RESEARCH REPORT

Submitted to

Asstt Prof: Muzamil Aftab Qureshi

Topic: Drowning PIA

Submitted by:

Sadia Rizwan Baig Roll No: 1 BBA Hons

ACKNOWLEDGEMNT
When I start writing, I stop for while and think what to write? How to write? I have no words to express my feelings. But I have to write to offer my humblebees sense to ALL MIGHTY ALLAH The most beneficial, gracious and merciful who enable me to perceive higher ideas of life and helped me throughout my life especially in writing this report and all blessing to His favorite PROPHET MUHAMMAD (PBUH) who is the greatest personality of this universe. After God I owe my heartiest gratitude to my parents and my family whose prayers encouraged me to complete my task. I am also extremely thankful to my teacher Sir Muzamil Aftab Iftikhar Qureshi for his sympathetic treatment, reward less help, precious suggestions, constant encouragement and personal interest and kind guideline that enable to write my report.

SADIA RIZWAN BBA HONS

INTRODUCTION

AVIATION: Man always wants to travel from one place to another with the priority of less time because he wants to save the time in this running world For the ease of human being to travel or to send the freight aviation plays an important role .From the management point of view here under are the worlds important Air lines are overviewed. This can help you to understand of the importance of the aviation industry for a country. Following are the world leading Air lines which are generally overviewed. EMIRATES: An emirate was founded in 1985.It carries the flag of United Arab Emirates based out of Dubai. It is the largest Air line in the Middle East operating over 2400 passengers flight per week. It has total fleet of 150 planes. It receives the best Air line award 2011. COPERATE MANAGEMENT: It is the subsidiary of the Emirates group. The Air line has a recorded a profit every year. The growth has never fallen below 20% per year.

FINANCIAL AND OPERATIONAL PERFORMANCE:

YEAR ENDED PASSENGER FLOWN TURNOVER NET PROFIT

31-3-2011 31-3-2010

31,422.00 27,454.50

54,384.00 43,455.80

(+) 5,441.00 (+) 3,538,000

31-3-2009

22,730.9

43,266.3

(+) 981.676

31-3-2008

21,229.2

1,282.1

(+) 5,020.545

31-3-2007

17,5441

29,839.6

(+) 3,096.416

Govt Share

DOMESTIC NETWORK OF PIA

INTERNATIONAL ROUTE MAP OF PIA

VISION
PIA vision is to be world class air-line meeting customer expectations through excellent services, on time performance, innovative products and obsolete safety.

MISSION
Developing safety culture. Using state of the Art technologies. Ensuring cost effective measures in procurement operations. Offering quality customer services and innovative products.

HISTORIC ACHIEVEMENTS OF PIA

 First airline from an Asian Country to fly the Super Constellation. First airline to operate a jet air craft. First airline in Asia to induct the new technology Boeing 737-300 air craft. First airline in South Asia to introduce auto-ticking facility. First airline to start air safari with jet aircraft. PIA flight services dept was awarded the ISO-9001-2000 certification award during May 2006 and many more.

VALUES Customer expectations:

Convince, caring and competitive tariff.

Service:
Personalized and Courteous.

Innovation:
Cherishing new ideas, Translated into actions.

Integrity:
Business Ethics, Accountability. Safety: Passenger, Employees, Health.

BOARD OF DIRECTORS The board of directors consists of nine non-executive members including Chairman, who takes wide descions that effects the whole organization, details are as under: Ch Ahmad Mukhtar ( Minster of Defense) Malik Nazir Ahmad Mr. Javed Akhtar Dr. Waqar Masood Khan Mr. Husain Lawai Lt Gen (Rtd) Syed Ather Ali Capt Nadeem Khan Yousafzai Makhdoom Syed Ahmad Mahmood

 Mr. Yousaf Waqar STRUCTURE ( HIERARCHY) Managing Director Chief Financial Officer Director Corporate planning Director Engineering & Maintenance Director Finance Director Flight Operations Director Information Technology Director H.R Director Marketing Director Training & Development Director Procurement & logistics

REVENUES:
Year REVENUE MILLION PROFIT ( LOSS) MILLION (20,785) (5,822) (36,139) (13,399) 18,019 17,944 18,036 18,149 EMPLOYEES

2010 2009 2008 2007

107,532 94,564 88,863 70,481

2006 2005 2004

70,587 64,074 57,788

(12763) (4,412) 2,703

18,149 19,263 19,634

RESEARCH METHODOLO 2.1

QUALITATIVE ELEME

I had a focus meeting with two of financial position of PIA

2.2.2

QUANTITATIVE E

Quantitative part of report is base questionnaire is to measure the f

SECONDARY DATA

The secondary data was got from th data in this research mainly got from

2.4 RESEARCH INSTRUMENT 2.4.1 RESEARCH INSTRUMENT CONSTRUCTION

A blend of qualitative and quantitative questions has been used.

2.4.2 INSTRUMENT VALIDIATY AND RELIABILITY

The instrument is reliable in that it contains specific questions for the required objectives the open ended questions are provided with specific categorical options. The validity of the questionnaire can be judged by the fact that it is given to the potential respondents.

2.5 PROCEDURES DATA COLLECTION AND SCREENING PROCEDURES

Data has been collected through research papers questionnaires, and from PIA website.

2.6

SUMMARY

In order to achieve the study objectives, a pains taking effort has been made to construct a questionnaire in which every question has corresponds to the objectives. The questionnaire contains open- ended as well as close ended questions.

DEFINING THE PROBLEM

Problem is that that the PIA was getting in loss from previous years. No serious effort is made to over-come the losses. During the last year PIA has sustained the loss of $301millon.Operationally it was black listed by EUROPEAN UNION in 2009 PIA has lost its market share in the domestic airline market which has dropped to 48%.in the financial year of 2010.

WHAT I STUDY?
After studying the last five year income statement of PIA it was alarming that PIA was getting in loss from 2005 to till 2011. Every year its market share was dropped, its number of employees is increased, continuous management lapses, poor services, and ranked as 3 star airlines from SKYTRAX.

FINANCIAL LOSSES AS CULCULATED. PROBLEMS

The major problems faced by the aviation industry of Pakistan revolve around low volume off air passenger , undeclared price war on the domestic sector and foreign sector as well, extremely poor financial health of the national airline, absence of a Level playing field.

CRITICAL SITUATION OF PIA TODAY

Today the situation of PIA is really critical and I have to analyze it to some extent. The PIA board of directors will be presented a delayed budget for 2010projection losses of about is 14 billion as against the estimated losses in2009 running close to 17 billion. (PIA sources).

LOSSES OF 2008 2009 AND 2O10

PIA suffered a loss of Rs 12.7 billion in 2008. And Rs14 billion in 2009 and in 2010 it suffered Rs19 billion loss. I also calculated per day and per hour loss.

PER DAY LOSS

PIA is losing over Rs 40 million in every single day.

PER HOUR LOSS.

PIA is facing over Rs 2 million losses in single hour.

FINANCIAL PERFORMANCE
During the first quarter of 2009, the airline achieved a 3% growth in overall revenue Mainly supported by 5.4% decrease in passenger revenue which was partially lowered by a 10% reduction in cargo revenue. The revenue growth was reduced due to the EU ban which meant only the Boeing 777 were able to operate into Europe. This caused many of the European services to be put on hold until the aircraft that were considered to be inefficient to be brought up to EU standards so they can continue flying. Even with the fuel cost remaining at the 2009 level due to stable oil prices in the first quarter 2008, the operating and financing cost increased in proportion. The impact of 2007 salary hike, increased cost of leased aircraft and higher maintenance cost of PIA fleet increased the overall operating expenses by 32%. Consequently, the airline suffered an operating loss of Rs 301 billion in the first quarter.

MARKET SIZE AND MARKET GROWTH

The total market size of the year 2010-11 was 7.27 million passengers compared to 7.77 million passengers for the year 2009-10, therefore resulting to as in increase in losses of PIA.

After studying the different sources of PIA I come up with following causes for the poor financial losses.

OVER STAFFING.
One source of PIA inefficiency was the over staffing over the past 20 years that has crippled the organization finances.

HIGH OFFICIALS.
Another reason for losses was that the high officials of pia are travel abroad with their families on the expense of PIA.

NEPOTISIM AND POLITICAL INVOLVEMENT.

PIA being government organization has strong influence of the political and govt officials. Research says that the chairman of PIA appointed his own friend as DIRECTOR of MIS at a very heavy salary. Selection and requirement was not done on merit. The previous deputy managing director was pilot by profession and appointed as deputy managing director, and sometimes flies for some hours to keep his license on.

LOW SCALE ADVERTISEMENT AND AWARENESS.

No advertisement and awareness in such a modern era of marketing. Cricket stars and sportsmen are hired on heavy salaries but with no profit to organization. No such efforts are made to enhance the brighter and soft image of air- line.

AGED FLEET.
PIA has been of total 43 planes out of those only 31 are operationally at the moment. The average age of fleet has become 13 years with the introduction of 4 new planes. Due to aged fleet the fuel consumption was increased and the maintenance expense was also increased. PIA has to pay high amount in terms of insurance cost.

CORRUPTION AT ITS PEAK

.Corruption was at its peak in PIA. Sale of ROOSEVETT HOTEL in Dubai is clear example of this. The hotel was valued about 1 Billion but it was sold only in 40 Millions. The sale of PIAS

kitchen in KARACHI is another example of it. There is a profit making unit of company that was sold. It was sold confidentially.

INCREASE IN EXPENSES
During research I find, that many of the expenses at very high rate which causes loss to PIA. These expenses are fuel cost that increases due to rapid increase in oil prices in recent years. Repairing expense also becomes the major of the cost that is very high as compared to other companies of airline business.

LAPSES IN MANAGEMENT
The PIA management is inefficient to resolve and plan at the right time. Strikes by the engineers and pilots also happen due to mismanagement of PIA.

LACK OF CHECK AND BALANCE.

As there is no co ordination between the departments, so there is no check and balance on employees, staff, and on over all function of PIA.

LACK OF EXPERTISE
In PIA they dont have expert employees in each department, whether it is Marketing, Finance, or H.R. The departments are running on outdated staff. The element of favoritism is also present in this category because if you heir the staff just on the basis of relationship rather than education it always create problem for all the organization.

FINANCIAL ANALYSIS--------------- A HOT RECAP

Year 2009 and 2008 did not bring any significant improvement in the financial performance of PIA. The problems of past years recurred and compounded to give the company a higher net loss for the both years .A brief recap of 2007 reveals that during the year the company experienced a series of financial, and operational problems. In the early part of the year, imposition by the EU caused considerable disruption in the PIA schedule as well as significant curtailment in the capacity. The unprecedented hike in oil prices adversely impacted PIA;s bottom line PIA late starter was unable to hedge the risk against the high oil prices and thus had to absorb the burden of expensive fuel. In 2010 PIA suffer a loss of $20 million in the just first quarter of the year. From last two years PIA was always targeted by the politics. The most glaring feature of the year 2010 is that during the three year tenure of previous MANAGING DIRECTOR Capt. Aijaz Haroon, the air- line incurred a loss of its 55 years history. According to chairman report the total outstanding liabilities and obligations of the PIA were PKR183, 277million as on Dec 31 2010.

Reviewing PIA profit /loss picture over a period of last 30 years, it is observed that until the year 2001, the airline accumulated a losses of 11 billion and had three profitable years with new management. The rot started when Shaukat Aziz, the then Prime Minister appointed his friends Tariq Kirmani and Zafar Khan to head the airline and the debacle did not stop there till Aijaz Haroon brought it to the point of bankruptcy. As accumulative results of one PIA traffic performance in the last quarter of 2009 has been quite promising. This together with the drop in oil prices and relative stability in Pakistani rupee in 2009 has had a salutary effect for the 4th quarter. H air line has moved close to breakeven point in the 4th quarter of the year 2009 The loss in2008 was mainly caused by two factors .Firstly, the PKR Rupee lost its value against the US dollar, contributing to a net exchange loss of PKR 24.1 billion. Secondly the crude oil prices sky rocketed in 2008, reaching the highest ever- level of US $147/barrel in July.

PIA AT BOTTOM LINE

Revenues Revenue Net

Dec 31 2010
79,817,592 5,458,688 875,530 183,806 686,755 936,578 9,205,365

Dec 31 2009
62,002,315 4,849,735 865,657 163,806 712686 718,333 7,546,179

Passenger Cargo Excess baggage Charter Handling & related Services Engineering Services Room, food, bewares

PRIMARY DATA ANALYSIS

For the primary data analysis following methods are used

SCALAING
The scaling which is used the respondents would be given a questionnaire for which they have to mark their preference from the given multiple choices

PERCENTAGE
After getting the results from scaling %ages of results will be calculated the formula for this calculation is % no of respondents *100 Total no respondents

RESULTS AND DISCUSSION

I will discuss the questionnaire results and discuss various factors behind the poor condition of PIA.

SURVEY RESULTS

In Flight Services includes consumer liking towards the in flight

services such as meal, security and comfort

68% people are not satisfied with the meal 57%people are satisfied with the security 43% people are not satisfied with comfort Passengers view about flight timing
About only 35% people are satisfied with the timings of departure / arrival.

Reservation systems for tickets 53% people are satisfied

12% people are somewhat satisfied 35% people are dissatisfied Staff Attitude 80% people are dissatisfied with the attitude of staff

.SWOT

ANALYSIS OF PIA

STREGTHS Point to point services.[Lahore to London] Government sponsored organization Perfect timings People oriented organization [no language problem] Healthy internal environment Leading airline in Pakistan

WEAKNESSES Less international traffic High fares Weak rewards and appraisal Low salary of engineers Lack of professionalism Less effort in the field of marketing Over burdened employees Poor management OPPORTUNITIES Traffic ethnic Better recruitment policy Low cost carriers Big markets available that are un served THREATS Fluctuating oil- prices High amount of loan Government changing Busy flight schedule Terrorism Privatization.

CONCLUSIONS:
From the above Swot Analysis I came with certain conclusions about PIA.PIA should upgrade its old ageing fleet as it is causing major PIA financial loss because of fuel prices has fluctuating in the international market. PIA has still old fleet, which causes higher operating cost. Another burden on PIA is it has the highest numbers of employees as compare to other airlines as number of persons per aircraft is highest. No proper check and balance system was implemented. Many employees in PIA receive heavy salaries such as PIA Security guard receives RS 40000/ per month, wages are not given according to services of employees. Political influence is major factor to bring PIA at her lowest level of performance. Recruitment of employees as compare to air blue without merit is second major factor. If hajj flight operation is not available to PIA, then PIA will be drowned within a month.

RECOMENDATIONS:
Decentralization: PIA should decentralize its structure that would lead to the easy management and increase the motivation. Strategic Business Unit: PIA should make its different department into strategic business unit. Every SBU should have a defined business strategy. Employee Empowerment: PIA should make efforts towards empowering the employees that is going to lead to more employees participation in decision making processes. Overhead Costs: PIA should reduce its over head cost that is it should manage its resources.

References:
PIA Wikipedia Gohar .com (PIAs downhill slide into heavy losses in 2010) wwwscribd.com/doc/61307853/pia www.scribd.com/doc/20490113/pia-project M.Asharaf (salary maintainer PIA Islamabad) Attaullah Khadim Finance department (PIA Faisalabad) Express Tribune 26th February 2011.

QUESTIONNAIRE
NAME------------------------------------I am a student of AIR UNIVERSITY and conducting a research on the measurement of satisfaction level of passengers of PIA which has a direct impact on PIA financial position. Gender Male Female Age 15-30 30-45 45-60 Frequency of travel Weekly Monthly Yearly Reason for preference Economical Comfortable Efficient services Which class do you prefer to travel? Economy Business Reservation system for tickets Satisfied Dissatisfied Somewhat satisfied Arrival/departure timings Satisfied Somewhat satisfied Dissatisfied Extra luggage facilities Satisfied Somewhat satisfied Dissatisfied Security of passengers and luggage Satisfied Somewhat satisfied Dissatisfied

Entertainment facilities during flight Satisfied Somewhat satisfied Dissatisfied Staff attitude Satisfied Somewhat satisfied Dissatisfied Political factors are affecting PIA performance Agreed Somewhat agreed Disagreed

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