Report On The Management Of P.I.A

FINAL REPORT

ON

PAKISTAN

INTERNATIONAL AIRLINES

GROUP MEMBERS I.D No.

MUHAMMAD BILAL KHAN 2642

DANISH RASHEED 2670

MUHAMMAD NOMAN 2524

BINISH JAVED 2624

IRFAN ALI 2691

ABOUT AUTHORS

We are Muhammad Bilal Khan, Danish Rasheed, Muhammad Noman, Benish Javed

and Irfan Ali. We have been given a project to study and analyze the role of

management in any organization. We are students of MBA in Iqra University in the

year 2008. Presently we are getting through our 2nd semester from IUGC and we are

assigned to prepare this report.

Every project needs a lot of research, work, physical involvement and a great amount

of personal interest in making it as informative as it can be.

The terms of information technology is used in this report and also used appropriate

language to make this report effective.

ACKNOWLEDGEMENT

We would like to express our emotions to pay a lot of thanks to the personalities who

have been very co-operative throughout making of this project.

At last, we would like to thanks our family members, our teacher and friends for their

support in preparing report as well as other we have shared together.

TABLE OF CONTENTS

1. INTRODUCTION.

2. VISION, AIM AND OBJECTIVES.

3. ROLE OF MANAGEMENT IN ACHIEVING AIMS AND OBJECTIVES

THROUGH PLANNING AND MONITORING.

4. SOME OF THE PROBLEMS RECENTLY FACED BY P.I.A

MANAGEMENT.

5. MANGEMENT OF RESOURCES.

6. EVALUATION OF MANAGEMENT.

7. S.W.O.T ANALYSIS.

8. RECOMMENDATIONS.

1- INTRODUCTION

Pakistan International Airlines (PIA) is a national airline, 87 percent of the shares are

held by the government and 13 percent held by public. P.I.A is operating passenger and

cargo services covering eighty-two domestic and foreign destinations. Established in

1955, PIA has a vast experience in the airline industry of Pakistan with a large fleet of

aircrafts. The fleet size is forty.

PIA is a huge corporation with more than 18,000 employees. This organization is divided

into following departments: Human Resource and Administration, Marketing, Corporate

Planning, Information Services, Finance, Flight Services, Flight Operation, Engineering,

Procurement and Logistics, Customer Services, Training and Development, Quality

Assurance.

The hierarchy of the organization follows, with the Chairman at the top and directors of

departments reporting to him. The structure is centralized with the top-level management

making the decisions.

2 - VISION , MISSION STATEMENT AND VALUES

PIA's vision is to be a world class airline exceeding customer expectations through

dedicated employees, committed to excellence.

MISSION STATEMENT

Employee teams will contribute towards making PIA a global airline of

choice:

Offering quality customer services and innovative products

Participating in global alliances

Using state-of-the-art technologies

Ensuring cost-effective measures in procurement and operations.

VALUES

Customer Expectations

Convenience, Caring, and Competitive Tariff

Service

Personalized and Courteous

Innovation

Cherishing New Ideas, Translated Into Action

Cohesiveness

Respect for Individuals, Teamwork, and Effective Communication

Integrity

Business Ethics, Accountability, and Transparency

Reliability

Loyalty and Consistency

Safety

Passengers, Employees, Environment, and Health

AIMS AND OBJECTIVES :

Like any other organization P.I.A real goal is to expand, grow and earn as much revenue

as they can through providing good services to the customers.

3 -ROLE OF MANAGEMENT IN ACHIEVING AIMS AND

OBJECTIVES THROUGH PLANNING AND MONITORING.

Planning acts as a base for achieving the aims and objectives in PIA. Through planning

the management set their goals and develops the ways through which they strive to

achieve these goals. Through out our research we found that PIA does not depend upon

the plans and strategies of a single department but the management of each department

depends upon the coordination with other departments as well. In other words the

management framework is interdependent.

For instance, If the Research and Development Department of PIA plans to expand their

business in a new unserved area than they grasp information from their Marketing

Department because Marketing Department has network of agents all around the world

through which they will find out how many passengers are available in the target market,

than the Research and Development will coordinate with Fleet Planning to purchase a

fleet of certain number of seats according to the number of passengers (provided by

Marketing Department). In the next step of coordination, the fleet planning will contact

the finance department to know that whether they have sufficient funds for the purchase

of new fleet or they will have to hire on lease. Finally with the coordination of the board

of directors the plan gets approved and than strategy is made according to the

requirement of the plan.

The stated goals of P.I.A is different from its real goals, during our study we found the

real goals of P.I.A, which is very similar to other organization. The real goal of P.I.A is to

grow, develop and expand. Now how they achieve their real goals through planning and

monitoring.

They divide their real goals into sub goals that are objective, now to achieve these sub

objectives planning and monitoring is done at every level of P.I.A.

Basically research and development department is in continual process of identifying new

unserved areas. To serve these unserved areas they make certain plans. For instance,

Under planning R & D department consider demographic dynamics, class of target

market, growth expectation etc. Keeping in mind these variables they plan how to

achieve these objective, for accomplishing these plans proper strategies are established.

Then recommendation on the basis of this is forwarded to marketing department.

Now the marketing department analyze this recommendation either they are feasible or

the resources available to them are quite enough or not to go for this recommendation.

After answering yes to these questions or if they want to proceed further then they plan

how to achieve these targets.

Then the marketing department starts promoting P.I.A in the target region through its

different marketing tools. For instance, they have their agents’ network to promote P.I.A,

they use print media as well for the promotion, and they have hording within the airport

premises of the target market.

On the other hand fleet management is engaged in acquiring the crafts according to the

requirements of target market. For instance, they analyze with help of R & D and

marketing, that how many passengers will be available in each flight and what will be

number of flight each week to and from the destination? According to this information

they arrange the air crafts.

The fleet management is engaged in the most crucial business of P.I.A i.e. weather to

purchase or hire fleet on lease. For short-time or seasonal impacts or quick requirements,

fleet management hire the air crafts on leasing from leasing companies. But if the plan is

for long term requirements the fleet manager decides to purchase fleet from

manufacturing companies like BOEING and AIR-BUS. Purchasing or hiring an aircrafts

is a very sensitive issue because each air craft has minimum value of $ 200 million or

above, so if the prediction of R & D department and marketing is wrong than the

planning of fleet management will be wasted as well. In other words it will be a loss of

more than $ 200 million here it is important to mention that P.I.A is having a core

competency over its competitors because P.I.A have purchased BOEING – 777 which

have the record of longest flight in the world. It was the biggest purchase decision in the

history of Pakistan when P.I.A purchase eight Boeing – 777 crafts in 2002 and it is the

honour for P.I.A than it was the first airline in the world to purchase Boeing – 777 so, the

planning of fleet management depends upon long term and short term requirements. So, it

is obvious that there are short terms and long term planning’s for both accordingly.

Now the fleet manager will consult the finance manager to know that either finance

department have sufficient capital or they will have to go for loan. All these decisions are

made with the coordination of M.D of P.I.A who is continuously monitoring the entire

activities of the management. If P.I.A have sufficient capital than they will go for it

immediately otherwise the finance department will consult the banks and other financial

institutions for loan on short term or long term according to the size of loan and future

revenue and liquidity predictions. Once the finance is arranged the fleet management will

survey the manufacture and then the deal is signed for the purchase of fleet. The previous

fleet is continuously monitored and purchase decision is made keeping in view the

monitoring reports.

Here it is important to mention that the fleet planning will prefer the crafts having same

company engines because it’s more economical.

Once the deal is signed the H.R manager starts to find the crew, pilots and resources

required for operation of flights because there is no surplus crew available. The H.R

manager forecast current and future requirements. Monitoring is done in H.R department

to evaluate the performance of the crew, pilots and ground personals to identify whether

there is any action required for improvement or not.

After the co-ordination of all departmental managers a meeting is conducted with the

M.D of the P.I.A in which all the pros and cons of the objective and goals are measured.

This meeting shows the P.I.A decentralized at top level and then managers implement

their plans and decisions at lower level to achieve the organizational goals.

4 - SOME OF THE PROBLEMS RECENTLY FACED BY P.I.A

MANAGEMENT

PROBLEM NO: 1

All the airports of the country presented a deserted look when the national carrier PIA

grounded all its fleet on November 2, 2007. The main reason that led to the situation was

that more than 800 engineers of PIA had collectively gone on sick leave following a

protest campaign against the administration's reluctance to increase their salaries. They

had also asked for improvement in workplace conditions, privileges such as flight

allowance, rest allowance, fulfillment of promises made by the PIA management and the

elimination of a 'faulty' evaluation system.

The management had to led down in front of the engineers as they had to increase their

salaries because there was no way out for the management due to the reason that without

engineers PIA could not carry on its operations.

RECOMMENDATION:

The staff should be hired on merit basis rather than favourism and skilful and

competent staff should be given reasonable salary packages and benefits according

to the international standards to motivate them as well as to avoid such issues.

PROBLEM NO.2

Operating on the non-profitable routes also called socioeconomic routes is also a

constraint for PIA management because due to government intervention the management

have to deploy fleets on such non-profitable destinations.

As a result of which PIA is bearing a loss of Rs Four crores per day i.e. Rs. 18 Lakhs per

hour. For instance Chitral, Gilgit, Skardu, Gwadar, Panjgur, Turbat, Pasni and Jiwani are

non-profitable routes for PIA as the fares on these routes are less than the fuel

consumption.

RECOMMENDATION:

We have concluded that PIA management should negotiate with the government officials

and brief them through the fact and figures, either to increase the fares on these routes or

must convince the government that PIA management will decide where to fly to avoid

socioeconomic routes.

PROBLEM NO.3

PIA's real test in competing with private sector airlines began after the entry of Air blue

in the market, in the year 2005. Comprising mostly the old management staff of PIA, Air

blue started operating in domestic routes with its new aircraft. Air blue has put the

national flag carrier into trouble with its innovative products and aggressive marketing

strategy. The airline introduced e-ticketing system for the first time in the country, which

was ultimately followed by other airlines including PIA.

On the other hand business class clients prefer gulf-airs rather than PIA due to gulf

unmatched services.

Competitors are continuously giving tough time to the PIA with their better services and

operations. The management is continuously trying to cope with the competitors by

offering different sort of customer services. For Instance, the management of PIA

expanded the scope of Air Express and launched a full-fledged courier service, and PIA

Speedex was initiated. Initially it was serving in Karachi, Lahore, and Islamabad,

afterwards the management decided to expand Speedex to other 12 major cities as well.

Today, PIA Speedex offers premium courier services in 70 cities across Pakistan, and

shipments are collected from and delivered to the doorsteps of our customers.

The management has started a unique service of pick and drop service to the customers to

compete with the competitors.

PROBLEM NO.4

PIA has a ratio of 440 employees per plane, as against the international average of 150 to

250 employees. This is because of the external intervention by the government officials

to recommend their own people to be adjusted in PIA which is one of the root causes of

huge financial losses to the organization.

RECOMMENDATION:

The management should planning to deal with this issue by considering the option of

downsizing of surplus employees and retaining skilled personnel.

5- MANGEMENT OF RESOURCES

We have emphasized upon the major resources that the P.I.A possesses which are:

FLEET RESOURCES :

P.I.A possesses 40 fleets. The management of P.I.A endeavors to efficiency utilizes the

fleet resources but due to the government intervention and other external forces the

management is unable to utilize the resources. For instance, the fleet having a seat

capacity of 120 passengers carries only 100 passengers from one point to another. Due

to inefficiency of management the revenue of 20 seats is gone to waste.

RECOMMENDATION:

We recommend that P.I.A should deploy the fleets according to the seating capacity

or P.I.A can deploy two small air crafts for the same destination to avoid the loss.

CARGO RESOURCES :

P.I.A cargo services are one of the main sources of revenue. As we have analyzed

that the management is properly utilizing the cargo resources. The management

makes sure that each cargo flight is taking a maximum amount of consignments. So,

we don’t think that there is no need of recommendation as management is handling it

perfectly.

TECHNOLOGICAL RESOURCES :

In today dynamic environment technological developments are playing a vital role in

progress of any organization. P.I.A is using different sort of software’s in its different

departments to help managers in making accurate decision. For instance, fleet

management uses TRAP, FP5 software. Marketing department uses the computerized

data base management system powered by CAA (civil aviation authority) for improving

marketing decision. P.I.A has launched SMS services through which customers can get

there flight schedule by sending single SMS on 7422.

Decision are made on the basis of facts and figures, the software’s provided by Boeing

company is specially designed to process information of passengers and fleet which helps

in making decision making and future perditions.

RECOMMENDATION:

As this Boeing software was implemented by P.I.A in 1998 so, there is need to

implement latest software developed by AIR BUS and biometric scanners.

HUMAN RESOURCES :

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 will be seen soon. 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. Amid a highly

competitive environment, PIA needs to motivate its employees. For this purpose,

‘Promotion Boards’ are held twice a year. ‘Extra-mile Awards’ are handed over to the

competent employees. An ‘Employee Suggestion Scheme’ gives employees an

opportunity to be vociferous regarding their issues. The three best suggestions are given

monetary awards ranging from Rs.5000 to Rs. 20,000. Efforts are made by PIA’s

management to ensure that employees are exposed to information in a manner which

minimizes uncertainty amongst them so that they are not disillusioned. However,

information through grapevine disturbs this process at times.

RECOMMENDATION:

Employee unions are basically formed for the purpose of empowering employees and to

make sure that the rights of the employees are given appropriately but it has been

experienced that the PIA employee union is engaged in some mishaps with the

organization which was seen couple of months back when the employees went on strike

for the purpose of increasing their salaries. So the employee union should be banned in

PIA as the H.R management is already committed to take necessary steps for the

improvement of employee benefits.

INFORMATIONAL RESOURCES :

Basically the major sources of information for P.I.A is I.A.T.A (international air traffic

authority), which provide information of current market trends, information about routes,

latest technological improvements. Another source of information is civil aviation

authority. Each department has a suggestion box where employees can drop any

suggestion.

RELATED DIVERSIFICATION:

1. P.I.A has used vertical back integration by becoming its own supplier by opening

poultry farms, which is not only catering the needs of P.I.A kitchen but also other

airlines.

2. P.I.A owns two international hotels one in NEWYORK and another in PARIS.

Both of these hotels are the resources of income of P.I.A. But unfortunately due to

current economic conditions of P.I.A, these hotels are mortgage with the

government of Pakistan for an amount of Rs. 50 billion.

According to the Managing Director of P.I.A this amount will be spent on new

business plan to add 30 new air crafts into P.I.A fleet during 2009 to 2011, while

new flights will be started to Barcelona, Seoul, and Madina etc.

3. P.I.A provides maintenance services to other airlines, which is a source of revenue

because each engine overhauling takes about eight to ten million dollars.

5 - EVALUATION OF MANAGEMENT

Throughout our study we found that P.I.A is possessing talented, experienced and efficient

managers. They have the capability and skills to cope with the difficult circumstances as we

have observed that under current economic meltdown the survival of P.I.A is a an example

of good management because P.I.A which is already facing the loss of 16.5 billion rupees

would have gone bankrupt, under such critical global economic crisis, but it is the

management of P.I.A who review their business strategies to deal with the economic

condition of P.I.A.

Decision making is one of the most crucial responsibility of managers it was the P.I.A

management who took the biggest economic decision in the history of Pakistan by

purchasing eight Boeing -777 against $ 1.5 billion.

But on the other hand P.I.A management is having certain loop holes. For example, the

management previously took decision to provide assistance to EMIRATES airline through

assisting their pilots, staff, crew and management. Now the EMIRATES is three times

bigger than P.I.A and their main competitor. What the P.I.A management should do is that

They should opt for EMIRATES shares when they were providing assistance to them so,

that the revenue generated by EMIRATES could benefit P.I.A as well.

It would be a good decision for future because currently the difficulties of financial

resources faced by P.I.A would be catered by that decision.

As far as marketing is concerned the management is not only up to the standard, the

marketing managers are utilizing the efficient marketing strategies to attract customers.

The fleet management is inefficient because the maintenance of aircrafts of P.I.A is not up to

the international standards due to which E.U (Europe union) has banned P.I.A fleets to take

their passengers which is causing a loss of 26.5 billion rupees to P.I.A .

The H.R management is also not functioning according to the set standards. It is due to the

external intervention i.e. government which recommends people on political basis, not on

merit. It is a dreadful fact that each fleet is possessing 450 crew but the international

standard is 150 to 200 crew per fleet. This is causing a severe financial loss to P.I.A

There are no proper strategies or policies for overcoming the internal organizational

conflicts to resolve them. Conflicts in power sharing are so common due to which resources

are gone to waste.

In a nutshell the management of P.I.A is facing certain constraints and according to the

manager of international affairs “It is the government of Pakistan that is creating hurdles for

P.I.A and expecting higher revenue as well”.

7- S.W.O.T Analysis

STRENGTHS

Boeing-777

PIA acquired Boeing-777 aircrafts in 2002 from Boeing Company, which have the

capability of taking long flights all around the world. PIA is having core competency

over its competitors and Boeing-777 is generating reasonable revenues for P.I.A.

Coming Back To Home

P.I.A officials admit that the airline is maintaining the traditional Pakistani

environment in its flights which attracts the local passengers within the country as

well as outside to chose P.I.A as its fleet. P.I.A recognizes it as the advantage over

its competitors like Emirates, Air-Blue etc.

Poultry-Business

P.I.A is engaged in the poultry business as well to provide fresh meat to its

In-flight kitchens to avoid the low quality meat. Not only this but other airlines

also consult P.I.A for this purpose.

Hotel Business

P.I.A owns number of hotels within the country as well as outside the country

which are considered as the strength of P.I.A to generate revenues.

WEAKNESSES

Attitude Problem

P.I.A is facing obstacles due to rough attitude of its in-flight staff. Most of the

passengers opinion about P.I.A staff is that they do not behave according to the

standards set. Than “Why Come Fly With P.I.A?”

Over Utilization Of Fleets

P.I.A is losing its customers and business because it uses aircrafts more than the

life of these aircrafts which becomes dangerous. Recently E.U banned P.I.A due to

this reason due to which P.I.A suffered a loss of 25.6millions.

Inefficiency In Bilateral

P.I.A can increase its revenues by successful bilateral negotiations with other

countries because these countries have the advantage over P.I.A because they take

more number of flights than P.I.A does, due to in-efficiency of bilaterals with

these countries.

Over-employment

According to the international standards the number of crew on the aircraft during

flights should be 150 to 200 but on the P.I.A flights the number of crew is 400 to

450 which causes severe loss to the airline in terms of finance because maintaining

such number of people on the flight is nothing but loss to the airline.

OPPORTUNITIES

Purchase Of Fleets On Discount

In the current global economic conditions most of the airlines have delayed their

orders with BOEING and AIR-BUS due to financial losses. It is the right time for

P.I.A to purchase these delayed orders from manufacturers because manufacturers

can be inspired to deliver the fleets on discount rates as these manufacturers do not

want to retain their orders that are delayed by other airlines.

New Markets

There are several countries in which P.I.A is not making its flights. In fact in these

markets P.I.A can earn much more revenue. For instance P.I.A can deploy its

BOEING-777 on long routes which may include Barcelona, Seoul, and Madina

etc.

Sale out of Old Crafts

Currently there is a golden opportunity for P.I.A to sale out its old aircrafts

because currently the dollar has fluctuated to its peak rates, so the earnings should

be utilized in betterment of financial position of P.I.A.

THREATS

Rapidly Changing Environment

Just like other organizations P.I.A is under continual threat of environmental

changes. As P.I.A is engaged in the global business it has to take into account the

international environmental factors along with the local factors. Keeping in view

such variables the management has to abandon certain projects or delay them

which cause severe losses to the airline.

Competitive Environment

P.I.A was enjoying its monopoly recently but after the C.A.A has authorized

private companies to enter in the airline industry they are giving tough time to

P.I.A through their better services and innovative strategies.

Purchasing Power Of Customers

Due to increasing inflation rates in Pakistan the purchasing power of the customers

have been affected due to which the business of P.I.A is also affected which

results in declining revenue graph of P.I.A.

Global Economic Melt-Down

Due to the current global economic melt-down the liquidity of the airline has been

affected and P.I.A which is already suffering for survival is facing the problems of

liquidity i.e. lacking of enough reserves to pay its installment debts on the aircrafts

purchased previously.

Terrorism

Tourists are avoiding to visit Pakistan due to the terrorist activities in the country.

Most of the foreign countries have warned their citizen to avoid going to Pakistan.

This factor is a threat for the revenues of P.I.A as it has lost the customers outside

the country.

8- RECOMMENDATIONS

DECENTRALIZATION

PIA should decentralize is its structure that would lead to the easy management,

increased motivation, easy access to information and resolution of the conflicts (as they

would be resolved by the immediate manger time span would then reduced). Since

employees issues regarding their behavior would lessen, so it would ultimately lead to

more satisfied employees that would result in enhanced productivity of the organization.

EMPLOYEE EMPOWERMENT

PIA should make efforts towards empowering the employees that is going to lead to more

employee participation in the decision making process and also result in more employee

satisfaction and enhanced motivation. Apart from this, employees would feel more

independent to discuss the issues explicitly without hesitation. This would also enhance

team work process at PIA as quality team and cross-functional teams. The employees will

work with more commitment and dedication and every employee would work to his/her

fullest due to increased motivation. However, with empowerment comes accountability,

so it is suggested that while they empower their employees, there should also be a

“controlled check’’ on them to ensue the correct usage of power delegated to every

employees within their circumscribed limits.

OVERHEAD COSTS

PIA should also reduce its overhead costs that are it should mange its resources: labour

more effectively, so that with less input, more out put can be achieved and the saved

resources can be utilized in other areas such as introducing more training courses for the

employees so that the quality of the workforce could be increased. Hiring the services of

expertise can improve the efficiency of their services, so by saving the overhead costs,

they can utilize that money for the expertise services. So by analyzing the various

segments of the organization and making the right corrections.

TWO-WAY COMMUNICATION

The suggestions of the employees can prove to be very effective in improving the

operations as they are the ones who manage them. Therefore, a top-down approach

should be replaced with two-way communications. In this way, the employees would feel

motivated and valued as they would be included in decision-making.

IMPROVEMENT IN SERVICES

P.I.A should provide services according to customer’s need not according to

Pakistani/local culture in order compete with their competitors.

Properly train air hostess make them familiar with different foreign languages.

HIRING ON MERIT BASIS

P.I.A should remove all the employees appointed on political grounds, because most of

them are more like a burden on P.I.A expenditures as they are getting salaries for nothing.

On the other hand skillful and talented engineers should be paid reasonable salary

package to motivate them.

PROPER UTILIZATION OF FLEETS

What we have analyzed that P.I.A is using four engine plans even for the short roots like

Islamabad and Lahore. We recommend that the P.I.A should use two engine fleets for

short roots in order cut some maintenance cost.

Report On The Management Of P.I.A

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