Factors Effecting the Service and Financial Performance of Pia free essay sample

Corruption at its peak:14 Less technology advanced as compared to its competitors:15 Poor image:15 Lack of training facilities:15 SWOT Analysis of Pakistan International Airlines:16 STRENGTHS:16 LEADING MARKET POSITION:16 BRAND RECOGNITION:16 SUPERIOR OPERATING STRUCTURE:16 NETWORK PRESENCE:17 HUB AIRPORT AT KARACHI:17 EFFECTIVE USE OF TECHNOLOGY:17 WEAKNESSES:17 FORMULATION OF GOVT. RULES:17 HIGH DEPENDENCE ON PASSENGER REVENUES:17 DEBT:18 RELIANCE ON OIL PRICES:18 OPPORTUNITIES:18 HAVING THE MAXIMUM ROUTE AND FLEET:18 GROWING DEMAND FOR LOW COST AIRLINES:18 CUSTOMER LOYALTY:18 SHIFTING CUSTOMER NEEDS:19 INDUSTRY RECOVERY:19 THREATS19 HIGH INTEREST RATES:19 ACCIDENTS:19 STRONG COMPETITION BY AIRBLUE:20 INTEREST AND FOREIGN CURRENCY EXCHANGE RATES:21 DECLINE IN AIRLINE INDUSTRY:21 PEST ANALYSIS21 POLITICAL FACTORS:21 ECONOMIC FACTORS:22 SOCIAL FACTORS:23 TECHNOLOGICAL FACTORS:23 Recommendations and suggestions:24 Implementation of program:25 Human resources and administration department:25 Management issues:25 Marketing department:26 Modernization of fleet:28 Explore more market:28 Training and development department:28 Accountability:29 Finance:29 Benefits29 References31 Sites31 Journals, Reports, Magazines,31 Executive Summary In 1946, Pakistan International Airline was founded as Orient Airways. It provides transportation, cargo and courier services. Pakistan International Airlines serves at two levels that is Domestic and International Level. In comparison to the other Airlines which are operating in Pakistan at Domestic level, PIA expanded its networks to areas where other flights don’t fly. On the other side in international sector it is facing tough challenges in international market due to the lower fares which are offered by other airlines whereas it’s also facing competition on the routes to the Middle East and the Gulf. Due to less advanced technology, Poor Image, Over-recruitment, Nepotism and political involvement, Corruption PIA is facing financial crisis. Market share is being loosed in international and domestic market. The report is based on the current position of the PIA and problems which PIA is facing and solutions to the problems. The report is comprised of three parts. First part is about the introduction of Pakistan International Airline. The Second part tells about the problems which Pakistan International Airline is facing and further describing the problems. The third part of the report suggests the solutions to problem which PIA can apply for the better performance. In our report we did SWOT analysis and PEST analysis on PIA, and also expressed the market segmentation and market analysis of PIA. We have also studied activities in different departments of PIA. We have also gave some recommendations in order to restructure the organization by conducting interviews and briefly studied financial reports as well as their services offered by PIA. Introduction Brief History: Birth of a nation; An Airline: Air transport has probably never been more important to the development of a new nation than in the case of Pakistan. In June 1946, when Pakistan was still in the offing, Mr. Mohammad Ali Jinnah, the Founder of the upcoming nation, instructed Mr. M. A. Ispahani, a leading industrialist, to set up a national airline, on a priority basis. With his singular vision and foresight, Mr. Jinnah realized that with the formation of the two wings of Pakistan, separated by 1100 miles, a swift and efficient mode of transport was imperative. Despite wars and economic trouble, the carrier survived to grow. Orient Airways, a privately owned company, with limited capital and resources, could not be expected to 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 outcome of the merger was the birth of a new airline, through PIAC Ordinance 1955 on January 10, 1955. In addition to transport activities, Orient Airways had established the nucleus of overhaul and maintenance facilities and acquired trained pilots, engineers and technicians, measures which proved to be a great asset for PIA during its teething phase. PIA’s First International Service The year 1955 also marked the inauguration of the fledgling airlines first scheduled international service to the glittering, glitzy capital city of London, via Cairo and Rome. PIAs focus was, and continues to be, 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. On March 1960, PIA launched its first Boeing 707 jet service on the London-Karachi-Dacca, route which later proved to be very successful. This trail-blazing accomplishment resulted in PIA becoming the first Asian Airline to operate a jet aircraft, setting trends for the future. In 1961, the airline took on the mammoth task of initiating a cross-Atlantic service from Karachi to New York. By this time, PIA had placed orders for more new aircraft, which included Fokker F-27s, Boeing 720Bs and Sikorsky helicopters. Helicopter services in East Pakistan had gained momentum by 1962 and expanded to include Sylhet, Chittagong, Dacca, Comilla and Ishurdi. PIAs helicopter services carried over 70,000 passengers during the first year of operation Ushering In a New Era of Growth and Development PIA heralded the nineties by donning a bright new corporate identity. Old-timers may remember the flutter that the earlier green and gold livery had created when it was first introduced in 1974. However, in keeping with the changing times, PIA introduced a smart, sporty 90s look. The familiar PIA green was reinforced with moss green and pale blue stripes were incorporated into the new corporate identity. The stripes, a universal symbol of sport, highlighted PIAs active participation and sponsorship of a diverse range of national games. PIAs players have always been at the forefront of Pakistani Cricket, Hockey, Squash, Football, Chess, Bridge, Polo and Table-Tennis teams. The nineties also saw the expansion of PIAs massive Hajj and Umrah operations to Pakistans smaller cities, in addition to the major cities of Islamabad, Peshawar, Lahore, Quetta and Karachi. PIAs growth continues unabated and the airline now operates globally, covering the entire domestic landscape and international destinations spread over 4 continents. In a nutshell, About PIA: PIA, Pakistan’s flagship national airline has been an air travel pioneer since its inception in 1955. PIA has many firsts to its credits and continues to soar, ever committed to innovation and Rich customer experiences. With a fleet of younger airplanes, a crew dedicated to providing the highest standards of inflight service, and stellar management, PIA is an airline that’s going places. It is the 16th largest airline in Asia, opening scheduled services to 73 destinations throughout Asia, The Middle East, North America, Europe, as well as an extensive domestic network linking 24 destinations Financial Performance The following table gives the key financial results for 2011 along with those since 2004. The financial performance for FY 2011 continues to be a challenge with an after tax loss of PKR 26. 67 billion. This was preceded by six consecutive loss making years dating back to 2005. The airline did report a reduction of post tax losses of 83% in 2009 (compared to 2008) based on a reduction in fuel cost, comparatively stable exchange rate for the Pakistan Rupee and higher revenues. But in 2011 amp; 2010, losses again rose sharply compared to the previous years. The airline faces many challe nges to its profitability such as staffing levels and overall management issues. An employee count of 18,014 for a fleet of 40 aircraft  is clearly an area that needs to be reviewed. Revenues  | Year| Revenues (PKR in Million)| Profit/(Loss) (PKR in Million)| Employees (Ave. )| 2011| 116,551| (26,767)| 18,014| 2010| 107,532| (20,785)| 18,019| 2009| 94,564| (5,822)| 17,944| 2008| 88,863| (36,139)| 18,036| 2007| 70,481| (13,399)| 18,149| 2006| 70,587| (12,763)| 18,282| 2005| 64,074| (4,412)| 19,263| 2004| 57,788| 2,307| 19,634| The report for the first quarter of 2012  does not show any improvement. The after tax losses reported for the first quarter of 2012 are PKR 7. 81 billion as compared to PKR 4. 24 for Q1 of 2011. Revenue is also pretty much stagnant at PKR 26. 4 billion for the first quarter of 2012 compared with PKR 26. 18 billion for the first quarter of After hovering around the five and a half million mark for around 5 years, the passenger traffic rose to just under six million in 2011 while the passenger load factor went down from 74% in 2010 to 72% in 2011. Passenger Traffic  | Year| Revenue Passengers (Million)| Passenger Load Factor| Average Pa ssenger Stage Distance (Statute KM)| 2011| 5. 953| 72| 2,631| 2010| 5. 538| 74| 2,827| 2009| 5. 535| 70| 2,510| 2008| 5. 617| 71| 2,479| 2007| 5. 415| 67| 2,527| 2007| 5. 15| 67| 2,527| 2006| 5. 732| 69| 2,639| 2005| 5. 499| 70| 2,638| It is also interesting to note that for 2011, about 81% of revenue is from passenger traffic and only 5% from cargo. Another 7. 8% is from room food and beverage sales! The remaining 6% is from excess baggage, charter, engineering services, handling amp; related services, mail amp; other. Research Methodology We have conducted the research on factors effecting the service and financial performance of PIA. For that we have asked some question with relative department such as HR, Finance, Sales and marketing. After secondary data collection primary data is collected through questionnaire the method is used open ended questionnaire where concerned parties have answered them in form of comments and opinions. We have visited head office of Pakistan International Airlines at Islamabad Office. The respondent of our research were upper management staff of PIA. Our target population was upper management as PIA has a centralized structure so lower working staff has not allowed sharing data. INTERVIEW Interviewer Mehmood Rafique, Asad Bashir Interviewee Azhar jameel Bhutto, Ms. Kausar, Ms. Verda Designation Passenger Sales Officer, Marketing officer, Hr Assistant Organization Pakistan International Airlines (PIA) Interview Duration 60 Minutes Interview Session: Q1. Tell Something about PIA? Ans: PIA is the national flag carrier of Pakistan and the national airline operation passenger and cargo services around the world Its main hubs are Jinnah International Airport, Karachi, The Allama Iqbal Lahore and Islamabad Benazir International Airport Islamabad. Q2. Which Markets do you serve? Ans: PIA serves two markets Domestic and International. In the domestic sector it has outperformed itself by stretching its networks to areas. In the international market it faces severe competition, especially due to the fact that these international organizations are providing fares much lower than Pakistan international airlines. Q3. What is the current structure PIA is following? Ans: PIA is following centralized structure. Every decisions and policy changes is taken by Upper management. Q4. How do you give the value to customers? †¢Through pricing strategy †¢Through your services? Ans: Through both pricing strategy as well as services. PIA is the only airline which offers low rates for travelling to its potential customers. Q5. Do you empower employees to share their opinions by participating in the decision making? Ans. PIA does not empower employees in a way that they can raise their opinions. As it is centralized structure everything is decided by upper management. Q6. PIA hires contractual employees or permanent? Ans:PIA hires both contractual as well as permanent employees depends on the job requirement that either a candidate should select as contract basis or permanent. Q7. What is the corporate image of PIA? Ans: Yes off course PIA has a big network, and owned by Government, it has corporate image not at national as well as international level Q8. In Last five years did PIA adopt any technological advancement? Ans:PIA has adopted different enterprise system for technological advancement Like we have installed a new enterprise system ‘’Enterprise Recourse Planning’’. The outcome of applying this system is, it helped us to improve the efficiency of work due to which work load has been reduced and distributed. Q9. How many employees are currently working in PIA? Ans: Currently in PIA 27000 employees are working. Where it’s not a plus point that due to big network a lot of employees are associated with PIA. Management should consider this issue. Q10. What is the current sale of PIA? Ans:The current sale of PIA is 8. 2 billion only in Rawalpindi and Islamabad. Q11. What is the best quality of PIA? Ans: PIA’s best quality is. It gives the priority to its customers, to let them loyal with us though PIA faces lots of problem because our most of passenger is not educated so our team deals with love and care, no matter how much passenger harsh to our employees. With that there is no communication barrier with customers. Our team deals with them in a way customer feels convenient. But if we talk about employees perspective, then PIA’s best thing is allowances and benefits given to its employees. Q12. Which accounting standard is followed by PIA? Ans:We follow International Accounting Standard 35. Q13. What is your employees hiring criteria? Ans: First of all we select the eligible candidates CV’s then we send it to Karachi where regional officer decides which candidate should be call for interview. Then those who are selected we call them for entry test and in entry test general questions are asked after clearing test medical test is taking from candidates then finally candidates are call for interview. All positions will be filled by above average intelligence, integrity and good character candidates. * The standard of criteria will be determined by management of PIAC. * Person who is dismissed or convicted of an office shall not be eligible for any post. * Competent authority may relax the maximum age limit up to 10 years. * All appointments sh all be made on clearance certificate from police. * Permanent posts are not given by PIA, now posts are given on contractual basis. * Mostly contract extends from 1 to 5 years. Q14. What marketing channels are used by PIA? Ans:PIA use different marketing channels like we have our magazine that is updated every week. ________________________________________________ Problem Description: According to our research the company is having the problem in the following areas. The problems for Pakistan International Airlines include: Over Staffing: Pakistan International Airlines is a large organization with 18,043 employees. Its fleet comprises of 43 planes. It operating planes are just 33. It means round about 525 employees per plane. The industry average is being between 150-250 people. This describes the position of the company clearly. This drives the cost of the company further. De-motivated employees: Pakistan International Airlines is a company which is constantly going in loss. Higher number of employees and the company already going in loss de-motivates the employees. The employees do not feel secure themselves in the company and try to move to other successful organizations. Also certain issues such as centralized decision making and salary issues also de-motivate the employees taking their attention away from their job. Nepotism and Political involvement during recruitment and selection: Pakistan International Airlines being the government organization has the strong influence of the politicians and government officials. Reports say that Mr. Tariq Kirmani was appointed chairman PIA due to being a friend of Prime minister. Similarly Mr. Kirmani appointed his own friend Director MIS at a heavy salary. Selection and recruitment is not done on merit. Current deputy managing director is another example of this who was a pilot by profession and now deputy managing director still flies some hours a week to keep his license on. Lack of experience relating to aviation industry for the top management: Look at the background of former three chairmen of PIA. Mr. Tariq Kirmani was from PSO, Mr. Zafar Khan was from PTCL and Mr. Ahmad Saeed was from Service industry having no experience of aviation industry. What could they contribute to the organization with no such knowledge? Lapses in the management: The PIA’s management is ineffective to resolve and plan at the right time. Planes with damaged Nose Radome are grounded for consistent 9 days. For an Airline with cargo aircraft and a frequency of eight weekly flights to USA, such an unwarranted delay in procuring Nose Radome is amazing to say the least. New flights to America are thought to start but with American aviation industry there is no talk. Strikes by engineers happen due to the mismanagement and cause a great loss to the company. Million of rupees worth cargo off loading from A VVIP flight is another example of this. Government’s and Civil Aviation authority’ policies: Pakistan International Airlines has to pay a big amount as an expense on its borrowings from banks. Already being in such a big crisis, the company is getting no support in this regard like WAPDA is getting. Also civil aviation authority of Pakistan’ policies are hampering PIA a great deal. Pakistan International Airlines being a national carrier has to go to those routes which are going in loss. Routes such as, Swat, Bahawalpur, Dalbandin etc are called socioeconomic routes and PIA has to get to those routes despite of great loss. On these airports, airport staff is greater numbers as compared to passengers. The money which is received as for providing services to passengers is taxed by the government at a very high rate. Rising fuel prices in the World: There is been consistent rise in fuel prices in the international market. Fuel prices have impacted on almost every airline in the world. This has affected Pakistan international Airlines more than any other airline due to its aged fleet. New planes are fuel efficient as compared to old ones. In an airline normally 30-35% of expenses account for fuel expenses but in Pakistan International Airlines this number goes to 45-50%. Due to these factors PIA has to charge more fare to customers that’s dissatisfies the customers. Aged fleet: Pakistan International Airlines fleet has total 43 planes. Out of those 43, only 33 are operating at the moment. The average age of the fleet is 13 years which has become 13 years with the induction of 4 new planes. Previously it was 14. Due to aged fleet the fuel is consumed more and maintenance expenses are increase. Thus theses factors result in increment in expenses. Due to the aged fleet and maintenance problem PIA has to pay higher amount in terms of insurance cost. Maintenance problems: Beside having a large number of engineers, there is always been a question mark on PIA’s fleet maintenance. In 2010 European Union banned 20 out of 42 planes were banned from operating in Europe. This results a 4 billion Rs. loss to the company just from Europe’s segment to the company. This ban was imposed just due to the lack of proper maintenance. Corruption at its peak: Corruption is a sin that has hollowed Pakistani society bases. Like all other departments of our country corruption is at its peak in Pakistan International Airlines. Sale of Roosevelt hotel in Dubai is a clear example of it. The hotel was valued about 1 billion but it was sold only in 40 millions. The sale of PIA’s kitchen centre in Karachi is another example of this. There a profit making unit of the company was sold. It was generating great revenues for the company but was sold confidentially. Less technology advanced as compared to its competitors: PIA is competing with the airlines from all over the country especially with the Middle East airlines which are coming in with heavy investment. Its competitors such as Emirates and Qatar airways have great capital. Theses Middle East organizations are putting in newer and newer technology and acquiring greater manpower. PIA being already in a financial crunch faces a tough task. Poor image: With already going in financial loss, 9/11 impact on the industry and above all incapability of Pakistan International Airlines’ management has badly damaged the image of the Airline. Due to all such problems the fares of PIA are higher but service is not up to that class. This also gives a bad image to the passengers. Lack of training facilities: Although PIA is running a training and development department in Karachi but it is in sufficient to feed such a big organization with almost 18000 employees. Special skills such as engineering, technicians are lacking. If they are there, they are not delivering. SWOT Analysis of Pakistan International Airlines: STRENGTHS: LEADING MARKET POSITION: PIA is one of Pakistan’s leading air carriers, with more than 800 daily flights. Around 150,000 passengers a month fly on PIA, making it one of the major operators in the domestic market in terms of passenger kilometers. PIA’s international market share was 43. 5%, In the Domestic market, its market share was 69. 4%. On a system-wide basis, PIA’s market share was 51. 2% at the end of year 2011. Its strong market position is driven by consistently low fares as well as reliable service, frequent and convenient flights, use of new technologies like e-ticketing and self check-in terminals, comfortable cabins and superior customer service. BRAND RECOGNITION: PIA has high brand recall. It is recognized by travelers all over the country. PIA is a national airline, operating passenger and cargo services covering eighty-two domestic and foreign. PIA has earned the number one ranking in customer satisfaction. This strong market position gives the company a scale advantage and helps it strengthen its brand image. SUPERIOR OPERATING STRUCTURE: PIA has maintained its position as the low cost carrier. It has been first class Pakistani airline to use the latest technology. Factors’ contributing consists of different series of Boeing and Airbus and an efficient, high-utilization and point- to-point route structure. Flying one type of aircraft significantly simplifies scheduling, maintenance, flight operations, and training activities. PIA has continually achieved high asset utilization and employee efficiency. Superior operating structure serves as the primary competitive advantage of PIA. NETWORK PRESENCE: PIA enjoys a strong network in key domestic and international destinations. The company’s network includes three the major airports in Pakistan, as well as major international airport such as Dubai International Airport. Having a strong network means that PIA can generate traffic feed for both its domestic and international Flights. HUB AIRPORT AT KARACHI: PIA operates from its hub in Jinnah International Airport, Karachi. Jinnah International is one of the world’s busiest airports in terms of number of passengers carried. It is also one of the largest international gateways to Asia. It is also the leading international air passenger (and cargo) gateway to Pakistan. The company’s strong presences in airports with heaviest traffic levels in Pakistan give it a competitive advantage. EFFECTIVE USE OF TECHNOLOGY: PIA has successfully incorporated latest technology in all its systems, giving it an edge over competitors. PIA takes credit for introducing most new technologies to the Pakistani market. It was the second carrier in Pakistan to incorporate the c-ticketing system and the second in South Asia to introduce self check in systems at the Jinnah International Airport, Karachi. WEAKNESSES: FORMULATION OF GOVT. RULES: The Basic flaw of this organization is its consolidation that is centralized system. The key policies, strategies and set of laws are designed by the upper management. The centralized system is one of the biggest obstacles of long term success of PIA. PIA centralizes structure lead to barrel between different level of management, decreased motivation, hard access to information. HIGH DEPENDENCE ON PASSENGER REVENUES: Passenger revenues accounted for 87 percent of the PIA’s total revenue in 2011. Cargo services allow airlines to generate additional revenues from existing passenger flights. In addition, cargo revenues are usually counter cyclical to passenger revenues and have lower demand elasticity than passenger business, which allows airlines to pass on fuel price hikes to customers. DEBT: PIA has a significant amount of 42 billion debts. Current and future debts could have important consequences for stakeholders of the company. For example, debt could impair PIA ability to make investments and obtain additional financing for working capital, capital expenditures, acquisitions or general corporate or other purposes. Debts could also put PIA at a competitive disadvantage to competitors that have lesser debt and could also increase the company’s vulnerability to interest rate increases. RELIANCE ON OIL PRICES: PIA’s sustainability, growth and revenues directly depend on oil prices. A steep rise in oil prices can seriously damage the long term viability of any airline. Recently many airlines around the world went bankrupt due to rising oil prices. Airlines need to hedge against this risk by taking proper measures. OPPORTUNITIES: HAVING THE MAXIMUM ROUTE AND FLEET: PIA is having the maximum route and fleet domestic and international destinations network in Pakistan as compared to its Competitors. Route and fleet expansion will positively impact the company’s operations by increasing revenues. GROWING DEMAND FOR LOW COST AIRLINES: The growing demand for air travel is driven by lower fares and consumer confidence. A survey by International Aviation Authority showed that ticket price is the number one criterion for passengers when selecting a flight, well ahead of the availability of a non-stop service. CUSTOMER LOYALTY: PIA’s frequent flyer and loyalty programs can help it retain customers. PIA’s Awards+plus (frequent flyer program) was established to develop passenger loyalty by offering awards and services to frequent travelers. Such schemes encourage repeat travel on PIA, as passengers seek to accrue the benefits given to regular travelers. This enables the airline to retain customers and reduce costs, as it does not have to spend money targeting new customers to replace those lost to other airlines. SHIFTING CUSTOMER NEEDS: The needs of air passengers are increasingly changing, as they are becoming more and more price sensitive. If PIA succeeds in making its prices more competitive, then the company will be able to gain significant market share. INDUSTRY RECOVERY: Market analysts believe that the global airline industry will experience an upturn in fortunes over the next few years. This represents an opportunity for PIA, as it could generate increased revenues and command market share if it capitalizes on increases in demand. THREATS HIGH INTEREST RATES: The past few years have seen State Bank of Pakistan impose high as well as low interest rates to check inflation and the over heating of Pakistani conomy. Inflation in Pakistan may see another raise in the short-term. ACCIDENTS: There had been five accidents with PIA listed as below: * Pakistan International Airlines Flight PK 705 was a Boeing 720 – 040 B that crashed while descending to land on Runway 34 at Cairo International Airport on May 20, 1965 resulting in 119 fatalities. * Pakistan International Airlines Flight PK740 was a Boeing 707-340C tha t crashed after takeoff from Jeddah International Airport on November 26, 1979. All 156 aboard were killed. Pakistan International Airlines Flight 268 was an Airbus A300B4-203, registration AP-BCP, which crashed on approach to Kathmandus Tribhuvan International Airport on September 28, 1992. All 167 on board were killed. * PIA Flight 554 is the flight number of a Pakistan International Airlines (PIA) Fokker F27 that was hijacked on May 25, 1998. The flight started its journey at Gwadar in Balochistan after originating in Turbat, and was flying to Pakistans southern port city of Karachi. The aircraft was carrying 24 passengers and 5 crew members. Pakistan International Airlines Flight 688 (PK688, PIA688) was scheduled to operate from Multan to Lahore and Islamabad at 12:05 pm on July 10, 2006. It crashed into a field after bursting into flames a few minutes after takeoff from Multan International Airport. All 41 passengers and four crewmembers on board were killed. PIA has to continu ously ensure utmost safety and security of its passengers. Accidents can adversely affect customer confidence in PIA and result in declined revenues intensifying competition. STRONG COMPETITION BY AIRBLUE: PIA is now competing against carriers such as Airblue and Shaheen Airline. PIA remains Airblue’s strongest competitor because of the huge market it has gained over time, strong brand image and customer loyalty. PIA has started new low-fares subsidiary â€Å"PIA Express† to stop the Airblue market share growing to fast. Moreover, major legacy airlines have been focusing on restructuring costs, which has improved their competitiveness. With costs restructured, the legacy airlines are becoming more formidable competitors in terms of increasing capacity, matching prices and leveraging their frequent flier programs. Increasing competition could adversely affect the company’s margins. INTEREST AND FOREIGN CURRENCY EXCHANGE RATES: Fluctuating foreign currency exchange rates can have a significant impact on PIA’s earnings. For example, as PIA is providing its services to the UK. Negative or positive effects arise from exchange rate movements as change in expenses. Strengthening of foreign currencies against the British Pound will positively impact PIA and vice versa. DECLINE IN AIRLINE INDUSTRY: A number of factors have caused the current decline in the airline industry. For example, the threat of further terrorist attacks since September 11 and a fall in the number of business travelers have both caused passenger numbers to fall. These and other factors may continue to affect demand for air travel in the future, which will affect revenues of PIA. The threat of terrorism may discourage people from traveling by air and could especially reduce the number of passengers traveling on international flights. PEST ANALYSIS The macro-environment includes all factors influencing a company that are not within its control. These include political, social, economic and technological factors. These are known as PEST factors. A technique of analysis of the macro environment is PEST analysis. Environmental analysis should be continuous arid precede all aspects of planning. Since the airline industry is very much influenced by changes taking place in the environment and has undergone rapid and dramatic changes during the last decade, this analysis is especially important for PIA. POLITICAL FACTORS: Political factors always have a great influence on the way businesses operate in the airline industry and the spending power of customers. In recent years it has been observed that government played an active role in increasing competition in the airline industry. A number of new airlines such as AirBlue and JS Air have been awarded licenses to enter the domestic market. Pakistan has achieved some political stability in recent years. If the management of PIA believes that the present government will perform well (consistently), then there will be more investment in the form of purchase of new airplanes and latest technology. The over all industry will grow resulting in more luxurious and comfortable flights. With the military takeover government policies have become more liberal. ECONOMIC FACTORS: Currently, Airlines industry has three major players: Pakistan International Airlines, an Airblue, Aero Asia and Shaheen Airlines. Their target market includes domestic travelers as well as Pakistanis living abroad particularly in the UK and USA. These countries have strong economies coupled with high purchasing power. Customers’ purchase behavior depends very much on prices of the competing airlines as well as services offered. As inflation rate is unstable in Pakistan, spending power of consumers has effected in the long term. In fact growth in Pakistani economy has resulted in an increase in spending power and has positively impacted the airline industry. Economically, the new millennium has been highly volatile; the September 11 attacks revolutionized the whole world. Consequently, there was a global depression in the North America, South America, Australia and Europe. However, in Asia especially Pakistan the effect in the short term was otherwise. The economy began to boom because of greater remittances from abroad and whole sum immigration by expatriates. As a result, demand for air travel in South Asia rose. Economic conditions of Pakistan are however improving. PIA has cost a advantage over its competitors because of its newly acquired, improved, long distance aircrafts from Boeing’ which give longer range and better fuel economy than any other jet currently produced. This cost advantage is a barrier to entry for new firms. However, this cost advantage will not be significant on domestic routes. SOCIAL FACTORS: The social arid cultural influences on business vary from country to country. The social structure of Pakistan is closely tied. The trend is now changing as the general public is educated and is pursuing professional goals. Customers are more aware of market conditions and available options and want to get best value for their money. They spend considerable time and money on entertainment hence increasing the need of in-flight entertainment systems. Also, word of mouth has a significant impact in the use of airline services. Hajj attracts a huge number of customers. The social environment of Pakistan is turning liberal with the new regime. The initiative to automate check-in and ticket booking process might not be very popular with the general public (even educated population) is still technology averse. E-ticketing might also face significant challenges as consumers are generally reluctant to provide their credit cards information over the phone and the internet. The consumers, however, have a warm reaction to the prospect of less costly but quality service flights. TECHNOLOGICAL FACTORS: Technology is vital for competitive advantage and is a major driver of the airlines industry. Major technological changes are taking place in the airlines industry with innovations in the reservations and booking systems. In-flight entertainment systems and auto check in counters are two examples of such innovations. Internet plays a key role in e-ticketing as consumer can easily reserve tickets or check the status of the flight. A key issue will be the extent, to which technological advancements (such as Internet) impact distribution and cost synergies from industry consolidation, can offset upward pressures on costs. PIA has always led the path of technological innovations by introducing new technologies ahead of its competitors such as its auto check-in counters which has helped it gain market share. It was the first airline in Pakistan to install Sabre system followed by the market leader. Recommendations and suggestions: Needed better functioning of human resource and administration department * Management is needed to perform it responsibility professionally. Reducing costs and trying to achieve more market share by combining the organization. * Marketing department must deliver in order to create a strong figure for the organization. It must be responsible for creating more sales and getti ng more market share. Providing awareness about the good characteristics of the organization. Getting information on related field and report to the top officials. * Modernizing the airline’s fleet is badly needed as well proper maintenance of the fleet is required. Must take advantage of the increment in the air transportation especially towards Middle East countries and India. * Better and modern functioning of training and development department * Need for accountability. Implementation of program: Human resources and administration department: Pakistan International Airlines is a huge company with over 18, 000 employees. A human resources and administration department is working but it is needed to be work efficiently and according to the standards. If it would have been working properly then there would not been 525 ratio of employees per plane. Jobs must be designed by this department. Each and every position must be clearly defined. From the chairman to a sales agent and even further down everyone must be clear about his responsibilities. He should be held responsible for his job. International standards for recruitment must be adopted. Right number of persons must be appointed for a specific job. Proper advertisements for each and every job must be done. So that as many talented candidates can come in front. PIA’s manpower should be combination of youth and experience. Both the age groups shall be included in order to gain profitability. Rewards and incentives must be attached with the performance. Similarly there should be a check if an employee is not fulfilling his or her responsibilities. Job security must be done so that employees feel secure within the organization and remain loyal and committed to it, work for its benefits. Employee participation in the decision making must be enhanced. For the top level management such as chairman or managing director people having aviation industry experience must be hired. There should be no political or government influence during recruitment or selection. Merit must be considered at first. Management issues: There should be no compromise on discipline. Discipline should be the key factor for the organization. Policies must be clearly defined. Goals and objectives should be determined for the organization as a whole and individually as well. Management must assure that each and every person is committed to his job and the organization is going towards the achievement of its targets. Management should ensure the punctuality of flight, in flights services and their standard must be world class. Safety and maintenance issues for the planes must be strongly checked. Management’s perspective should be to increase the profitability and ensure the good image of Pakistan. Security and safety of cargo must be ensured. It must be management’s responsibility to ensure services to the passengers both in plane and at airport as well. The management must talk to the government on routes rationalization. Only those routes must be held which are profiting or which can provide profits in the future. The management needs to bring all the available resources in use and bring the modern facilities, software’s and information to the organization or at least report the need to top level decision makers. Management should be done by objectives, both short term and long term. Short term objectives to increase the profit and market share by reducing the costs and expenses. Long term objectives must be image building, providing state or the art equipment and fleet to the organization and creating corporate culture and value in the organization. Marketing department: Pakistan International Airlines marketing department has two divisions. It is passengers division and cargo division. Passenger sales division must be held responsible to boost sales by introducing different types of packages. It must also have the responsibility for handling customer queries and complaints. Effective campaigning of the special interests tourists’ packages for Pakistan to increase the travel to Pakistan must be done. Soft and brighter image of Pakistan and PIA must be enhanced. Cargo division must be responsible for supplying both perishable and non-perishable goods in the global market place. The major objectives of this division should be: * To develop Strategic alliances with other carriers so as to increase the capacity on the high yield sectors. Annually enhancing the cargo reservation services, terminal services and warehousing services at domestic and international stations to be competitive other carriers in the industry. * Revisions of cargo fares and offerings on annual basis to optimize the full potential of cargo space on all the sectors. Marketing planning should be done in such a way: * It must gather effective information regarding marketing and sales activities of va rious airlines. * Must Adopt and access the emerging software’s / programs which are needed to remain competitive in the industry. Annual assignment of realistic sales targets must be given to each sales area. * Effective evaluation of the sales targets on monthly basis must be done to take corrective measures for fulfillment of the sales targets. * The organization must provide a lot of activities in-flight to ensure that the passengers are entertained during their journey. These activities include movies, music, and in-flight duty free shops. * The pricing objective of PIA should be to maximize profits. It is considered an airline which charges high prices as compared to its competitors. So it must provide services to the passengers comparable to its price. Prices and services must be settled in accordance with the industry. PIA being huge organization must use a lot of promotional methods to persuade people to use its services. These must include advertising (newspaper, internet), through its own magazine, personal selling, sales promotion, and public relations. Advertising is an impersonal form of communication which should be used by PIA in many ways, such as TV ads, print ads. PIA can also use internet for its promotion. The passengers must provide online booking facility, online checking facility and up to date flight schedule. PIA is treated much of an ethnic airline rather than being a commercial airline. Its image must be advertised and portrayed in such a way so that every group and segment of passengers can travel on it. Modernization of fleet: A big reason for the decrease of market share and profits is due to the aged fleet of Pakistan International Airlines. PIA is competing with the rich and wealthy airline companies from the Middle East. Average age of PIA’s fleet is 13 now with the induction of 4 new planes, while its competitors have average age fleet between 7-8 years. PIA must modernize its fleet. At the moment it has 43 planes out of which only 33 are operating while rest of them are not in operating condition. PIA must modernize and expand it fleet number to 55 in the coming two years. Fuel efficient planes must be bought. It will not only enhance the brighter image but also will bring great financial benefits by reducing maintenance cost and fuel consumption. The modern fleet will be well equipped with all the modern facilities. Explore more market: India can be a great market for Pakistan international Airlines. It is a huge market and needed to increase its flight to India. Similarly the frequency of flights can be raised to profit making routes. According to IATA average annual growth in passengers will be 7. 8% for Asia pacific and 9. 8% for Middle East from 20011-2013. PIA can take advantage of this situation and by providing greater services it can get more market share. Training and development department: Training and development must function properly. It must prepare the employees for the upcoming challenges and threats in the industry. Both the airline’s staff and other employees of the organization must be well equipped with the latest techniques and skills used in the airline industry. Engineering department plays a vital role in this regard. A lot of money can be saved if engineers and technicians are well equipped. No need to go abroad for maintenance and over hauling of the planes. Accountability: There should be proper check and balance in the organization. Everyone should be held responsible for its responsibilities. There should be proper audit of each and every department of the organization. If found any mishap, the responsible people must be punished. Finance: * Government of Pakistan holds 83% of the shares of PIA. 13 % or more shares can be sold through IPO’s so that more finance will come into the ompany. Also private investors’ interest will rise. Both the government and private interest will give a new look to the company. The way of thinking will be changed entirely. * Pakistan international can lease its some of the international routes which are going in loss (such as American routes) and it is thinking to close these stations. Simila rly it can arrange an agreement with domestic airlines. Benefits * By purchasing new fleets the repairing cost decreases and attracts the customers that cause to decrease the cost and increase the revenue of PIA. Fleet modernization will bring more security, safety, less maintenance expenses and will project a brighter image of the airline. * By applying the modern techniques of management, management will focus on its objectives and goal in an efficient and productive manner which will reduce the expenses and focus on the achieving the profit * By properly marketing itself PIA will present a better image to the world. By clearly describing facilities and projecting its image it will help in growing market share. * Training and development of employees will prepare the employees for current tasks and for future challenges. By removal of old employees it creates an opportunity for fresh energetic candidates to show their performance. It also causes to reduce the cost because their salaries have been increases very high. * By the publication of magazine the awareness of the people about PIA increases. It increases the number of passenger that increases the revenue. * Timely decisions are possib le by decentralizing the decision making power. * Strict control on inventory stock will reduced the cost. * By appointing employees on permanent basis the sense of ownership will increases. When employees secure about future they can focus on their work more efficiently. * By giving the importance to the suggestion of lower level management and their participation in decision making, they wok with responsibility and tried their best for the organization. * Reducing the HR budget by clearly defining the job and designing the jobs. So right number of people and required number of people will work. A proper performance and reward system will induce employees to work effectively, efficiently and remain loyal to the organization. References Sites www. piac. com. pk ttp://en. wikipedia. org/wiki/Pakistan_International_Airlines_destinations3 http://en. wikipedia. org/wiki/Pakistan_International_Airlines www. google. com http://www. historyofpia. com/ http://www. airlinequality. com/Forum/pia. htm http://www. britannica. com/EBchecked/topic/438805/Pakistan/23702/Transportation-and-telecommunications#ref=ref387351 http://aviation-safety. net/database/operator/airline. php? var=4 931 http://www. centreforaviation. com/news/2009/07/10/pakistan-international-airlines-reports-second-consecutive-operating-profit-in-1q2009/page1 http://findarticles. om/p/articles/mi_m0EIN/is_2006_May_8/ai_n16347759/? tag=content-inner;col1 http://wwwagse. informatik. uni-kl. de/teaching/pia-scenario/ http://www. abacus. com. pk/news_events/travel_secure. asp http://www. asiatraveltips. com/news06/95-Abacus. shtml http://www. etq. com/airsafety/ Journals, Reports, Magazines, Vouchers amp; broachers * Annual report of PIA 2012 * PIA in-flight entertainment magazine. * New Frontiers in HRD By Monica Lee, Jim Stewart, Jean Woodall * An internship Report on PIAC by Miss. Asiya Khan MBA LUMS. Lahore 6. (2006-2008) http://www. scribd. com/doc/13082382/Pia-Report? autodown=doc