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Preface This report has been prepared for the managers, supervisors and personnel associated with customer service skills at PIA. The report highlights the problems which PIA has been suffering from for the past few years. The report contains data collected from PIA employees and research journals. A hypothesis has been put forward and evaluated in the light of the factors indicated by the research. Recommendations to overcome the problems have also been presented. Executive Summary The following report will emphasize the importance of superior customer servicing as a viable model for enhanced brand equity, improved customer acquisition and long term retention translating into augmented growth. Inculcating a new organizational model emphasizing service relations and promoting a reinvigorated move to introduce operational efficiencies are firmly proposed. Keeping in mind the current turbulent period of PIA, rising costs, reduced customer loyalty and falling revenue growth, this report aims to provide a feasible solution to our ongoing woes.

Introduction Transportation sector is most important sector of any economy and aviation industry is major part of this sector. In Pakistan the transportation and communication sector holds more than 10% share in GDP (Gross Domestic Product). The aviation industry affects the other sector of the economy, e.g. the International Trade, tourism and socio-economic condition of the country. Pakistan International Airline dominates the major portion of aviation industry. PIAC was established in 1955 to conduct the domestic as well international operations. PIA currently occupies a dominant market share of about 69% of the total air transport in Pakistan. Its vast network covers all the major cities of Pakistan and a host of international destinations in the Middle East, USA, UK, and Canada. Due to a dearth of transit options in the domestic market, and a marked increase in regional air travel, PIA can gain a foothold by delivering better customer value, attracting new customers in the process. Satisfying customers by positioning them at the center of our value structure and augmenting this with a strong organizational culture catered to delivering superior service is the need of the hour. Purpose By rethinking the customer value proposition, PIA can effectively capitalize on its vast network and mature brand equity. The fact that PIA is by far the premier airline operating in Pakistan, with a large client base, extensive destinations and a large network, catering to our customers needs, beyond what is already being practiced could be the answer to PIAs problems. As the industry faces price pressures, increasing regulations, intense competition and market fragmentation, executing strong customer service initiatives has become central to surviving. Placing clients at the center of operations, and harnessing the benefits of this improved relationship is crucial to PIAs renewed growth. The proposal for a customer-centric companywide policy executed with proper planning, coordination and infrastructure has been highlighted in the report. Thus the need for a boundary spanning initiative including all control departments (flight operations, fleet management, and sales) has been presented. Problem Statement Despite a high market share, PIA has been suffering an operating loss for the past years largely because of high fuel prices, salary increases and growing maintenance costs. Hypothesis Can PIA increase customer retention, market share and effectively rebuild its tarnished reputation by implementing effective customer service mechanisms? Background Orient Airways was launched in October 1946. Orient Airways, together with the help of BOAC aircraft, which had been chartered by the Pakistani government, began relief operations and transport of people between Delhi and Karachi, the two main cities. Then, Orient Airways transferred its base in Pakistan and became an important link between Karachi and Dhaka, the two main cities of the two wings of Pakistan.
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Orient Airways was a privately held company with limited capital and resources. It could not grow and expand independently. It was then that the government of Pakistan decided to form a state-owned airline and invited Orient Airways to merge with it. The result of the merger was the birth of a new airline, Pakistan International Airline, through PIAC Ordinance in January 1955. The year 1955 also marked the inauguration of the fledgling airline's first scheduled international service to London via Cairo and Rome. PIA's focus was to serve the Pakistani community at large. The provision of transportation to expatriates has remained one of the foremost priorities of the national airline. Moreover, PIA earned substantial foreign exchange through international services, which it invested in the purchase of aircraft and spare parts, as fleet expansion was a grave necessity for the airline. PIA was the first airline to get certified (initial certification) on Safety Management System (SMS) by Civil Aviation Authority CAA - Pakistan. CAA Air Navigation Order (ANO 91.0032 issued in September 2008) binds all airlines operating in Pakistan to have SMS. Before the issuance of ANO, PIA initiated SMS awareness and implementation in July 2008. PIA was awarded initial certification on SMS on 27th February 2009 by CAA. Current Situation PIA'S current situation is not so good and its going beyond the crisis. Rampant faults regarding service staff indulging in unethical and illegal activities1. Although the safety procedures of PIA are thorough and rigorous, the general mismanagement of domestic airlines has a negative reflection on PIA as well2. We will be working on all these respective issues, so that feedbacks would be positive, and airline's name would be renowned worldwide for its services. Literature Review A range of researches have been published regarding the crucial link between improved customer service and marketing (Lehmann and Reibstein 2006; Srinivasan and Hanssens 2009), brand equity (Leone et al. 2006), customer lifetime value# (Farris et al. 2006), global customer management# (Yip and Bink, 2007), price (De Vany and Saving, 1983), and customer resource management (Winer, 2001).

Furthering the focus of research on approaches applicable to the airline industry in particular reveal many views. Emphasizing the importance of customers to PIA, viewing customers as assets should be the starting point of any organization wide strategy (Gupta and Lehman, 2003). By realizing the intangible value of each and every passenger, PIA can further its efforts to attract, retain and capitalize on specific customer segments (business travelers, haj & Umrah). Customer service goes along way in creating brand equity for the PIA brand. Although the methods of defining and valuing brand equity varies (Ailawadi, Lehmann, and Neslin 2003), it can be influenced by advertising, pricing, promotions, product innovations and market presence. Thus a concerted effort must be set in motion to allow for any improvements in customer service to translate into benefits for the organization. Expected waiting times, perceptions of faulty customer service and the existence of many alternative competitors further affirms the case for enhanced customer service protocols to endow benefits for the organization (De Vany and Saving, 1983, Allon and Federgruen, 2004). By focusing historically on safety,
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Currency smuggling bid foiled by Dawn: http://dawn.com/2012/05/22/currency-smuggling-bid-foiled-2/ PIA flight makes emergency landing in Karachi due to cracked window by The Express Tribune: http://tribune.com.pk/story/382634/pia-flight-makes-emergency-landing-in-karachi-due-to-cracked-window/

geographic reach, regulatory constraints and labor issues, the airline industry has shifted attention from achieving operational efficiency, translating to beneficial results for passengers (Doig et al, 2003). Findings A higher preference for air travel exists amongst domestic consumers of all socio-economic classes (SEC) surveyed (A1, A2 and B). This can be due to the precarious situation of the railway service and increasing unreliability of road networks and bus services. Respondents regard current services offered by airlines to be unsatisfactory. This also gives rise to the lower perception of domestic carriers in the minds of local customers. As incomes levels and SEC levels rise the demands of consumers increase. Thus it can be inferred that the higher the ability to pay, the more discerning the customer. An increasing number of individuals are using the internet to book their travels, which presents PIA with a strong position as www.piac.com.pk offers a complete web solution to online ticket booking, prices and payment. Attitude and friendliness of the staff has been highlighted as the major determinants of a desired customer experience. Of the onboard service requirements, cost effectiveness and cleanliness have been given the greatest importance by respondents. Thus, showing that improving operational efficiency leading to reduced costs and better services is the leading source of increasing customer satisfaction. Recommendations Our safety audits, management systems (SMS), health and safety services and emergency response planning services are up to date, hence the safety of our passengers has been ingrained in the culture of PIA. The fact that safety plays an important role in customer service for the airline industry (Appelbaum and Fewster, 2004), translates into an effective starting point for any renewed customer satisfaction initiative for PIA.

Increasing operational efficiency is no longer enough. These operational enhancements must translate into an improved customer service experience (Doig et al., 2003). On the ground this means drastically reducing flight delays, lowering number of bags misplaced, reducing aircraft taxi times, cutting the time it takes to dock the aircraft, refuel and clean it before each flight. These changes influence the passengers travelling experience and can also lead to an increase in customer retention, brand perceptions and the price they are wiling to pay, (Allon and Federgruen, 2007). Emphasizing the importance of customer service to increase the expected value of business from each customer, over his/her lifetime, PIA must emphasize the satisfaction of every passenger as the responsibility of each and every employee. Deviating from the traditional structure of our firm, we must consider adopting a business unit organizational structure. This enhanced structure has been adopted by various international carriers (SAS, Lufthansa, Air Canada, Singapore Airlines), and have many positive implications on the improved operations of the airline (Heynold and Rosander, 2006). The increased use of outsourcing services (catering, refueling), and greater competition from low cost carriers operating in the market have forced the global aviation industry to alter the traditional lines of control. Accommodating these changes, and allowing for greater emphasis to be paced where it is deserved, in offering better services, smooth operation of business units and furthering growth of diversified businesses
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(AirExpress). As is the case with business units in the manufacturing industry, members from all supporting units must also be accommodated. Thus, by placing catering, ground handling, maintenance, repair, overhaul and shared services under the service business unit, with a Chief Services Officer (CSO), can be the possible solution to PIAs current dilemma. I must be further emphasized that implementing this organizational model, will be a long term process, requiring strong leadership, the induction of change agents and radical action. A gradual shift will have to be initiated, with specific functions collaborating effectively to deliver better service. Recognizing the need for ground handling staff, catering employees and related unit employees to work together, each contributing to the larger effort to ensure happy customers. Conclusion PIA is the oldest, and currently the leading airline of Pakistan. I has around one half of the market share for domestic travels, and has established international routes as well. In the past, PIA was ranked amongst the top ten best airlines and has received different international awards several times because of its customer service and brand equity. Yet PIA is loosing out its potential because of poor customer care which in turn is damaging the brand name of PIA.

According to the research the one of the ways for PIAs survival is by resorting to its old ways of better customer care. Research and development needs to take place in the customer care area. The staff needs to be trained in this area so that they acquire the skills of becoming a better host. Coupled with this, motivation of the employees needs to be a high priority. Since airline business is part of a service industry whereby customers interact with employees directly, better employee motivation plays a vital role. This is important because customer experience depends on employees behavior, and employees behavior depends on the motivation provided by the firm. So in order to provide a quality customer service, PIA needs to motivate its employees as well. This is especially vital for the employees who are part of the crew, since the customers interact with them the most. Better on board experience will motivate customers to use the airline again. With increasing number of satisfied customers, PIA will be able to regain its image that it enjoyed in the past. This will help them gain more domestic market share, and they will also be able to regain their international market share.

References:

Ailawadi, Kusum L., Donald R. Lehmann, and Scott A. Neslin (2003), Revenue Premium as an Outcome Measure of Brand Equity, Journal of Marketing, 67(4), 1-17. Allon, G., A. Federgruen. 2007. Competition in service industries. Working paper, Columbia University, New York. De Vany, A., T. Savings. 1983. The economics of quality. J. Political Econom. 91(6) 979 1000. Farris, Paul W., Neil T. Bendle, Phillip E. Pfeifer, and David Reibstein (2006), Marketing Metrics: 50+ Metrics Every Executive Should Master. Upper Saddle River, NJ:Wharton School Publishing. G.S. Yip and A.J.M. Bink, Managing Global Customers: An Integrated Approach (Oxford: Oxford University Press, 2007). Lehmann and David J. Reibstein (2006), Marketing Metrics and Financial Performance, Marketing Science Institute Monograph. Leone, Robert P., Vithala R. Rao, Kevin L. Keller, Anita M. Luo, Leigh McAlister, and Rajendra Srivastava (2006), Linking Brand Equity to Customer Equity, Journal of Service Research, 9(2), 12538. Srinivasan, Shuba and Dominique M. Hanssens (2009), Marketing and Firm Value: Metrics, Methods, Findings and Future Directions, Journal of Marketing Research, 46(3), 293-312. Stephen J. Doig, Adam Howard and Ronald C. Ritter, The hiden value in airline operations, The Mckinsey Quarterly, 2003 (4) Steven H. Appelbaum, Brenda M. Fewster, (2004),"Safety and customer service: contemporary practices in diversity, organizational development and training and development in the global civil aviation industry", Management Research News, Vol. 27 Iss: 10 pp. 1 - 26 Sunil Gupta and Donald Lehmann (2003), Customers as assets, Journal of Interactive Marketing, 17 (1), 9-20. Winer R.S. (2001) A Framework for Customer Relationship Management, California Management Review, 43 (4), 89-105 Yael Heynold and Jerker Rosander, A New Organizational Model for Airlines, The Mckinsey Quarterly, May 2006

http://www.pakistaniaviation.com/Competition-In-Open-Blue-Skies.htm http://www.travels-agencies.com/airlines-in-pakistan/58-pia-history.html http://en.wikipedia.org/wiki/Pakistan_International_Airlines

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