Pia

11/18/2014

Economic

Development of

Pakistan IMPROVEMENTIN TRANSPORT AND

COMMUNICATION SECTOR, PIAC

AS CASE STUDY

INSTITUTE OF BUSINESS AND TECHNOLOGY (IBT)

PAKISTAN INTERNATIONAL AIRLINE (PIA)

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ACKNOWLEDGMENT

First and foremost of all we would like thank Allah Almighty, for without Him, none of this

would be possible, and then we appreciate the help and guidance of our lecturer Mr. Azhar Iqbal,

We have had throughout our semester experience. We are most grateful to his for assigning this

project, which has further helped us in evaluating many interrelated dimensions of research field.

We enjoyed working with his and appreciate his guidance.

While we are of course solely responsible for the content provided in our final project. We want

to thank several people for their constant support and encouragement. This includes the faculty,

our families and friends who guided us on every step of the project. Therefore we consider our

work incomplete until we record our gratitude to them.

Qazi Zuhair (Leader) BB-2170 Maaz Uddin BB-25227

Hassan Raza BB-26214 Wahaj Aziz BB-26124

Shah. Muhammad BM-26170 Fahad Ali BB-1976

Asad Hussain BM-26077


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EXECUTIVE SUMMARY

As we have visited Pakistan International Airlines because it plays major role in

economy transport and communication sector of Pakistan’s economy. We have

discussed in report further about the organization development project its

implementation process. P.I.A. organizational structure and its hierarchy. Problem

faced by P.I.A. Process of planning and implementation of development project in

P.I.A for induction of five new narrow body passenger aircrafts. Which are cost

effective their fuel consumption is lesser from previous fleet. Their maintenance

cost is low. Forecasting for these new fleet for next five years is calculated.

Different term related to revenue and passenger forecasting are discussed.

Recommendations for P.I.A. to grow efficiently, effectively, recover its liabilities

and losses. In this report references are also mention of those grateful personalities

of P.I.A. who provide us access to the information about organization’s

development project and our teacher’s guidance in preparation of this report.


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INSTITUTE OF BUSINESS AND TECHNOLOGY

ABSTRACTED SUBMITTED BY: Qazi Zuhair

Maaz Uddin

Hassan Raza

Wahaj Aziz

Shah M

Fahad Ali

Asad Hussain

DISCIPLINE: BBA (Hons.)

TITLE OF PROJECT REPORT: Transportation and Communication sector Of Pakistan

(Pakistan International Airlines)

MONTH OF SUBMISSION: November

NAME OF PROJECT SUPERVISOR: Sir.Azhar Iqbal


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TABLE OF CONTANT Introduction……………………………………..……05

Vision & Mission…………………………………..…06

Corporate Values …………………………………......07

Corporate Profile…………………………..………….08

Structure of PIAC…………..……………………........09

Problems with PIA Planes……………………………10-11

Developmental Projects Of PIAC…………………….12

Forecasting & Taxes…………………………………13-14

New Fleets Induction…………………………………15

Steps And Procedure of Leasing new Planes………...16-17

Recommendations………………………………….....18

Reference………………………………………..…….19

Letter Of Transmittal………………………………….20


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INTRODUCTION

Pakistan International Airline (PIA) is a national airline, 86 percent of shares are held by

Government and 13 percent held by public. P.I.A is operating passenger and cargo services

covering 82 domestic and foreign destinations. Established in October 1955, PIA is a vast

experience in the airline industry in Pakistan with a large fleet of air crafts. It Own 46

aircrafts.

PIA is a huge corporation with more then 18000 employees. The organization is divided

into following departments: HR, Marketing, Corporate Planning, Information services,

Finance, Flight services, Flight operation, Engineering, Procurement and Logistic,

Customer Services, Training, and Development, Quality Assurance. It is managed by

managing directors, as well as by 9 Board of Directors.

Air Commander Noor Khan was the first Managing Director of PIA & Mr. M.A. Ispahani

was the first Chairman. Its hierarchy flows from top level to lower level of management.

PIA is fully centralized. Main headquarter is located in Karachi.


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VISION OF PIA

PIA’s vision is to be a world class profitable airline meeting customer expectations through excellent services, on-time performance, innovative products and absolute

safety.

MISSION OF PIA

Employee teams will contribute towards making PIA a global airline of choice

through:

Offering quality customer services and innovative products

Using state-of-the-art technologies

Ensuring cost-effective measures in procurement and operations

Developing Safety Culture


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CORPORATE VALUES

Customer Expectations

(Convenience, Care, Affordability)

Service

(Personalized, Courteous, Passionate)

Innovation

(New Ideas, Products, Value Added Services)

Cohesiveness

(Respect for Individuals, Teamwork and Effective Communication)

Integrity

(Business Ethics, Accountability, and Transparency)

Reliability

(Loyalty and Consistency)

Safety

(Passengers, Employees, Environment)

Social Responsibility

(Welfare, Health, Education)


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CORPORATE PROFILE

BOARD OF DIRECTORS

Syed Ali Gardezi

Federal Secretary Aviation and Acting Chairman

Mr. JunaidYunus

Managing Director

Mr. Ghiasuddin Ahmed

Malik Nazir Ahmed

Syed Yawar Ali

MrAtifAslamBajwa

Dr. AslamKhaliq

Mr. Waqar Masood Khan

Federal Secretary Finance

Mr. Muhammad AzamSaigol

Mr. Younus M. Khan

Secretary-PIA

Mr. Jawed Mansha

Chief Internal Auditor (Officiating)

EXTERNAL AUDITORS

Messers A.F. Ferguson & Co.

Chartered Accountants

Member firm of PriceWaterhouse Coopers (PwC)

Messers .YousufAdilSaleem& Co.

Chartered Accountants

Member firm of DeliotteTouche. Tohmatsu


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Structure of PIAC

FINANCE MARKETING IT HR

Revenue

Accounting

Funds Management Budget & Financial

Monitoring

Accounting

Costing Budget

General

Accounting

Provident Fund

Financial

Settlement

Disbursement

PAX Revenue Cargo Interline Station Control

Interline

Cargo

Misc.

Agents sale

Credit Control

International sale

& Refund

Domestic sale&

Refund

Sales balancing

TCN

Credit Card

Lift


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PROBLEMS IN P.I.A.

Rising fuel prices globally:

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.

Global impact of 9/11 on Aerospace and Aviation industry of Pakistan:

After the 9/11 attacks air traffic has been decreased all over the world. It has

affected Pakistan international Airlines also. Passengers are more inclined

towardstraveling to other countries such as European countries. Air traffic in Asia,

especially in south Asia has decreased.

Aged fleet:

Pakistan International Airlines fleet has total 43 planes. Out of those 43, only 33are

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

these factors result in increment in expenses. Due to the aged fleet andmaintenance

problem PIA has to pay higher amount in terms of insurance cost.


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Maintenance problems:

Besides having a large number of engineers, there is always been a question

mark on PIA’s fleet maintenance. Last year 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

competitorssuch 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-in

capability 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 insufficient 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.


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DEVELOPMENT PROJECT OF P.I.A.

PIA is Pakistan’s only government owned airline. It is also Pakistan’s largest airline in terms of Passengers, Destination and Fleet size (aircrafts).

Improved seat factor of 75% previously in 2013 was 73%

Coupled with 11.7 % increase in yield

That posted a healthy impact of format 15 % increase in revenue

Load factor and cargo yield registered a decline of PKR 726 million in cargo

revenue

The decision of induction of fuel efficient 5 narrow body aircraft

Which will increase its operation and maintenance cost for previous

aircrafts

Fuel cost in percentage of revenue remained 50.51% from year 2013 was

57.12%


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Forecasting

New Fleets 2015

No. of new aircraft 5

Seat Factors 78.3%

Yield 17.4%

Revenue forecasted PKR 4115706

Variable Operating Cost (2349108)

Direct Fixed Cost (1702531)

Revenue/ Contribution 64067

2015 Forecasted 198141

Fuel

(50% of expensive parts of old

aircraft)

(1056891)

Salary Each Year 5%

Maintenance

(previous aircraft were less fuel

efficient and 25 years old aircraft)

(809310)


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Forecasting Of 6 years

2016 591862

2017 607545

2018 702999

2019 744491

2020 798448

2021 857420

TAXES.

Pakistan International Airline (PIA) takes some taxes with fare which includes,

i. Central Exercise Duty (CED) 15% of Fare.

ii. Embarkation Fee Rs.120

The CED goes to the Government and Embarkation fee goes to Civil

Aviation Authority (CAA).

DIFFERENT FARES

1) PIA has different fares for different age group:

Adult Full Fare.

Child 50% Fare (below 12 years).

Infant 10% Fare (below 2 years).


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2) PIA has different fares for different people:

Groups

Family.

Senior Citizen.

Journalist

Handicap

Industrial people

Defense People (APW)

Induction of New Fleets:

Boeing 777-300ER,777-200ER,777-LR

ATR 72-500

Airbus A320-200 , A320-321, A320-319

These aircraft variants have mainly the difference of seats from each other. The

term yield is used in aircrafts passengers revenue forecasting and in P.I.A

revenue gained from passengers is termed as “Pax Revenue”. Yield is calculated from past experience of passengers traveled including a percentage

of infants, old aged, and discounted passengers.

Forecasting includes number of Passengers and numbers of routs planning

(international and domestic). P.I.A. is having 32 domestic destinations and 30

international destinations.


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STEPS AND PROCESS OF INDUCTING OF NEW AIR CRAFTS

Planning number of aircrafts to be inducted

Procurement Advertisement according to PPRA (Public Procurement

Regulatory Authority) rules advertisement must be given within 30 days. Then

proposal of aircrafts would be analyzed with technical and financial evaluation.

In results of this PIA and PPRA will evaluate and prepare each aircraft separate

evaluation reports.

Letter of Intent (LOI), terms and conditions, delivery, timing, place, insurance,

maintenance and transfer security deposit which can be refundable if conflict

arises due to costing.

After this agreement is signed with the approval of board of directors.

In last a Contend Negotiation team is formed to settle the deal completely in

general term agreement is signed according to technical and engineering

perspective. Different agreements also took place in this last step.


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Induction of New Fleets

Letter Of Intend

(LOI)

Procurement with PPRA

Planning

Done/ Transferred

Contend Negotiation

Agreement


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Recommendations:

Right sizing of employees is necessary because it is necessary to put right

candidate at right place.

Restructuring of the department.

Paper work should be reduced or near to eliminate and everything must be

online. It will reduce the paper cost, cost of maintenance and also time

saving.

Should concentrate on present employees instead of hiring new ones.

The condition of the current available aircrafts should be improved to make

the travelers aware that travelling with PIA is safe; it will also increase rate

of flights.

Frequency of flights should be increased. It will create a huge impact

because passengers are demanding more frequent flights to travel.

Fleet size should be increased by adding new planes; this will also help

attract passengers who are not travelling through PIA because of less

availability of flights.

Government influence should be minimized as it is also considered as one of

the biggest reasons of PIA’s downfall.

PIA should take more fuel efficient narrow body fleets for bright future of an

organization.


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REFRENCES

General Manager Corporate Fleet Planning

(Mr. Zulfiqar Ahmed Shaikh).

General Manager Human Resource Management-Special Projects

(Mr. Qazi Ata-Ur-Rehman).

Manager Coordination Marketing Department

(Muhammad Abubakar Wyne)

Manager Pax Revenue

(Mr. Agha Hassan Abid).

Senior Officer Credit Control

(Mr. Waqas).


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LETTER OF TRANSMITTAL

Sir. Azhar Iqbal

Instructor

Institute of Business & Technology (IBT),

Gulshan Chorangi, Karachi.

18th

November 2014

Dear Sir,

We are pleased to inform you that the Term report you assigned for 18th

November, 2014

has been completed.

We have chosen Pakistan International Airline (Transportation sector) induction of new fleet as our

topic for the report. This report as per your instruction has covered all the authentic areas of

concern and contains all the relevant information.

We would dearly like to thank you for the faith you showed in our capabilities & the

encouragement you gave us when assigning us the report.

If there is anything else you wish to know we will be glad to assist.

Yours sincerely,

Qazi Zuhair BB-2170

Maaz Uddin BB-25227

Hassan Raza BB-26014

Wahaj Aziz BB-26124

Shah Muhammad. BB-26170

Fahad Ali BB-1976

Asad Hussain BM-26077

Pia

Business

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