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PIA/OFF ARSALAN ALI

72
ND
EC
AEROSPACE DEPARTMENT
COLLEGE OF AERONAUTICAL ENGINEERING, RISALPUR.
Email: wingman.zero@yahoo.com
Cell Number: 0345-905-5961
Number of words: 2,657

TOPIC:
PIA: CAUSES OF THE CURRENT STATE & EFFORTS NEEDED TO
RESTORE ITS SAFE & EFFICIENT OPERATIONS













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CONTENTS

1) INTRODUCTION
a) ORIENT AIRWAYS, 1946
b) CREATION OF THE STATE, 1947
c) THE MERGER, BIRTH OF PIAC

2) CAUSES OF THE INSTABILITY, PI ISSUES
a) ADMINISTRATION
b) FINANCE
c) MARKETING/SALES
d) SERVICE DELIVERY
e) PERSONNEL
f) SERVICE DEVELOPMENT
g) CONTINGENCY PLANNING
3) EFFORTS NEEDED FOR IMPROVEMENT













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1. INTRODUCTION
The national airline of Pakistan has been struck hard with calamities all through its history. The
ever aging fleet, corrupt administrations and poor employee skill rating have annexed the incompetency
of PIA to such an extent that it looks almost impossible to revert to the course of prosperity. The fleet
appears to be lost in the skies with thousands of passengers aboard.
a) ORIENT AIRWAYS, 1946
The very early traces of the creation of the Corporation can be dated back to the days when
Pakistan was not even an autonomous state. With the dream of a piece of land right at hand, in 1946,
Muhammad Ali Jinnah realized the need for an airline network for the materializing country. An
American writer and aviation pioneer Anne Morrow Lindbergh said, Good communication is as
stimulating as black coffee, and just as hard to sleep after. Therefore, for the accomplishment of such
an ambition he called upon the help of an industrialist Mirza Ahmad Ispahani to develop a flag carrier for
the nation. With this, an airline called 'Orient Airways', registered in Calcutta, was formed on 23 October
1946.
b) CREATION OF THE STATE, 1947
Though, even the thought of a state of their own seemed audacious to the critics at first, with
the continued struggle and the sheer determination of the people, in 1947, hard work and diligence of
the Muslims of the subcontinent earned them a piece of land for which they had been striving for since
their downfall. This creation was just the beginning of a new constant struggle that the people had
embarked upon themselves, whereby, the infant state had to develop the infrastructure required for its
sustainability and growth. Soon, policies and rules were laid down. Building the every bit of the country
was underway. One prime component for the country to acquire then was an airline major, which could
suffice the needs of commercial air transport. Though, Orient airways were established to meet the
demands of the newly born country, it lacked an overall gesture to hold the title for the National Flag
carrier. Therefore, work began on framing a new body which could meet the demands of the state.
c) THE MERGER, BIRTH OF PIAC
After independence, certain relief operations were conducted by the Orient Airways by
dedicating its flights for the mass movement of people across the borders. With the settlement of the
migrants underway, the Government of Pakistan before long realized that the composure of the Orient
was failing economically. Consequently, a proposal was floated that Orient Airways should merge into a
new national airline. Pakistan international Airline was, therefore, established in 1954 after merger of
Orient airways. PIA started its regular service on May 10 the same year. It was formed into a corporation
on 11 March 1955. The PIAC act was incorporated on 18th April 1956 under the PIAC Act 1956.

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2) CAUSES OF THE INSTABILITY, PI ISSUES
John Egan said, The absolute fundamental aim is to make money out of satisfying customers.
Although the aim of the governments has always remained to make PIA something of a more than
capable Corporation, still the other side of the picture has yet to be unraveled. The more intriguing part
of the story is that despite all the good reasons, PIA has still not been able to flourish like its
competitors. In a nut shell, PIA is in such dire financial straits that it is threatened with liquidation every
now and then and all this just because of its long list of losses and liabilities which exceed its assets by
huge margins. To picture some of the causes which have hampered it to become one of the elite
airlines, we discuss its various PIs, the Performance Indicators.
a) ADMINISTRATION
Leadership, planning and monitoring are three basic areas where nurture is most effective for
an industrys embellishment. Unfortunately, golden circles of elite politicians, executives and high-status
gentry have failed the ambitions of making PIA a boon for the nation. Elting E. Morison said, The
executive exists to make sensible exceptions to general rules!. Very likewise, appointments of high
ranking officials, lower staff and the corporations internal affairs in PIA have been massively
compromised by the continuous intrusion of unhealthy elements. Corrupt MDs and ironic lobbies of the
people in charge have not left us with any margin of hope.
b) FINANCE
The stories of the financial inconsistencies are rather more horrific. Regrettably, the vicissitudes
of the airline have been choked up with the bad part, with the good part almost fading away as if it
never was at the first place. Whether it be the days of Orient airways or the story after the merger,
financial mess has always accompanied.
During early 70s, Violent uprisings in East Pakistan led to the formation of the independent
state of Bangladesh and scuttled the flights that had connected Pakistan's two widely separated wings.
This effectively cut PIA's traffic in half, lowering overall revenue generation. Even then the most
lucrative efforts from the corporation can be traced back to these early years. Although Pakistan went
through hard times, the airline was substantiating evidences that it had got the mettle to stand out.
Immediately, Routes were redrawn and the fleet was trimmed in response to PIA's loss of territory. PIA
was also doing a brisk cargo business which was proving better and generated revenues in good
amounts. After losing money in 1971-72, PIA showed a profit of $3 million in 1974. Its ancillary services
to other airlines brought in $4 million a year, while its annual budget was about $200 million. Operating
profits reached $5.5 million in 1975-76 on revenues of $206.6 million.
In contrast to PIA's earlier growth periods, much of the fleet seemed outdated by 1995. PIA was
making profits, but was hampered by certain government mandates, such as artificially low domestic
fares, high jet fuel taxes, and a ban on serving or selling alcoholic drinks. A couple of years later, the
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government would increase duty on aircraft and parts as well as airport fees. These initiatives, in one
way or another, disabled the airline to boom at its full possible scale. PIA posted its losses for the fiscal
year 1991 due to the spike in insurance premiums and fuel prices caused by the Gulf War. It lost an
estimated $40 million on domestic service alone. In the late 1990s, former Prime Minister Benazir
Bhutto was accused of illegally giving out jobs at PIA during her second term in office, between 1993 and
1996.
PIA lost Rs.11 billion in 2000. Management expected the company to break even by the end of
2001. By July 2001, PIA had a Rs.20 billion financial package from the government. U.S.-led campaign
against the Taliban in bordering Afghanistan resulted in most foreign airlines canceling their scheduled
flights to Pakistan. Twenty-nine of them closed their offices in Pakistan in September 2001, after the
alleged 9/11 attacks by Taliban. The air campaign against Taliban forces also affected PIA negatively, due
to the closing of seven of Pakistan's airports and declaration of its airspace as a war zone. This was
simply a catastrophe, and with the show of the airline already on bailouts, disaster was inevitable. PIA
lost Rs.2.09 billion on sales of Rs.47.11 billion in the year 2001.
More recently, in 2006, Pakistan International Airlines was threatened with bankruptcy yet
again because of its monthly losses rising to all-time highest values of more than Rs.1 billion and its then
current liabilities exceeding its assets by more than Rs.20 billion. At the outset, the impact of fuel cost
has been crippling, for there was a 74 per cent hike in fuel prices since 2004, the cost per barrel going up
to an unprecedented and unanticipated $78. Thus, fuel was the main killer and has stunted the airlines
turnaround that would have been much speeded up, were it not so. In short, industry wide average of
fuel cost as a part of total revenues of an airline is 31 per cent, whereas the fuel cost of PIA as part of its
total revenue was a whopping 49 per cent.
Further losses were incurred at the expense of the airlines maintenance department, when on
November 2, 2006, it had to temporarily suspended Boeing 747 operations to Europe and switched to
smaller Airbus A310 and Boeing 777s in the aftermath of concerns expressed by European aviation
authorities. Revenues were hit hard, with the image of the airline overwhelmed and torn apart.
2010 has not been different so far, with the airline still struggling at large to meet the challenges
at hand. Pakistan International Airlines Corporation announced earnings results for the first half of 2010.
For the period, the company reported with total revenues up at Rs. 7.4 billion ($88.4 million), a 17.6%
rise year-on-year. Overall profitability suffered due to increase in fuel costs, unsustainable interest costs
and the inflationary effect on expenses. For the second quarter specifically, the nations largest carrier,
posted a wider loss after fuel costs rose. The net loss was Rs.4.37 billion ($51 million), or 1.79 rupees a
share, in the three months ending on June 30, widening from Rs.3.35 billion, or 1.56 rupees, a year
earlier. Airline spent Rs.10.9 billion on fuel during the quarter, 74 percent more than a year earlier. The
price of jet fuel in the Middle East rose 35 percent to an average of $87.22 a barrel in the three-month
period, from $64.84 the year before. Pakistan International fell 1.8 percent to 2.20 rupees on the
Karachi Stock Exchange; with the shares tumbled 16 percent this year.

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b) MARKETING/SALES
Peter F. Drucker said, The aim of marketing is to know and understand the customer so well the
product or service fits him and sells itself. A satisfied customer is the best business strategy of all.
Whether it is the ticketing scandals of the early days, or the fuel costs of the present days, sales have
continued to remain on the shorter side with reference to marketing department. The efficiency and
creativity of the marketing section never boasted revenues. With huge dependence of worlds leading
corporations on the marketing departments, PIA is definitely lagging very far behind.
c) SERVICE DELIVERY
The success of any business depends on the way it treats its customers. Whether you are in a
service-oriented industry or not, your relationship with your customers will reflect on the company's
bottom line. In the late 1990s, there were huge complaints of inefficiency and poor customer service.
PIA had lost international stature and was considered by some to be primarily an "ethnic carrier"
devoted to ferrying expatriates home, rather than a competitive choice for tourists or business travelers.
W. Edwards Deming said, Profit in business comes from repeated customers; customers that boast
about your project or service, and that bring friends with them. Gruffly, PIA has lost the battle in this
area as well. To put icing on the cake, complaints are even raised against the flight stewards for their
deliberate circumvent attitude, who are considered as the Flying Nurses. It is utterly ridiculous but then
this is how a paradox is defined!
c) PERSONNEL
The aircraft to employee ratio in PIA is indeed very large, and this has affected its efficiency
greatly. For illustration, the worldwide employee to aircraft ratio is 130 employees per aircraft, but PIA
has a huge ratio of 410 people per aircraft. Downsizing has been a constant course of action for the
airline. Imbalance between the remunerations offered by the airline to people of different sections
seems utterly biased. For instance, foreign airhostesses hired by PIA are getting exorbitant salaries.
Likewise, pilots are waged heavily for driving the jets through to the destinations.
Besides, PIA employees are as old as the PIA aircraft. Moreover, the ever growing inductions on
personal relations and political ties have ruined the overall performance of the airline. Recently, Airline
has fired 200 employees for presenting fake degrees at the time of hiring. It speaks of the credibility of
the Public relations and the Human Resource departments.
d) SERVICE DEVELOPMENT
Henry Ford, a popular person and the founder of Ford Motor company said, It is not the
employer who pays the wages. Employers only handle the money. It is the customer who pays the
wages. The inefficient staffing, the political postings, the inept maintenance (as observed by the EU and
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other mishaps internationally), the Multan Fokker crash, and the never-ending massive bail-outs at tax-
payer expense, all point to a failing airline.
e) CONTINGENCY PLANNING
A Corporation stretching to such multi-million dollar finances and employees ranging above
19000 is likely to have some backup plan in case of some monetary disruption. But PIA has yet to
develop this basic notion of self-sufficiency. Government bailouts and awkward downsizing reflects that
the airline has no contingency plan what so ever. Authority and responsibility, planning and monitoring,
budgeting, creativity, investment appraisal, assumptions, high risk/high probability, failure points,
setting trigger points, action plan, risk profile, team building, communication, training, role play, impact
analysis etcetera all these elements do not seem to render any importance to the airline at all. Let
alone, contingencies are not even in the books!

3. EFFORTS NEEDED FOR IMPROVEMENT
Its always better to light a candle than to curse the darkness. Although the wounds are deep,
still they havent been reduced to something as hopelessly incurable altogether. Remedial measure and
dramatic changes are needed in order to change the calamitous situation of the airline. Some of the
areas that can be addressed for the purpose of improvement are:
PRIVATIZATION:
Like PTCL, A possible privatization plan for the airline can be launched, agreed upon by both the
government and the airline itself so that the both the stakeholders can be equally benefited.
BETTER HR UTILIZATION:
Like Peter Schutz said, Hire character, Train skill. The blood and sweat of the workers should be
dissipated efficiently. More resourceful Human Resource department can handle these requirements
more efficiently. Influence of foreign elements in the internal affairs of airline must be stopped
immediately. Hiring of the personnel should be backed with full scale credible evidence of the personnel
technical skills. Training of the staff should be made on regular basis so that they can be addressed with
the new ways and tactics of the trade. Skilled pilots and engineers should be put to their ultimate
abilities since they are the ones who actually lay their hands onto the aircraft itself.
SMALL INDUSTRIES:
Like the early days of airlines, Indigenous production of in-flight requisites should be boasted.
This will in turn create chances for small industries to improve on their scales, and provide cheaper
items to the airline. Instead of buying in-flight items from foreign companies, small industries within the
realm of the airline itself should be setup so that extra price demand can be cut off.
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ATTRACTIVE OFFERS:
Lucrative and attractive offers, like the domestic night coaches of the 80s, should be hovered
with a solid marketing sweat so that people are dragged back to the PIA counters. Besides, the current
air-fares maintained by the airline are way above the level, considering its service standards. The fares
should be made consistent with the services offered. Any amount charged from the customer should be
perfectly feasible so that long term customer relation can be endorsed.
SPONSORSHIPS:
Corporate sponsorships, like the Planetariums and Horticulture, and relationship with strong
multi-national companies can hugely benefit the airline. Money-spinning subsidiaries should be cheered
like the PIA Hotels, Midway House and Skyrooms.
It is never too late to redeem. Out of the current instability, still, I believe that the Skytrax can be
forced to reconsider PIAs 3-star rating. All this can really happen if the sheer management skills and
tactical approach to the ongoing situation of the airline can be rejuvenated. Situational awareness,
marketing sense, a credible fleet of aircraft and a responsible group of employees can still nurture PIA
into one of the greatest names in the business.














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REFERNCES:
www.bloomberg.com
www.lbis.com
www.wikipedia.com
PIA Annual report 2006
www.answers.com
www.pakistaniat.com
www.airlinequality.com
www.pakpoint.com
www.eturbopr.com
www.ciitronian.com