PIA Case Study by AhmadRizwan1


									Introduction and Background:
Pakistan International Airlines faced many problems, staff was on strike, no operations were
taking place and passengers were suffering. Staff demands the scrapping of a proposed
codesharing agreement with Turkish Airlines that would see PIA relinquish most of its routes to
Europe and the United States and the firing of managing director Aijaz Haroon.
At least 30 flights had been cancelled since the strike began, including flights to Britain, the
Middle East, Europe and Asia. Five pilots were recently suspended and around 70 PIA
employees forced into compulsory leave last month for "agitation" against management plans, a
senior company official told AFP on condition of anonymity.
The proposed sale of routes would mean PIA relinquishing lucrative routes to Germany, Italy,
the Netherlands, Spain and US destinations New York and Chicago. Last year, PIA asked the
government to write off losses of $1.7 billion to save it from looming bankruptcy.
Airline spokesman Mashhood Tajwar played down the fallout, saying the situation at Islamabad
airport, where a backlog of planes unable to take off was building up, had "started to improve".
He said about 5,000 passengers had been affected by cancelled flights. According to PIA
managing director Haroon, management was working to restore flight operations as soon as
possible. However, Sohail Baloch, president the Pakistan Airlines Pilots Association, said neither
the management nor the government had invited it for talks.
"Our agitation will continue until the management declares its agreement with Turkish Airlines
null and void, and that all employees who have been suspended are reinstated," said Baloch.
Dozens of PIA staff blocked a road outside Islamabad airport, causing traffic mayhem and
denouncing the Turkish proposals. "I've been waiting here for the last four hours. PIA people say
the flight is ok, but the security people aren't allowing us to proceed to check-in," said passenger
Gulfraz Majeed. "Once I reach Britain, I'm going to sue PIA and demand compensation. They're
bound to give us a hotel and alternate flight, but they haven't bothered to offer us a single cup of

Organizational History:
After a short period of independence, Pakistan decided in 1951 that it needed a national flag
carrier airline; the government of the country accordingly established Pakistan International
Airlines (PIA) in this role, and on 25 May ordered three examples of the Lockheed L-1049C
Super Constellation four-engine airliner as the new operator's initial equipment. PIA flew its first
service with the Super Constellation on 07 June 1954 on the route linking Karachi and Dacca
(now Dhaka), which were the main cities of the country's western and eastern halves, of which
the later is now Bangladesh. On 1 February 1955 the airline flew its first international service,
between Karachi and London via Cairo. On 11 March 1955 PIA formally took over the assets
and routes of another Pakistani operator, Orient Airways, which had in effect been part of PIA
since October 1953.
Modernization of the fleet used for domestic and regional operations was now a matter of high
priority, and in May 1956 the airline placed an order for three examples of the Vickers Viscount
815 four-turboprop airliner, the first of which was accepted in the UK on 2 January 1959 for a
debut in revenue earning service on the service linking Karachi and Delhi on 31 January 1959.
Further enhancement came in 1961 with debut of the Fokker F-27 Friendship twin-turboprop
type, of which the first was received on 3 January 1961. The availability of the F-27 for
operation on the routes linking the major Pakistani cities freed the DC-3 fleet for use on new
services to the remoter parts of East Pakistan.

PIA was the first Asian airline with pure-jet aircraft, in the form of a Boeing 707-321 machine
leased from Pan American World Airways for use from 7 March 1960 on the London service
that was extended to New York on 5 May 1961. On 21 December 1961 PIA began to receive its
own jet aircraft when it took delivery of the first of three Boeing 720-040B aircraft, whose
availability permitted the operator to enlarge its international route network. In 1963 PIA called
off its New York service, but on 29 April 1964 became the first non-communist airline to operate
a service to the Chinese city of Shanghai. n 1971 East Pakistan secured its independence as
Bangladesh, and PIA ceased operations to that country. The airline's fleet and network were both
reduced, but the service to New York was resumed in 1972.

The first wide-body airliner used by PIA was the McDonnell Douglas DC-10-30 three-turbofan
type, which the airline first received on 1 March 1974. A pair of Boeing 747-282B four-turbofan
aircraft (initially leased from TAP Air Portugal) followed in April 1976, and on 3 March 1980
the airline accepted its first Airbus A300B4-203 two-turbofan type. In 1985 PIA became the first
Asian operator of Boeing 737-300 aircraft, a total of six Boeing 737-300s were ordered to
replace ageing Boeing 720B aircraft. PIA received first of its six Airbus A310-308 aircraft on 25
June 1991 from Airbus Industrie.In the first half of the year 1999, PIA acquired five Boeing 747-
367 aircraft (initially leased from Cathay Pacific) for its European and North American
destinations. In 2002 PIA signed an agreement with Boeing Company for the biggest aircraft
deal in the history of PIA. After a dry spell of 10 years, PIA ordered new aircraft - 8 wide-body
aircraft from the Boeing 777family for its long-haul flights. The airline accepted delivery of its
first Boeing 777-240ER aircraft at Boeing Field in Seattle, USA, on 29 January, 2004. On 2
November, 2005, PIA signed an agreement with Avions de Transport Regional (ATR) of France
to purchase seven brand new ATR 42-500 turbo prop aircraft. These new 48-seater ATRs will
replace PIA's ageing fleet of Fokker F-27s on airline's domestic and regional route network. On
May 31, 2006, PIA received its first ATR 42-500 in Toulouse, France. The remaining six ATR
42-500s were delivered to the airline between 2006 and 2007.

The Airbus A310, Boeing 747 and Boeing 777 are currently the mainstays of PIA's medium- and
long-haul operations, with feeder, local and regional services provided by the Boeing 737-300
and ATR 42-500.
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
      and Luton, initially these also operated to Amsterdam, Basel and Cologne. If used
      properly this can become a winning strike for PIAC.

     Founded                                     1946 (as Orient Airways)
     Hubs                                        Jinnah International Airport (Karachi
     Subsidiaries                                    Roosevelt Hotel

                                                      Scribe Hotel

                                                      Skyrooms (Private) Limited

                                                      PIA Investments Limited
     Fleet size                                  43
     Company slogan                              Great People to Fly With"

                                                 "Come Fly With Us"
     Parent company                              Ministry of Defence (Government of Pakistan)

     Key people                                  Managing Director
                                                 Capt. Nadeem Khan Yousufzai
                                                 Deputy Managing Director
                                                 Mr. M. Salim Sayani
                                                 Acting Director Finance & CFO
                                                 Mr. Nayyar Hayyat
                                                 Director - Corporate Planning
                                                 Mr. Shahnawaz Rehman
                                                 Acting Director - Human Resource,
                                                 Administration & Coordination
                                                 Capt. Saleem Ahmed
                                                 Director - Engineering and Maintenance
                                                 Mr. Maqsood Ahmed
                                                 Director - Flight Operations
                                                 Capt. M. Ilyas Malik
                                                 Acting Director - Airport Services
                                                 Mr. S. Aijaz Mazhar
                                                 Acting Director - Flight Services
                                                 Mr. Mamoon-ur-Rashid
                                                 Director - Information Technology
                                                 Mr. Irshad Ghani
                                                 Director - Marketing
                                                 Mr. Imran Ahmed Khan
                                                 Director - Precision Engineering Complex
                                                 AVM Amin Ullah Khan
                                                 Director - Procurement, Logistics and Food
                                                 Mr. Khalid Iftikhar
                                                 Director - Standards & Special Projects
                                                 Capt. M. Junaid Younus
     Website                                     www.piac.com.pk

Scenario Building:
Pilots, engineers, staff and the entire workforce has formed a joint Action committee against the
management. Entire workforce felt threat to be downsized from the organization because of
proposed sale of routes to Turkish Airlines. They have issues with Captain Mohammad Aijaz
Haroon (Managing Director). They wanted to fire the MD from his post and cancel the
agreement with Turkish Airlines. All over Pakistan PIA staff joined hands for one purpose.
Workers protesting against the issue were beaten by people sent by MD. Workers occupied the
Airport and raised slogans “go MD go”. Workers have immense enthusiasm that they can let
down the MD by their unity and struggle. When Government involved into the situation they
said no future talks would be held until the government promised to kick out the MD. The reason
of PIA falling down both financially and administratively due to MD. “Under MD, the deficit in
the PIA has risen to Rs88 billion and the entire airline is heading towards a complete disaster.
The situation aggravated when the Defence Ministry served termination notices on president and
secretary-general PALPA and the PIA served termination notices on five pilots.

However, the Sindh High Court suspended the termination notices served on president and
secretary-general PALPA. a spokesman for PIA said that the national flag carrier airline had
been suffering a loss of Rs300 million every day due to the protest by the employees. PIA
Managing Director Ejaz Haroon told a private channel that there was no agreement or MoU with
Turkish Airline. “We are ready for talks with the stakeholders to resolve the issue,” he said.
He said PALPA has some misunderstandings regarding the document despite the fact that the
administration has time and again said that there was no agreement between the two airlines.
The MD said the administration cannot take any decision under the pressure of any union, adding
that it had to take decisions in the interest of its employees.

The employees of PIA protested against the agreement with Turkish Airline. The national flag
carrier has suffered a loss of Rs 1.0 billion due to the ongoing protest. all international and
domestic flights were cancelled as the protesters blocked all entry and exit points. The enraged
employees said that the protest would continue till cancellation of agreement with Turkish
Airline and dismissal of MD PIA.

Agreement with Turkish Airline is not in interest of Pakistan because PIA has to face financial
loss due to the agreement. They are demanding from the Government to end its agreement to
give air routes to Turkish Airlines and the resignation of Managing Director of PIA Aijaz
Haroon. The government team did not admit the demand to remove the PIA Managing Director.
At least 25 to 30 PIA flights scheduled to take off from Benazir Bhutto International Airport
were said to have been cancelled.

PIA has faced a huge loss as near about 810 million Pakistani rupees because they will have to
refund the payments to passengers. In Lahore, protesters blocked a road leading to the main
entrance of Allama Iqbal International Airport for an hour or so, forcing passengers to walk to
the airport, carrying their luggage with them.
Business Analysis:
PIA Key Financial Data
     Ticker:                     PIA                         Country:            PAKISTAN

   Exchanges:                   KAR                    Major Industry:          Transportation

                                                        Sub Industry:               Airlines

    2009 Sales                                              Employees:              18,036
                    (Year Ending 31 Dec, 2010).

    Currency:             Pakistan Rupees                Market Cap:            6,704,742,482

 Fiscal Yr. Ends:             December               Shares Outstanding:        2,576,744,828

   Share Type:                 A Share               Closely Held Shares:       1,877,656,017

PIA is striving to become the global airline of choice for customers; it is still predominantly
catering to the Pakistani Diasporas worldwide. In this backdrop, the Corporation is present in all
the major markets and covers destinations most frequented by Pakistanis.

A brief overview of the overall results of operations for the year ended December 31, 2010 is
given below:

                             Particulars        Year ended December
                                                   2010        2009
                                                  (PKR in millions)
                       Turnover – net            107,531      94,563
                       Operating Cost &         (106,989)    (91,897)
                       Other Income                2,269          644
                       Exchange Loss              (2,091)       (6,502)
                       Financial Costs            (9,300)       (9,244)
                       Loss Before Tax            (8,580)      (12,434)
                       Taxation                  (12,205)        7,486
                       Loss After Tax            (20,785)       (4,947)
Business Status
PIA 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

SWOT Analysis

   1) Strengths
PIA 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.   Experience curve advantage

   2) Weakness
PIA has following weaknesses

               a.   Corruption is at level high and lack of accountability
               b.   High amount of debt
               c.   Uncooperative and non-professional crew
               d.   Hold of union (Union has higher than average power)
               e.   Inefficient use of resources (Human and Technological)
               f.   High influence of Government officials on rules and regulations
               g.   Overstaffing in last 10-12 years

   3) Opportunities
PIA has following opportunities

               a.   Ability to have maximum route and fleet reach
               b.   Demand for low cost airlines is growing due to global crisis
               c.   Shifting customer trend to national airline due to racism in various countries
               d.   Industry recovery for airlines is predicted in couple of years
               e.   Better training programs

   4) Threats
PIA 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. Fluctuating fuel prices
              g. Terrorism
              h. High debt can affect its resource purchasing

Management & Culture:
The seven characteristics of organizational culture in PIAC are given below

                 CHARACTERISTICS                                    PIA
                 INNOVATION AND RISK TAKING                         Low
                 ATTENTION TO DETAIL                                Low
                 OUTCOME ORIENTATION                                High
                 PEOPLE ORIENTATION                                 Low
                 TEAM ORIENTATION                                   High
                 AGGRESSIVENESS                                     Low
                 STABILITY                                          High

The above table show that PIAC focuses more on the goal rather than means to achieve it.
Therefore, employees are not highly valued in PIAC. The characteristics and values form the
organizational structure which determines the behaviour of employees and the effectiveness of
the organization are following;
     Why PIA facing Problems?
     What are the reasons of strike?
     Why entire staff want to fire the MD?
     Is there any need to change the management?
     In your views, how to get back workers on their work?

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