Porter Generic Strate ies
There are three main types  strategy identiied by P rter in this m del: dierentiati n, c st-
 cused and niche. A dierentiati n strategy inv lves charging higher prices  r eatures that
add value t a pr duct. C st- cused strategies inv lve reducing the eatures  a pr duct t a
minimum t keep c sts l w s prices are minimized. A niche strategy inv lves pr viding a
highly-specialized pr duct t a narr w market, p ssibly with the additi n  c st r
dierentiati n elements.
PIA has applied tw  these three strategy ne is c st- cused and the ther is dierentiati n
strategy. T intr duce a c ncern  r the business envir nment w uld inv lve inc rp rating a
eature t the pr duct that d es n t reduce c sts but dierentiates it, p tentially adding value
and enabling PIA t charge higher ares pr ducts. It is n table that, in c ntrast, airlines with
several ranges have struggled t achieve success with all  them. PIA has attempted t
intr duce elements  dierentiati n n several ccasi ns, with a Business Class and the
element  l w c st with ec n my class as well as special packages n dierent ccasi ns.

3.3.Y ¦ive ¦orces


P rter's Five F rces the ry is useul in a discussi n  PIA because it l ks at h w inluences
aect c mpeting c mpanies within an industry.
3.3.1.Y £uyers
Be re 1993 the PIA was nly airline at d mestic level. The cust mers had n alternate
ch ices at that time. PIA ers their pr ducts t a large number  individual cust mers. This
kind  market will n t have p werul individual buyers, all wing PIA t dictate its terms.
As cust mers' purchase decisi ns are made n the basis  price, rather than eatures, the
p ssibility  ailing t pr vide an acceptable pr duct is minimized. Ater 1993 the scenari
changed as g vernment all wed private sect r t enter the airline industry which intr duced
an envir nment  c mpetiti n. PIA¶s igures  r punctuality and light c mpleti n are n t
t much better than c mpetit rs especially n internati nal r utes. it is unclear whether it is
still per rming better than c mpetit rs perati nally. The igures are helped by its strategy
 utilizati n small l cal airp rts with less air traic, hence minimizing the chance  delays.
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The c st- cus strategy means that intr ducing eatures  r a min rity gr up is n t c nducive
t making pr it; the business m del depends n a standard pr duct.
3.3.2.YSuppliers
PIA is a service pr viding rganizati n and m stly depends n ther rganizati ns t ulill
its needs. All airlines are subject t changes in il prices: c mpetitive advantage is gained
thr ugh h w they appr ach this change.
PIA's ther key suppliers are airp rts and aircrat makers like B eing. It has the advantage
ver c mpetit rs that the g vernment struggles t settle issues with these suppliers and
neg tiates with the suppliers.

3.3.3.Y?ntry to the market


Entering the airline market is dependent n having the inances t set up an perati n,
p ssibly requiring invest r supp rt. H wever, perati ns can be gr wn gradually, thr ugh
initially leasing r buying a small plane. In the case  PIA it is quite dierent because it was
initially initiated be Mr. Ispahani in the name  Orient Airlines decades ag . PIA was
established with ull inancial supp rt  g vernment.
It is harder  r airlines t gain a grip in certain r utes that are particularly c mpetitive. PIA¶s
inancial diiculties were caused largely by aggressive c mpetitive strategies r m ther
internati nal airlines existing in the market  r decades.
Undercutting c mpetit rs t  rce them ut is c mm n in the l w-c st carrier market. While
l wer prices may b st passenger numbers, the acc mpanying decrease in pr it is n t
sustainable l ng-term. This limits a very c mpetitive appr ach t the largest c mpanies wh
can a rd the impact  sh rt-term l sses t establish new r utes. PIA is n t in a c nditi n t
 rmulate this type  strategy. It cann t bear even sh rt term l sses made t expend the
cust mer base because it is suering already huge l sses.
3.3.4.YSubstitutes
PIA is acing a str ng c mpetitive envir nment in d mestic and in internati nal r utes.
Pr ducts (airares) ered by the c mpetit rs are substitutes  PIA pr ducts. Price sensitive
cust mers shit r m PIA and use alternate means  transp rt. At d mestic level the
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c mpetit rs prices are l w then PIA. The ther alternate means include Pakistan Railways
and a huge netw rk  inter-city c ach service which enj y r m their l w c st services.

3.3.5.YRivalry
PIA is in a particularly str ng p siti n in the market due t str ng supp rt  g vernment.
The slight dierences between PIA¶s strategy and th se  c mpetit rs pr vide them with
advantages, particularly in d mestic perati n. PIA can take advantage  g vernment
supp rt by pr viding c mpetitive prices t d mestic passenger by av iding rills n sh rt
haul r utes and by reducing delays as well. Furtherm re the c mpetit rs in d mestic
perati n are n t t much str ng but the p licies  PIA help them survive in the market.
PIA has l st its market share t rivals n c st basis. There is n any pr per system t c ntr l
perating c sts which are higher than th se  c mpetit rs.
3.4.Y SWOT Analysis
SWOT Analysis help in determining the strengths and weaknesses as well as the threads and
pp rtunities  a irm.
3.4.1. Stren ths
PIA is the largest airline in Pakistan with m re the 800 daily lights. It has devel ped a ast
nline ticketing system which enables cust mers t reserve their seats with ut visiting the
airlines b king ices. This has helped the cust mer in saving their time and the
passengers preer t travel with PIA. PIA has als successully included latest techn l gy in
all systems.
PIA is the nati nal airline and has brand rec gniti n thr ugh ut the c untry. Pe ple eel
pride by lying with PIA. PIA als has a superi r perati nal structure with talented crew
and m dern high techn l gy aircrats and access t all g vernment wned airp rts.
The g vernment ully supp rts during inancial crisis which is a c mpetitive advantage 
PIA ver its c mpetit rs. PIA has a vast netw rk in d mestic and internati nal destinati ns
which helps in gr wing its perati n d mestically and internati nally and n w PIA perates
gl bally, c vering the entire d mestic landscape and internati nal destinati ns spread ver 4
c ntinents. PIA has established its wn training center. The PIA Training Center is a leading
airline training instituti n that delivers the highest standards  aviati n instructi n. The PIA
Training Center pr vides quality training t PIA's pil ts, engineers, air h stesses, and t
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empl yees  ther ass ciated PIA divisi ns which helps the rganizati n t reduce training
c sts. Furtherm re the g vernment has all wed nly PIA t perate Hajj lights thr ugh
which PIA earns a c nsiderable revenue.

3.4.2.YWeakness
PIA t tally depends n the g vernment  r  rmulati n  its p licies. The strategies are
designed at t p level. With the change  g vernments, its p licies are als changed which
makes it unable t sustain l ng term c mpetitive advantage. An ther weakness  PIA is its
centralized system. In this system all decisi n are taken at t p level and the middle
management d es n t take part in decisi n making. As result the decisi ns s metimes ail t
address the pr blems r due t delays in decisi n making the rganizati n suers huge
l sses.
the high am unts  debt are als a weakness  PIA which makes the rganizati n unable t
make additi nal investment in the business and it is a big bstacle in expansi n  its
business which reduces its gr wth rate c mpare t the c mpetit rs. Changes in il prices als
directly aect n the revenue  PIA
3.4.3.YOpportunities
PIA has a vast netw rk  destinati ns in Pakistan and utside the Pakistan. It is an
pp rtunity  r it t serve all destinati ns and utilize its m dern aircrats t generate revenue
 r the c untry. . In the c untry there is a gr wing demand  l w are air transp rt and PIA
has pp rtunity t ulill this demand by m bilizing its res urces.
The gl balizati n has changed the taste  pe ple and they preer t travel by air t save time.
By taking right decisi n PIA may expand its perati n netw rk and generate revenues. Free
trade agreement has enhanced the m bilizati n  g ds between c untries. PIA can take
advantage  this pp rtunity by expanding its carg service.
PIA als enj ys cust mer l yalty. The rganizati n may build str nger l yalty by
intr ducing packages  r requent travelers.
3.4.4.YThreats
As PIA is currently bearing inancial l sses, it manages its inancial requirements thr ugh
receiving l ng term l ans r m inancial instituti n. The high interest rates are critical  r
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PIA as it pays already a large am unt as interest. Increase in interest rate results in inancial
crisis. An ther threat is high inlati n rate which may result in reduced number 
passengers. The increasing il rates may suer the airlines perati ns and its revenue
because the airlines t tally depend n il t c ntinue their perati ns. The c st  uel is an
essential expense  r all airlines. Rise in il prices may suer PIA¶s perati ns in resulting
huge decline in revenues.

4.Y Conclusion
Fr m the discussi n ab ve, it is clear that PIA is then nly nati nal airline  Pakistan. It has
devel ped a strategy dierent r m th se  its c mpetit rs, and that these dierences
directly and indirectly c ntribute t its c mpetitive advantage. PIA has reas nable
pp rtunities al ng with threats. But the requent inv lvement  every g vernment in t p
management  PIA resulted in disc ntinuati n  its strategic p licies. An rganizati n
earning average pr its ive years ag is n w bearing huge l ses.
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èomestic Network of PIA

C urtesy: www.piac.c m.pk


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C urtesy: www.piac.c m.pk


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References
1.Y Annual Rep rt  PIA 2007
2.Y Omar J. Khan, Lyn S. Amine (2004) New Internati nal Business Perspectives n
Pakistan. Thunderbird Internati nal Business Review, V l. 46(5). 493±519 Published in
2001 by J hn Wiley & S ns, Inc. Retrieved n January 06, 2011 r m www.wiley.c m
3. Michael H. M ett (2001) Thunderbird Internati nal Business Review, V l. 43(2) 303±
313, Published in 2001 by J hn Wiley & S ns, Inc. Retrieved n èecember 12, 2010
r m www.wiley.c m
3.Y www.piac.c m
4.Y Business Rec rder, 2011
5.Y Hal yearly Rep rt  PIA 2010
6.Y PIA Annual Rep rt 2004 (èirect rs Rep rt) Retrieved n January 06, 2011 r m
www.piac.c m