Pia

CONTENTS
Introduction ------------------- 2
Basic Facts -------------------- 3
Mission ------------------------ 5
Objectives of PIAC ------------- 7
Management Style --------------- 8
PEST Analysis ------------------ 9
Five Force Analysis ------------ 12
Generic Competitive Strategy --- 15
Strategy Clock ----------------- 15
Direction of strategy development16
Route Maps of PIAC ------------- 17
SWOT Analysis ------------------ 18
Value Chain Analysis ----------- 24
Core Competences --------------- 27
Financial Analysis ------------- 29
Conclusion --------------------- 35
Suggestion --------------------- 36
2
PIA: Great People to Fly With
INTRODUCTION OF PIAC
When PIA came into being in 14th August, 1947 there was only one
airline in operation called Orient Airline. After some time two more
airlines Pakistan Air Limited and Cresent Airways started commercial
operation. None of these small air service companies could succeed to
cover the requirements of the Air Traffic of the country. Ultimately two
of these failed to continue their operation. In 1952 Orient Airways was
the only operational company operating on domestic routes.
The govt. and the people of Pakistan were sincerely struggling hard for
development of their country with the aim to reach to the similar level
of advancement as of other free nations of the world. Communication
system is the basic requirement of country. So in 1955 the Govt. took
an initiative and passed an ordinance to form an air fleet under the
name of Pakistan international airlines (PIA) to meet the needs of
domestic and international air traffic.
PIA began operation on Karachi-Dhaka sector with three aircrafts in

1955. later PIA and Orient Airways, a private carrier, were merged to
form PIAC (Pakistan International Airline Company). Over the years PIA
gradually expanded its network and is now serving 83 destinations.
Department of Management Sciences

3
PAKISTAN INTERNATIONAL AIRLINES (P.I.A)

(STARTED IN 1955)
Aircraft
52 AIRCRAFTS (PAKISTANI PILOTS)
Ownership
(GOVERNMENT OWNED 56%-NATIONALIZED)
Management and Staff

(PAKISTANI MANAGENENT)
(+20,382 EMPLOYEES) (PAKISTANI CABIN CREW)
(KARACHI BASED)(INTERNATIONAL & DOMESTIC ROUTES)
Engineering
(PAKISTANI ENGINEERS)
(COMPLETE ENGINEERING DEPT WITH D-CHECK CAPABILITY)
(FULL ENGINE-OVERHAUL CAPABILITY)
(COMPLETE AIRCRAFT HANDLING AGENCY)
ENGINES: 2 G/S CFM 56-3B1
12 G/S CFM 56-3B2
18 GE CF6-50 C2
8 GE CF6-50 E2
12 GE CF6-80 C2A8
8 P & W JT3D-3B
24 P & W JT9D-7A
4 PWC PT6A-27
26 RR DART 532-7
Aircraft Details
WIDE BODIED LONG RANGE
6 B-747-300
6 B-747-223 B (S/C/D)
[Currently grounded. For sale]
2 B-747-240 B (COMBI)
1 B-747-200 B SIMULATOR
1. A-300-B4-203
1 A-300-B4-203 (DRY LEASED)
1 A-300-B4-203 SIMULATOR
WIDE BODIED MEDIUM RANGE

6 A-310-308
NARROW BODIED MEDIUM RANGE

4

7B-737-340
(WITH UPRATED CFM56-3B2 ENGINES)
CARGO-NARROW BODY LONG RANGE
1 B-707-300 SIMULATOR
COMMUTER
1 F-27-400
12 F-27-200
2 DHC-6-300
Note: Out of 6 B-747-223 B (S/C/D), 2 were bought from TAP &

4 were swapped by DC-10-30 from CPAL
PIA HAS PREVIOUSLY OPERATED THE FOLLOWING AIRCRAFT:

2 B-707-F (FORMER -321 C & -320 B)
4 D-10-30
? L-1049 G SUPER CONSTELLATION
? L-1049 H SUPER CONSTELLATION
5 VISCOUNT 815
? DC-3
1 B-707-121 (DRY LEASED)
? B-720-040 B
? B-707-320 B/C
? IL-86 (WET LEASED)
? TU-154 (WET LEASED)
? TRIDENT
? CV-240
2 Mi-8 (HELICOPTER) (DRY LEASED FROM UZBEKISTAN AIRWAYS)
3 S-61N (HELICOPTER)
MISSION STATEMENT
5
Mission statement is an overriding statement inline with business and

aspirations of stakeholder’s expectations.
Generally a mission statement covers following four areas.
 Key success factors
 Organizational value
 Organization philosophy
 Target market
Mission of PIAC
As a symbol of National pride, Pakistan International must strive to be an
airline of choice operating profitably on modern commercial concepts,
capable of competing with the best in its entire International and Domestic
markets consistently exceeding customer expectations. It should be a
choice employer deploying modern technology in all spheres of its
activities.
 Key success factors

Modernization: In airline industry modernization is the key
success factor. The airline should be responsive to the changes that
are taking place in the environment. Modernization of the
communication system and the fleet replacement & and up-
gradation is of massive importance in this regard. As far as PIA is
concerned modernization has been the hallmark of it. From
communication side PIA has recently upgraded its previous
communication system REPAK by the new and state of the art
SABRE system which is directly connected to Singapore. PIA also
maintains very close interaction with its agents and provides them
with the latest information including fare lists etc.

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PIA has been upgrading its fleet periodically keeping in view the
changing customer needs. Recently it has signed a contract with
Boeing company to purchase eight Boeing 777 aircrafts, which fall
in the category of wide body aircraft and will fulfill the requirements
of class one passengers
 Organizational value
Customer responsiveness: PIA is very responsive towards its
valued customers and customer responsiveness is embedded in the
organization culture. It believes on the slogan that “Customers are
the king”. It has continuously been offering special incentives and
schemes for its customers like AWARD PLUS and many others.
Initiation of telephonic reservation is also worth mentioning in this
regard. Moreover the customers place suggestion boxes at its
domestic and international counters to obtain helpful comments
and constructive criticism.
 Organization philosophy PIA believes in competition. It

believes that if an organization is capable of competing with the
best in the industry, nothing can hinder its growth and success.
 Target market: PIA has always kept its market broad. If we

compare its domestic and international route map over the period
of time will come across that it has expanded its operations
drastically to meet the needs of its customers.
OBJECTIVES OF PIAC

7
According to PIAC Act 1956, following are the main objectives of PIA
Corporation.
I. To provide and further develop safe, efficient, adequate,

economical and properly coordinated domestic as well as
international air transport system.
II. To operate any air-transport service or any flight by aircraft for a
commercial or other purpose, and to carry out all forms of aerial
work.
III. To acquire, own, run, manage or participate in the running of
management of, any hotel or business connected therewith.
IV. To provide for the instruction and training in matters connected
with aircraft or flight by aircraft of persons employed or desirous
of being employed either by the Corporation or by any other
person.
V. With the previous approval of the Federal Government, to
promote any organization outside Pakistan for the purpose of
engaging in any activity of a kind which the Corporation has
power to carry out.
VI. To acquire, hold or dispose of nay property, whether movable or
immovable, or any air transport undertaking.
VII. To repair, overhaul, reconstruct assemble or recondition aircraft,
vehicles or other machines and parts, accessories and
instruments thereof or therefore and also to manufacture such
parts, accessories and instruments whether the aircraft, vehicles
or other machines are owned by the Corporation or by any other
person.

8
MANAGEMENT STYLE
MANAGEMENT STYLE OF PIAC

PIA is centralized organization. There is no concept of MBO
(Management by Objective) in it. All the decisions are taken at
corporate level in Karachi and then communicated to all of its stations.
There is no concept of participative management. Also due to strong
government influence top management doesn’t feel free to decide
upon key issues. Recently PIA is put under Prime minister command. In
short a top-bottom approach is used.

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PEST ANALYSIS
Pest analysis is concerned with the effect of political, economic, social
and technological influences on the organization and its competitors.
Environment is not static but is continuously changing so PEST analysis
is very important to assess the effects of the ever-changing
environment on the organization.
Political
Government of a country plays a very important role in the
performance of an industry. Favorable policies of a regime can boost
up the performance and can put it on the right tracks. Similarly
unfavorable policies regarding a specific industry worsen its
performance.
PIAC being a semi-government organization is highly sensitive to the

political conditions in the country unlike private organizations like Aero
Asia As far as PIA is concerned General Mushurruf’s 12 Oct. take over
has been very fortunate for it. According PIA officials, it has become
less politicized after 98. It has improved its performance substantially.
Now merit is prevailing at PIA as far as recruitment is concerned. The
one of the major reason of the past poor performance was the
unprofitable routs, which has been revoked now.
One of the reasons is the bold stand of President Musharraf in response

to Indian ban on using its air space. Present government took a bold
step and reciprocated in the same manner. Fewer flights of PIA were
disturbed as compared to that of the Indians.
Recently Prime Minister Zafarullah Khan Jamali has decided to bring
the National Flag carrier, Pakistan International Airlines Corporation

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under his direct command, withdrawing the airlines from Ministry of
Defense’s control
Economic
Over the last couple of years Pakistan’s economy has improved
substantially. Its stock market (KSE) has become the fastest growing
stock market of the Asia. Almost all the economic indicators are also
heading towards an improvement.
So the business environment is growing and it has also invited some
other companies to step in the airline industry like the upcoming
coming named “AIRBLUE”. Good economic conditions make the
competition fiercer due to entry of more competitors.
As far as contingent liabilities of the Pakistan are concerned, during FY
2002-03, an amount of Rs 1.7 billion has been given for fleet renewal
and Rs. 1.7 billion have been paid out as interest (equity) to the
restructured loans and Term Finance Certificates to PIA. Government of
Pakistan has guaranteed interest payments (restructured loans and
TFCs) for five years starting FY 2001-02.
Social
PIA was declared as “national flag carrier” in 1954. So it has a big
advantage over its competitors. People prefer PIA to other domestic
airlines.
PIA is also keeping an eye on the socio-cultural environment. It

promotes Pakistani culture in its in-flight magazines. It has also
provided space to PTDC in all of its foreign offices.

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On the other hand Aero Asia being a very small airline as compared to
PIA is far behind in this regard. PIA also sponsors famous players of
cricket, hockey and squash. And every one knows cricket is passion of
this nation. So PIA is making the most of social and cultural influences.
Technological
Technological influences are very important in aviation industry. PIA
being the market leader keeps itself up-to-date in the form of providing
training in its very own training centre at Karachi. And now it has
singed an agreement with Boeing Company to purchase 8 Boeing 777
aircraft to meet the need of its class 1 passengers.
It has also its old REPAK system with the new and latest SABRE
system.
On the other hand Aero Asia Int’l. is Pakistan’s first airline in the
private sector which has introduced an apprenticeship and trainee
engineers scheme .Technicians & Engineers have been trained to take
over all maintenance activities in the near future. Today, a team of
more than 90 engineers are working diligently to make the operation
non-stop, safe and regular. In only 7 years, 31 trainee engineers and
technicians have been awarded certification with the approval of Civil
Aviation Authority of Pakistan

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FIVE FORCE ANALYSIS
THE THREAT OF ENTRY
Economies of scale:
Fixed cost constitutes a bigger part in airline industry. An airline
has to bear major portion of cost even if the aircraft is flying vacant. So
economies of scale plays important role. So it will be very important for
any prospective airline to consider the economies of scale. This is the
reason that almost all the airlines are trying to control the NOSHOW
rates. They try their level best to fill all the seats on a particular seat.
Capital requirement of entry:

Airline industry requires a huge amount of capital to be invested in an
order to start a completely new airline. It requires various types of
aircrafts. And also a very sophisticated engineering department apart
from other routine departments. Another important aspect is that the
cost of up-gradation is extremely high. For an airline to stay in the
competition it is very imperative that it periodically upgrades its
aircrafts to meet the needs of its passengers. So it involves huge
investments and large setup to enter into this business and that
perhaps the reason why there are not too many airline operating in
every country.
Cost advantages independent of size:

Experience also plays a very vital role. A company that has been
performing for a certain period of rime develops its relationship with
other concerned parties. Experience curve also explains that
phenomena that as the company get older and mature its average cost
also decreases. So a corporation like PIA with very strong goodwill and

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global fame makes it very difficult for other companies to enter this
business.
Role of Government:
Government plays the most important role in the economy of any
country and it also has deep effect on all the industries. A Company
cannot even think to survive without government support in an
environment like Pakistan. Since PIA is semi-government organization,
it enjoys government support and cooperation and government takes
keen interest in its performance due to its own interests in the
corporation. So a private company may find it very difficult to join the
competition.
Differentiation:
Differentiation is the key to success in today’s age of fierce
competition. But cost of differentiation is quite high. PIA is serving at
almost all the domestic and international routes. So in Pakistan it looks
quite impossible for a new airline company to offer services which are
not offered by PIA. That is one of the reasons why a couple of
companies have to leave the industry.
POWER OF BUYERS AND SUPPLIERS AND THREAT OF

SUBSTITUTE:
A present PIA is enjoying monopoly and the level of competition is
quite negligible. PIA serves at almost 85 domestic and international
routes whereas other airlines including Aero Asia serve very few. So
passengers don’t have any other option or substitute. So it can be
mentioned that
 Availability of substitute.
 Time factor,

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Determines the strength of buyer in our case. Since on most of the
routes, PIA is the only option available so passengers can’t do much
about it. Another important factor is the time. A passenger who wants
to go in emergency cannot travel by any other source.
COMPETITIVE RIVALRY
In our case competitive rivalry depends on the extent to which the
competitors are balanced. Since PIA is dominating the industry and
enjoying monopoly, the real competition does not exist. Other small
private companies like Aero Asia and Bhoja are in no position to
compete with PIA.
COMPETITION AND COLLABORATION

Since there is no competition and it is extremely difficult for a new
company to enter in the business, collaboration is the only option left
for prospective companies.
PIA has the largest setup with a well-established training centre at
Karachi and it also offers assistance to other airlines. So if any
company wants to enter into the industry it should try to benefit from
PIA setup and increase the possibility of making some profit as it would
be impossible for it to indulge in competition.

15
GENERIC COMPETITIVE STRATEGY
PIA has adopted differentiation strategy, which is quite obvious from its
domestic and international route map. On most of the domestic and
international routes PIA is the only airline that operates from Pakistan.
Other airlines which cannot enter into direct competition with PIA has
focused their operations to some specific areas like Aero Asia has
targeted Middle East on international level and major cities of Pakistan
like Lahore, Islamabad and Karachi on domestic level.
As result of differentiation PIA is charging premium prices for its
services. Its fares are substantially higher than that of its competitors.
But the quality of services is definitely better.
However, PIA can also afford to charge higher prices even for low
quality services due to monopoly at national level and can be placed at
other levels. And if we view it a little critically, in reality PIA has been
charging higher prices as compared to its quality of services on some
routes. But by and large PIA’s strategy can be classified as
differentiation strategy.
STRATEGY CLOCK
As mentioned above PIA is providing high quality services at relatively
higher cost, its placement in the strategy clock are mentioned below.
H
PIA’s
strategy
for PIA
Quality
L Cost H

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DIRECTION OF STRATEGY DEVELOPMENT
In PIA, the direction of strategy development can be viewed as

“MARKET DEVELOPMENT”. Since PIA falls in service industry, other
directions of product development, protect/build and diversification is
not much applicable. As far as the strategy of market development of
concerned, it is concerned with the market coverage. The main
components are,
 Extension
 Geographical spread
If we at the history of PIA we will find that since its inception PIA has
substantially increased its geographical coverage at both national and
international levels. Market analysis is very important for this purpose.
Due to involvement of very high fixed cost PIA cannot afford to
continue flights less below capacity. At present PIA is operating at 86
domestic and international destinations and is still planning to broaden
its coverage by expanding and upgrading its fleet. Due to monopoly at
national level and high entry barrier in this industry PIA has very bright
prospects in this direction.

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INTERNATIONAL AND DEMOESTIC ROUTE MAP
SWOT ANALYSIS
STRENGTHS
Following are the strengths of PIA.
 PIA is as old as the nation itself. So its reputation is its most

valuable asset. Being the national flag carrier it has
maintained goodwill.

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 PIA has the most comprehensive training centre to train its
employees and also the non-PIA employees to generate some
revenues.
 PIA is semi-governmental organization. So its interests rest

with that of the government. Due to this reason PIA has got
protection form any unfavorable geo-political change.
 PIA covers domestic and international destinations more than

any other domestic airline in Pakistan.
 Recently PIA has started its very own courier service named
“SPEEDEX”.
 PIA has its own kitchen, which not only fulfills its own needs
but also provides food to other airlines and hence is a source
of revenue generation.
 PIA sponsors famous players of cricket, hockey and squash,

which add to its national fame.
 PIA modernizes its aircraft’s when it is required e.g. currently

PIA has signed an agreement with Boeing Company to
purchase 8 Boeing 777 aircraft and also is planning to replace
Fokker aircraft too.
 PIA has the most advanced communication system in the local

industry. Recently it has replaced its old REPAK system with
new and more advanced system named SABRE. From accounts
point of view, all the accounts are managed through a self-
developed accounting software COSSIP III.

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 Recently PIA has replaced its counter reservation with
telephonic reservation keeping in view the customer
convenience. Now any passenger can get his/her seat reserved
by calling to 111-786-786.
 PIA is considered as the most attractive employer because it

offers the most attractive salary packages and other facilities
to its employees.
 Besides its revenue considerations, PIA flights also go to

northern areas like Gilgit and Swat while others don’t. Other
domestic airlines like Aero Asia focuses only on profitable
routes like major cities of Pakistan like Karachi, Islamabad and
Lahore.
 PIA has its on-line and off-line offices in all major cities of the
world at the heart of those cities, which provides PIA the
appropriate promotion opportunity.
 Passenger handling is very proper.
 PIA’s security department is doing extremely well and it is

indeed its strength.
 Tour Promotion department along with Public Relation

department is doing extremely well by publishing the
promotion material.
 PIA has the best and technologically proficient engineering

department, which not only fulfills its own need but also

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generates revenue by providing assistance to other airline and
also the facility of ground handling.
 PIA publishes its own magazines including in-flight magazine

“Hamsafar”, which not only promotes PIA globally but also
provides the employees an opportunity to express their views.
 PIA has the largest setup in the local industry and hence it
would be quite difficult for a new airline to come into the
competition with PIA.
 PIA has provided special printers to all of its agents to keep

them up to date with the latest fares and also offers the most
lucrative incentives to them.
 Auto ticketing facility is very convenient for the passenger.
WEAKNESSES
 Being a semi-government corporation PIA is a politicized

organization. Every government wants to impose its own
decisions on PIA. Had PIA been given complete autonomy in its
decisions it would have made much more progress.
 Most of the PIA’s aircraft’s are outdated and old fashioned.

Although PIA has planned to buy 8 Boeing yet more and more
should be replaced to cater to the increasing needs of the
passengers.

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 There is lack of corporate loyalty in PIA due to highly
centralized structure, which is extremely hazardous.
 Due to political influence PIA has to schedule its flights to the

unprofitable routs like northern areas and some other
countries. Whereas other private airlines don’t compelled to do
this.
 PIA flights are often late.
 Some of the aircraft handling equipment is out of date.
 Targets are most of the time unachievable for SPOs.
 Passenger sales development is not doing very well.
 Rude attitude of airhostesses has become a routine practice.
 Budget for tour promotion is not sufficient.
 There is no separate cargo aircraft in the fleet.
 MBO (management by objective) is not present and top down

approach of management is adopted.
 Manpower planning is not proper.
 Selection and recruitment process is not transparent.

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OPPORTUNITIES
As result of President Musharraf’s take over PIA has become less
politicized and a result its performance has also
substantially been improved and there are more chances
of improvement.
 Since PIA has a very well established training centre it can
easily expand its business and can also add latest aircrafts.
 PIA has got the lion’s share in domestic market.
 Privatization is being planned which can help improve its
performance.
 Pakistan has got great potential for tourism industry which is
also a great opportunity for PIA.
 On most of the international routes PIA is the only domestic
airline operating.
THREATS
According to an official 1100 employees are estimated to be
retired this year, which may create a huge gap of human
inventory so a massive recruitment is needed to be
launched.
 Undue political influences are the greatest threats to the
autonomy of PIA.
 Fuel prices are fluctuating and have become quite uncertain
especially after the 11-sep events which are threat.
 Other airlines are entering in this industry like “AIRBLUE”
which can be a challenge for PIA.
 Terrorism is also a threat for PIA.

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VALUE CHAIN ANALYSIS
Procurement
Support activities Technology development
Human resource management
Firm infrastructure
Marketing &
Operations
sales Services
Primary activities

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SUPPORT ACTIVITIES
Firm’s Infrastructure
From infrastructure point of view PIA has got a much bigger
infrastructure than that of Aero Asia. And in fact it is the greatest
strength of PIA which is extremely difficult by Aero Asia as it requires
huge investment. So PIA has got strong advantage over its competitors
in terms of its infrastructure like,
• Its very own training centre
• Own kitchen
• Sophisticated engineering department
Technological developments
It includes research and development, process automation, and other
technology development used to support the value-chain activities.
From technological aspect PIA has again strong advantage over Aero
Asia and also other domestic airlines. Recently PIA has replaced its
REPAK system with new and more advanced SABRE system.
From aircraft side as well PIA is superior to other airlines. Recently it
has signed an agreement with Boeing Company to purchase eight
Boeing 777 aircraft and has also planned to replace old Fokkers.
On the hand Aero Asia is using only kinds of aircraft Boeing 737-200
and Boeing DC-9 whereas PIA is operating around 15 kinds of aircrafts.
Human Resource
In today’s business arena of fierce competition it is the human
resource of an organization that wins it competitive advantage over its
competitors. Since PIA has got its own training centre it can train its
employees in a proper manner. PIA not only provides training to its

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own employees but also to some other international airlines like Saudi
and Qatar airways.
PRIMARY ACTIVITIES
Operations
These are the value-creating activities that transform the inputs into
the final product. But in airline industry it includes a bit different things
like flight operations etc. At PIA almost all of the functions are fully
computerized. For example PIA is using its very own developed
accounting software COSSIP III. Reservation is done through SABRE.
Sales and marketing: These include the activities associated
with getting buyers to purchase the product, including channel
selection, advertising, pricing, etc. PIA has got a well trained and highly
motivated sales promotion staff maintaining a long term relationship
with the agents to ensure improved sale and hence greater revenue.
With its aggressive and dominating advertising campaigns PIA has got
insurmountable advantage over its competitors. Especially by
sponsoring national sports heroes it has successfully built its image.
Services
These activities are those that maintain and enhance the product's
value including customer support, repair services, etc. In this regard
PIA’s public relation department is playing its role quite efficiently. It
closely monitors the developments involving PIA in all medias and
clarifies the corporation’s point of view. In this manner this department
helps maintaining a good public image of the corporation. Similarly any
inquiry or public complaints are dealt by this department.

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CORE COMPETENCES
Core competences should be created keeping view the following two

guidelines.
 Firstly, Core competences should be created through linkages

between various activities in the value chain so as to make them
difficult to imitate.
 Secondly, core competences should rest within the organization.
But in case of PIAC since it has got monopoly and there is lesser
possibility of its any competence being imitated, its core competences
rest even within its separate activities.

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Infrastructure: PIAC has the largest infrastructure and it would be
virtually impossible for any other airline company to establish such a
large well-integrated infrastructure.
Technology development: As mentioned above that
modernization is the hallmark of PIA. Its state of the communication
and other systems provides competitive edge over the others.
Human resource management: Since PIA has got its very
own well-established training centre, its employees are well trained
and more knowledgeable. The PTC (PIA Training Centre) covers all
areas of training from flight simulator to managerial areas.
Possible linkage
Technology development & Operations:
PIA can well perform its operations with the help of its technologically
advanced communication, reservation and accounting systems.
In fact PIA has no real competitor at domestic level so no reasonable
competition exists.
However, on the basis of above mentioned competences it can easily
outperform any existing or potential competitor.

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FINANCIAL ANALYSIS
• CURRENT RATIO:
Current assets divided by current liabilities. It shows a firm’s ability to cover its current
liabilities with its current assets.
Standard For C.R. 2:1
YEAR CALCULATION CURRENT

RATIO
1998 11,178,062
18,353,959 0.61
1999 12,449,200 0.58
21,520,789
2000 9,897,032 0.37
26,649,062
2001 11,343,082 0.40
28,483,770
2002 14,696,308 0.48
30,905,084

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INTERPRETATION
Current ratio has been decreasing since 2000. But there is some improvement in
2001 and 2002. Comparing internally for three year PIA current ratio has
gradually decreased from 1998 then there is slightly increased from 2001, this
improvement is considered nominal. So we can say that PIA is maintaining its bad
liquidity position. This gradual decrease was due to current maturities of long term
debt, creditors, accrued expenses and other liabilities. On the assets since there
was a decrease in stores and spares from 1999 to 2000, then there is improvement
in current assets. Overall, it presents management deficiency and co.’s less ability
to pay its current liabilities.
 DEBT-TO-EQUITY RATIO
Ratio that show the extent to which the firm is financed by debt
Debt-to-equity ratio = Long Term Debt
Shareholder’s Equity
YEAR CALCULATION RATIO
18,623,148
1998 4,287,994 =4.34:1
1999 18,603,397 =8.32:1

2,235,880
2000 14,622,154 =4.77:(1)

(3,062,943)
2001 15,946,821 =3.29:(1)
(4,843,936)
2002 11,250,674 =19.74:1
569,987

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INTERPRETATION
To assess the extent to which the firms is using borrowed money this ratio is used .
It shows that creditors are not providing more loans to the PIA because of losses
and especially due to the negative equity in 2000 and 2001. External finance is
consistently declining .In recent year equity has become positive.
 INTEREST COVERAGE RATIO

Earning before interest and taxes divided by interest charges. It indicates a firms
ability to cover interest charges.
Earning before interest and taxes (EBIT)
Interest expense
YEAR CALCULATION RATIO

1998 4,966,831 =1.84
2,696,249
1999 227,259 =0.14
1,680,193
2000 (2,864,463) =(1.18)
2,437,162
2001 718,730 =0.28
2,600,574
2002 4,463,087 =1.90
2,352,263
INTERPRETATION

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This ratio is designed to relate the financial charges of a firm to its ability to
serve or cover them. This ratio serves as one measure of the firm ability to meet its
interest payment .In general higher the ratio, the greater the likelihood that the
company could cover its interest payments without difficulty. In 2000 the ratio is
(0.18), it means that company has no sufficient income to meet its financial
charges. It had very alarming situation in 2000 there was little bit improvement in
2001 and the situation is quite good in 2002 to meet the financial charges.
PROFITABILITY RATIOS:
Profitability ratios are of two types. The ratios showing profitability in relation to
sales and those showing profitability in relation to investment. Both of these ratios
indicate the firm’s overall effectiveness of operations.
PROFITABILITY IN RELATION TO SALES

GROSS PROFIT (LOSS) MARGIN
= Gross Profit (Loss) x 100
Net Sales
NET PROFIT (LOSS) MARGIN
= Net Profit (Loss) after taxes x 100
Net Sales
YEAR G.P. Margin (%) N.P. Margin (%)
1998 6.05 3.84

1999 (2.54) (5.78)
2000 (7.54) (13.54)
2001 0.84 (5.06)
2002 12.77 4.29

32
INTERPRETATION :
Gross profit (Loss) margin ratio tells us the profit of the firm relative to
sale, after deducting the cost of producing the goods. It is a measure of the
efficiency of the firm’s operation. In 1999 and 2000 it was negative but in 2001 it
recovered and in 2002 there is reasonable G.P. of 12.77% it is due to the reduction
of costs and expenditures.
The net profit (loss) margin is a measure of the firm’s profitability of sales after
taking into account all expenses and income tax. This ratio shows the same
fluctuation as in case of gross profit margin.
PROFITABILITY IN RELATION TO INVESTMENT

RETURN ON INVESTMENT (ROI)
= Net profit (Loss) after taxes x 100
Total Assets
RETURN ON EQUITY (ROE)
= Net profit (Loss) after taxes x 100
Shareholder’s equity
YEAR R.O.I. (%) R.O.E. (%)
1998 4.87 46.85
1999 (4.95) (91.78)
2000 (13.9) (13.39)
2001 (5.57) (45.53)
2002 4.38 329
INTERPRETATION
ROI reflects profitability on the assets. PIA was maintaining loss on assets
till 2001 but now there is positive value of 4.38%. It goes in its favor and it is
mainly due to the decrease in costs and expenditures.

33

It was very bad situation of ROE because there was negative equity and net loss
till 2001 but now situation is changed and there is net profit and positive equity
resulting in 329% ROE.

34
CONCLUSION
Pakistan International Airlines Corporation (PIAC) is a giant

organization and enjoys complete monopoly at national level. Being a
semi government organization, PIA is highly affected by any change in
political or economic frontier. Airline industry due to heavy capital
requirement poses great barrier to entry. So PIA has no literal threat of
any potential competitor. As far as core competences of PIAC are
concerned, even its single activities are not less than its competences,
e.g. huge infrastructure, technologically advanced operational system
and a well established centre to train its workforce. Any a few linkages
can be created like between technology development-operations and
human resources-operations. PIA’s generic competitive strategy can be
categorized as differentiation, as it provides top quality services but at
comparatively higher prices. PIA’s management style is centralized and
the direction of strategy development can be viewed as market
development. Its financial position has also been improved over the
year due to sound management policies (cost controlling measures are
the important ones).

35
SUGGESTION
Following steps can be recommended in the light of PIA’s current
performance.
• PIA’s performance can substantially be improved if government
reduce its intervention in the internal affairs of the corporation.
• Duplication of work should be eliminated to save time and cost.
• NO SHOW ratio should be controlled to zero to increase revenue.
• Corporate loyalty should be inculcated in the employees to increase
their productivity.
• There should be a fair and just promotion criteria. In PIA most of the
employees have been working at the same posts for a long period
of time.
• In PIA decision making is centralized and no concept of MBO. A
more bottom up approach should be adopted to involve the lower
level in decision making process.
• Proper man power planning is the need of the hour at PIA as
according a recent estimate 1100 employees are going to be retires
every year which can create a serious human resource problem.
• Special cargo aircraft should be included in the fleet.

• PIA should improve quality standards by benchmarking and try to
improve its standards up to other international airlines.
• PIA should give due importance to its passengers. Passenger’s
complaints regarding Award Plus program should be removed.

Pia

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CONTENTS

PIA: Great People to Fly With

PIA began operation on Karachi-Dhaka sector with three aircrafts in

Department of Management Sciences

PIA: Great People to Fly With

PAKISTAN INTERNATIONAL AIRLINES (P.I.A)

Management and Staff

WIDE BODIED MEDIUM RANGE

NARROW BODIED MEDIUM RANGE

Department of Management Sciences

PIA: Great People to Fly With

Note: Out of 6 B-747-223 B (S/C/D), 2 were bought from TAP &

PIA HAS PREVIOUSLY OPERATED THE FOLLOWING AIRCRAFT:

PIA: Great People to Fly With

Mission statement is an overriding statement inline with business and

 Key success factors

Department of Management Sciences

PIA: Great People to Fly With

 Organization philosophy PIA believes in competition. It

 Target market: PIA has always kept its market broad. If we

Department of Management Sciences

PIA: Great People to Fly With

I. To provide and further develop safe, efficient, adequate,

Department of Management Sciences

PIA: Great People to Fly With

MANAGEMENT STYLE OF PIAC

Department of Management Sciences

PIA: Great People to Fly With

PIAC being a semi-government organization is highly sensitive to the

One of the reasons is the bold stand of President Musharraf in response

Department of Management Sciences

PIA: Great People to Fly With

PIA is also keeping an eye on the socio-cultural environment. It

Department of Management Sciences

PIA: Great People to Fly With

Department of Management Sciences

PIA: Great People to Fly With

FIVE FORCE ANALYSIS

THE THREAT OF ENTRY

Capital requirement of entry:

Cost advantages independent of size:

Department of Management Sciences

PIA: Great People to Fly With

POWER OF BUYERS AND SUPPLIERS AND THREAT OF

Department of Management Sciences

PIA: Great People to Fly With

COMPETITION AND COLLABORATION

Department of Management Sciences

PIA: Great People to Fly With

GENERIC COMPETITIVE STRATEGY

Department of Management Sciences

PIA: Great People to Fly With

DIRECTION OF STRATEGY DEVELOPMENT

In PIA, the direction of strategy development can be viewed as

Department of Management Sciences

PIA: Great People to Fly With

INTERNATIONAL AND DEMOESTIC ROUTE MAP

Following are the strengths of PIA.

 PIA is as old as the nation itself. So its reputation is its most

Department of Management Sciences

PIA: Great People to Fly With

 PIA is semi-governmental organization. So its interests rest

 PIA covers domestic and international destinations more than