A Report on Crises Management in Pakistan International

Airlines Company

SUBMITTED BY:
KashifJameel
Syed Jehanzeb
Rahat Bibi
Syeda Amber

SUBMITTED TO:
Mrs. Huma Waqar

DEPARTMENT OF BUSINESS ADMINISTRATION

BAHRIA UNIVERSITY, ISLAMABAD

 A Report on Crises Management in Pakistan International
Airlines Company

A Report to Fulfill the Requirements for Completion of Business Communication

Course

DEPARTMENT OF BUSINESS ADMINISTRATION

BAHRIA UNIVERSITY, ISLAMABAD

Abstract

Pakistan International Airlines is the national flag carrier and was established in 1955. It
not only provides transportation services, but its operations extend to providing cargo
services and courier services also. Pakistan International Airlines serves two markets –
Domestic and International. In the domestic sector, it has out performed itself by
stretching its networks to areas where other airlines do not fly to. 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.
Internationally also, Pakistan International Airlines is encountered with a severe and
strong challenge with many renowned international names. Pakistan International
Airlines faces competition with not only international airlines but also with local airlines
on the various routes to the Middle East and the Gulf.

Due to fierce competition and rising oil prices, international aviation industry regulations
and some internal factors such as human resource issues of over recruitment, de-
motivated employees, mismanagement of resources both in case of manpower and
other resources, aged fleet, corruption and lack of accountability PIA is facing a deep
financial crisis. It is losing its market share both in international market and domestic
circuit. The present report is written about the current crises situation of PIA and future
plan of action for PIA.

The report comprises of three sections. First section introduces the organization and
gives an overview of Pakistan aviation industry. The second section focuses on
determining the problems areas and describing it. The third part of the report calls for
the immediate changes that are required to make PIA in order to take out some better
performance from the national flag carrier. It describes the department wise strategies
internally as well as strategies to face external threats such as rising oil prices and
providing better services in a competitive environment.
Introduction

Air Transportation is a fast growing industry, highly capital intensive, highly sensitive to
business cycles, facing increasingly deregulated environment and hence highly
competitive background. The transportation sector holds a very important position in the
economy of Pakistan. Currently it contributes almost 10% in the GDP.

The aviation sector was deregulated just 20 years ago. This encouraged many airlines
that stopped their operation due to Millions of Civil Aviation Authority dues. Bhoja,
Hajvery and Shaheen Air were closed down, but they have been granted license again.

Private airlines have stunned the aviation industry as they charge below cost fares. At
the moment when fuel prices are touching all-time high levels in the Pakistani market,
cut-throat competition among private airlines has placed a million-dollar question about
the feasibility of airline sector in Pakistan.

PIA operates in two major markets; Domestic and International. Pakistan International
Airlines has the lion’s share in the domestic market. As it is the oldest and the pioneers
and it has the better fleet as compared to its competitors who are comparatively newer
in this segment. Besides this, Pakistan International Airlines has a huge network of
ground stations through out the country. The number of flights of PIA remains the same
during on-season and off-season.

Internationally also, Pakistan International Airlines is encountered with a severe and

strong challenge with many renowned international names. Pakistan International
Airlines faces competition with not only international airlines but also with local airline
named Air Blue on the various routes to the Middle East and the Gulf.

Its main hubs are Jinnah International Airport, Karachi, Allama Iqbal International
Airport, Lahore and the Islamabad International Airport, Islamabad.
It also serves regional airports, including Peshawar International Airport, Peshawar,
Faisalabad International Airport, Faisalabad and Multan International Airport, Multan that
connect to the main hubs and have flights to the Middle East.

Vision

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

dedicated employees, committed to excellence.

Mission

 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

Organizational Structure of PIA

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.
Pakistan International Airlines Corporation (PIAC) is majority owned by the Government
of Pakistan (87%) while the remainder (13%) by private shareholders. The airline falls
under the direction of the Aviation Division. It is managed by Chairman, Air Marshal
Arshad Malik as well as the Board of Directors. The Board consists of nine independent
non-executive members and has four sub-committees, being an Audit Committee,
Brand and Advertising Committee, Finance Committee and Human Resource
Committee each with its own charter and chairman. The Chairman leads the executive
management of staff who control the running of the airline. The airline's main
headquarter is located in Karachi whilst smaller sub head offices are located in several
cities within Pakistan.

Management

Of PIA

PIA is a huge corporation with more than 19,000 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.

Achievements and Recognitions of PIA

 First airline from an Asian country to fly the Super Constellation.

 First Asian airline to operate a jet aircraft.

 First Asian airline to be granted maintenance approval by the US Federal

Aviation Administration (FAA) and the Air Registration Board, predecessor of the
British Civil Aviation Authority (CAA).

 First non-communist airline to fly to the People's Republic of China, and operate
a service between Asia and Europe via Moscow.
 First airline in Asia to induct the new technology Boeing 737-300 aircraft.

 An IBM 1401, the first computer in Pakistan, was installed in PIA.

 First airline in the world to operate scheduled helicopter services.

 First airline to show in-flight movies on international routes.

 PIA set up Pakistan's first planetarium at Karachi.

 The first airline in South Asia to introduce auto-ticketing facility.

 The first airline in the world to fly to Tashkent, capital of the newly independent
state of Uzbekistan.

 First airline in the world to start Air Safari with jet aircraft.

 First Asian airline to start flights to Oslo, the capital city of Norway.

 First airline in the world to induct Boeing 777-200LR, the world's longest range
commercial airliner.

 First airline in the world to take delivery of the Boeing 777-200LR Worldlier
(Longer Range Variant).

 Pakistan International Airlines Flight Services Department was awarded the ISO
9001:2000 certification award during May 2006.

 First airline in the south east region to offer seat reservations through mobile
communications.

 First airline in Pakistan to operate a flight with an all female crew at command
and serving in the cabin.

 PIA was briefly featured in the Adam Sandler movie 'Anger Management.'
SWOT Analysis of Pakistan International Airlines

Strengths

 Domestic and International Reputation

 Direct flights from small cities to foreign destinations

 Organized distribution channels

 Product Quality on domestic sector

 Leading Market Position

 Brand Recognition

 Superior Operating Structure

 Network Presence

 Hub airport at Karachi

Weaknesses

 Centralized decision making

 Aging Fleet

 Ground services (lack of staff, improper management)

 Less technologically advanced as compared to foreign airlines

 High charges as compared to other airlines

 Weak financial position

  Formulation of Govt. Rules

 Debt

Opportunities

 New product innovations

 Improving quality by new techniques and resources

 Having the maximum routes

 Growing demand for low cost airlines

 Customer loyalty

 Shifting customer needs

 Industry Recovery

Threats

 Unstable Government policies

 Inflation

 Increasing competition

 High fuel prices

 High Interest Rates

 Accidents

 Unstable Foreign currency exchange rates

Current Problem Description

According to our research the company is having the problem in the following areas.
The problems for Pakistan International Airlines include:

Fleet Resources

PIA possesses 39 aircrafts in its fleet. The management of PIA endeavors to efficiently
utilize 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.

Over recruitment

Pakistan International Airlines is a large organization with 19000 employees. Its fleet
comprises of 39 planes. Its operating planes are just 30. It means round about 630
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.

Mismanaged 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.

Political Influences

After 1973, Pakistan People Party Government started the practice of politicizing PIAC.
Domicile based employment and unionization of employees started. Corporate culture
was polluted and the first germs of nepotism, favoritism, cronyism and corruption had
taken birth. This started to destroy the whole corporate integration with tremendous
financial implication. PIAC’s downward slide came and continued till the Martial Law of
late General Zia ul Haq in 1977. The Martial Law regime placed PIAC under Ministry of
Defence to stem the rot which had gripped it. Martial Law Ordinance 52 (MLR 52) was
imposed and hundreds of corrupt and inefficient employees were sacked, unions were
banned and the management came from the Armed Forces. PIAC started to turnaround
with the induction of wide body jets, automated sales/reservations/ticketing facilities,
strong administrative measures, career planning and new domestic /international
destination. By the time Gen Zia died in 1988, PIAC was in a very comfortable position
having a monopoly on domestic sectors and a 80% market share on international
destinations. Its financial position was very stable and very steady.

The era of PPP and PML(N) Governments from (1989 -2001) once again set the
negative influences on PIAC. Once again ethnic based employment, heavily politicized
union and the concept of TUNNELING was used to make corruption a science.
Public/Tax payers money was syphoned off by carefully selected cronies placed at the
exit of the money TUNNEL. Political routes e.g. SAARC Countries/5 Central Asian
Republics were opened up without proper due diligence. As a result extreme losses
started piling up.

Second PML(N) Government went way beyond its mandate and approved the OPEN
SKY PLICY in the garb of satisfying the needs of those market segments which PIAC
was ignoring. They justified this step by stating that people of Pakistan deserved much
more travel choices than the limited ones being provided. They had made a grave
mistake in two very big ways.

a) They destroyed PIA’s Monopoly by suddenly pushing it from a comfortable

monopolistic position straight into fierce market competition. They did not
bother to revamp and restructure PIAC for this situation rather they left it to
swim with the sharks.

b) Heavily damaged the foreign exchange reserves as all incoming foreign

carriers were selling in PKR and converting/remitting their heavy sales back
to their economies in HARD CURRENCIES.

Saudi and Gulf carriers specially Saudi Airlines and Dubai based Emirates Airline were
given bilateral under the open sky policy on extremely preferential and lop sided basis.
PIAC had to work with a local Kafeel on 50/50 basis. PIAC had to use their ground
handling and catering facilities not on reciprocal basis. Further more, these carriers got
access to heavily populated market with multiple market segments to be targeted both
long haul and short haul. Within no time all Gulf and Middle Eastern carriers jumped on
this new market. They had cheap jet fuel, latest equipment and British management
making them lethal for PIAC. In return PIAC, despite its best efforts, was out gunned
immediately due to expensive jet fuel. By year 2001 PIAC had gone into a nose dive
losing altitude very quickly.

In 2001 PIAC went in doldrums and GOP of that time moved quickly to react to this
situation. This time another formula was used. Capital intensive measures were used.
Top Management brought from the cooperate sector placed the largest single order of 8
Boeing 777 and 6 ATR aircrafts in Pakistan’s history. Modern H.R. Technique “BELL
CURVE” was implemented to control and motivate employees. Agreements with GDS
service provider SABRE were renegotiated on lower rates. GOP provided guarantees to
venders and underwrote the bank loans. Once again PIAC was able to bounce back,
but this time it was under debt and had to perform in order to survive.

From 2009 -2018 two successive PPP and PML (N) Governments broke all records of
nepotism, favoritism, cronyism, corruption and total mismanagement. Due to this
plundering, today PIAC has approximately PKR 400 Billion as debts, a dwindling small
fleet, bare minimum destinations and a totally de-motivated and underpaid work force.

Rising fuel prices in the Country

There is been consistent rise in fuel prices in the local market. 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 39 planes. Out of those 39, only 30 are
operating at the moment. Due to aged fleet the fuel is consumed more and maintenance
expenses are increased. Thus, these 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. 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.

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.

Low scale advertisements and awareness

A common Pakistani may even not know about Pakistan International Airlines. No
advertisements and awareness to the organization’s brands in such a modern era of
marketing. Cricket stars and sportsmen are hired on heavy salaries but with no profit to
the organization. Pakistan International already being an ethnic airline is just confining
itself to its own country. No such efforts to enhance the brighter and soft image of the
nation as well as airline are made.

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.

Recommendations for PIA

Decentralization

PIA should decentralize 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 employees 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 manage its resources: labor
more effectively, so that with less input, more output 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 the
corporation can get through its major crises.

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 PIA is using wide body aircrafts like Boeing-777 even for
the short routes like Islamabad and Lahore. We recommend that the P.I.A should use
small two engine fleets for short routes in order cut some maintenance cost.

Conclusion

No doubt crises management in any organization is an uphill task that requires a lot of
exercise according to the nature and scope of organization. The past record of
financials of the PIA is showing a drastic one. The corporation did a great deal in
emerging again as a profitable concern. But the business of corporation depends upon
on various factors. The overall recession in the economy, accidents of aircrafts,
management relation with employees, political disturbances and market dynamic
situation all impose certain limitations on the performance of the management.

The efficient and effective management of Human Resource and main assets of any
organization is the prime key of success for any organization. In case of PIA if its
management will be able to sort out its human resource and aircrafts then nobody can
stop it progress because all other relevant factors in shape of infrastructure and allied
support is already in placed.