Services Report Final

8/6/2019 Services Report Final

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The analysis of the Airline Industry of

Pakistan

VS

Submitted by:

Muneeb Iqbal

MAriam Salim

Aasma Gul

Fahd Choudry


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Table of Contents

INTRODUCTION ....................................................................................................................................... 3

BACKGROUND OF AIRLINE INDUSTRY IN PAKISTAN ............................. .............................. ....................... 3

OPEN SKIES POLICY .......................................................................................................................... 4

PRIVATE AIRLINES ............................................................................................................................ 4

PAKISTANS AVIATION POLICY .......................................................................................................... 4

CURRENT PAKISTAN SCENERIO ................................................................................................................ 5

PAKISTAN INTERNATIONAL AIRLINES ....................................................................................................... 7

AIRBLUE................................................................................................................................................... 8

CULTURE .......................................................................................................................................... 9

SEVEN CHARACTERISTICS OF ORGANIZATIONAL CULTURE ..................................................................... 10

COMPARISON: ............................................................................................................................... 10

COMPARISON WITH THE HELP OF OFFICIAL RATINGS AND CUSTOMER FEEDBACK ......................... 10

PIA Pakistan International Airlines official 3-Star Ranking of Product and Service Quality .... ............. 10

Customers point of view regarding the service of Air blue ............................. ....................... ................. 13

Average Ratings for Airblue www.airblue.com ............................................................................... 15

Domestic routes War: AirBlue growth beats PIA .................................................................................... 15

SWOT .................................................................................................................................................... 16

STRENGTHS .................................................................................................................................... 16

WEAKNESSES ................................................................................................................................. 17

C. OPPORTUNITIES ......................................................................................................................... 18

D. THREATS .................................................................................................................................... 19

SWOT PIA: ........................... ......................... ................................ ...................... ................................ .. 21

STRENGTHS .................................................................................................................................... 21

Weaknesses ................................................................................................................................... 22

Opportunities................................................................................................................................. 22

Threats .......................................................................................................................................... 23

Conclusion ............................................................................................................................................. 24


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INTRODUCTION

While the coming together of satellite communication and information technology has made

mass communication affordable and efficient for many people, air travel continues to remain

an important and integral requirement of all societies since it is an essential part of present day

lifestyle. Though just about one hundred years old, the commercial airline industry has come a

long way towards providing efficient, comfortable and affordable means of travel and trade. It

has successfully shrunk the world into a global village.

BACKGROUND OF AIRLINEINDUSTRYIN PAKISTAN

Pakistan International Airlines Corporation (PIAC) was established in 1955 and was the only

airline of the country. Since its infancy it has enjoyed the active patronage of successive

governments. Its initial leadership was dynamic and committed. Consequently, the airline was

established on a sound professional footing. This can be gauged from the illustrious record of

the airline in the 1950s, 60s and the 70s. At one stage during those decades, PIA was

considered the most vibrant airline in the Asian region. The development of the airline alsocontributed significantly towards improvement of its human resources and ancillary or support

infrastructure. This human resource, as indeed that which was produced by the Pakistan Air

Force, was to become the backbone of the aviation industry in general, and the airline industry

of Pakistan in particular.

However, the commercial airline industry has experienced rapid change in its regulatory

environment worldwide. The winds of change began in the United States, with the introduction

of the Airline Deregulation Act of 1978 and spread to Europe and gradually to the rest of the

world. After operating under strict regulation for nearly forty years, the airlines were given

freedom to choose the routes they served, and to set the prices they charged. Up to the early

1980s the regulatory aspects of the aviation industry were still evolving and the level of

liberalization varied from country to country. Whereas most of the countries have moved

rapidly, Pakistan is still in transition. The policy with regard to deregulation remains clouded

with uncertainties and lack of clarity. As a result, various segments of the industry remain

completely confused.

In 1982 the Pakistan Civil Aviation Authority (CAA) was created as a regulatory body through an

act of parliament, at the behest of the International Civil Aviation Organization (ICAO), to

govern and align civil aviation activities in the country with ICAO recommended practices. The

newly created CAA faced severe resistance from various professional cadres of PIAC. As the CAA

started to move forward, and made efforts to seriously undertake its regulatory duties,

the resistance from the national carrier started to take an ugly shape. Neither the government

of the time, nor the leadership of PIA and CAA made any meaningful and


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concerted effort to curb these unhealthy tendencies. This resulted in a gradual but certain

decline in standards in all areas of airline operations. It also led to professional compromises by

some CAA personnel. This situation was to become the main reason for the downgrading of

Pakistans CAA by ICAO a decade later.

OPEN

SKIE

S POLICY

In the early 1990s the government of Pakistan adopted an Open Skies Aviation Policy, and

signed a memorandum of understanding with a number of countries of the region and outside.

These exercises were undertaken in great haste without really understanding the implications

of Open Skies for Pakistans own carriers. PIA, which was at that time mainly dependent upon

domestic and ethnic passenger traffic, suddenly found itself competing with outside carriers at

home. The resultant chaos led to more confusion in the minds of unprofessional bureaucrats,

the regulatory authority and of course the national carrier. Each was looking myopically

through its own prism of interest, little realizing the negative impact of its actions, or inactions,

on the state of the civil aviation sector of Pakistan in general, and the airline industry in

particular.

PRIVATEAIRLINES

In line with global trends, and also as a consequence of our Open Skies policy, several local

airlines started to appear in the private sector during the 1990s. Most were set up with short-

term gains in view. They used old and inefficient equipment; lacked professional managements;

and they blatantly violated basic aviation standards and laws governing safety standards.

Sooner than later they also felt the heat of overt and sometimes covert competitive pressures

from PIA. Resultantly, several of these carriers lost money heavily and had to shut down

unceremoniously. Those that survived were nowhere close to the standards expected of decent

passenger carriers, with the exception of one or two. The reasons why PIA has managed to

survive, despite its under par and erratic performance, are: federal government patronage,

CAAs support to the national carrier, and a high average growth rate of passenger traffic of

around 8-10 percent per annum, to and from Pakistan, during the past 15 years.

PAKISTANS AVIATION POLICY

It must also be stated that Pakistans National Aviation Policy has been reviewed and revised

several times in bits and pieces, mostly by unprofessional bureaucrats and people with vested

agendas. It is now a moth-eaten document, which is perceived as protective and somewhat

tilted towards the national carrier. Nonetheless, neither the national carrier nor the airlines in

the private sector of Pakistan find the current aviation policy acceptable. This situation is a

major impediment in the orderly growth of the aviation industry in Pakistan. Lack of vision,

inability to use modern management tools and poor infrastructure, are some of the otherfactors responsible for this situation. In contrast, several smaller and lesser-developed

countries of the world, including a few in this region, have correctly envisioned and based their

national development plans on the back of their vibrant aviation sectors. Those who have

played their cards right, are reaping the fruits of their forward-looking policies. Others, like

Pakistan, which were unable to meet competitive demands, continue to be left behind. The

pace of growth in the region is now so rapid that within the next five years it would become


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next to impossible to catch up with the market leaders simply because of high investment costs,

and lack of professional human resources.

The Pakistan aviation industry was started up when Orient Airways merged with Pakistan

International Airlines Corporation (PIAC) to become the national flag carrier of Pakistan called

Pakistan International Airlines (PIA). PIA remained the only operator for many years after itscreation, but soon private airlines arrived at the scene to compete with the national flag carrier

as conditions of the country stabilized.

It was not early nineties there was a major growth in the Pakistani aviation market with four

new private airlines launching operations. The airline did very well to compete with the well

established flag carrier, PIA which was controlled by the government. However, this was not to

last as the UN placed economic sanctions on Pakistan that caused the airline market to suffer. It

caused two of the four airlines to file for bankruptcy and liquidate their assets. The airline

industry remained quite stable with PIA developing a strong hold on the international and

domestic market for many years. It was not until the early 21st century that the industry

started to pick up again that allowed the entry of a new carrier in the market, Airblue which

launched operations with new state of the art aircraft. As of August 2007, the aviation market is

developing and allowing more services and facilities to be inaugurated as well as the

development of a brand new airport to be built for the capital at Fateh Jang.

CURRENT PAKISTAN SCENERIO

An unbiased analysis of the current aviation scene in Pakistan brings out the following harsh

facts:

y Pakistan is inadequately and poorly served by its own and foreign carriers both forpassenger and cargo carriage. Lack of meaningful incentives to the industry does not

allow quality carriers to develop in the country.

y Our government has yet to understand the importance of civil aviation as a drivingforce in the growth of a developing economy. This is despite several high profile

examples within our region.

y Pakistans tourism industry continues to remain stunted because of many reasons: thisbeing so despite the existence of many attractions similar to those found in India, where

tourists flock in hordes, several coming on repeat visits. Apart from the questionable law

and order situation, lack of adequate support infrastructure, archaic laws, hostility of asegment of our society towards foreigners, there is also a lack of confidence in our

international carriers in terms of value for money, reliability, etc.

y The airport infrastructure is inadequate to handle the growing number of travelers, andtonnage of cargo, expected to be processed through these airports in the next 5-10

years. Additionally, there is a long over-due requirement of upgrading technologies


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existing at these airports. All this requires heavy expenditure, simply because little has

been done to update or upgrade these important facilities and operational equipment

on a regular basis.

y None of our airports is worthy of being called a world-class facility. Some are more likecrowded bus stations, and little else. Even security-related facilities at these airports arenot quite in line with global standards.

y None of our airports is capable of handling the new technology large aircraft such as theA-380, which is expected to start commercial flights in a couple of years. The passenger

handling facilities at the various terminals, as indeed the landing and parking spaces, are

also inadequate.

y All our civil airports are now in the middle of densely populated cities. Hazards forlanding and taking off aircraft are therefore on the rise. Bird hits are a common

phenomenon, resulting in frequent disruption of operations, inconvenience for the

traveling public, huge avoidable expenditures for the airlines, and most importantly, aserious safety concern for life and property. New airports need to be built away from

populated areas to service large passenger and cargo traffic in the coming years.

y The downstream industry in Pakistan, which is dependent for its survival on a thrivingaviation industry, also remains limited and weak. Investment in the hotel industry is

rather limited because of insignificant growth in tourism. Regular advisories against

travel to Pakistan by major governments do no good for this industry. Similarly, smaller

segments of the ancillary industries also continue to suffer heavily (transportation,

portage, catering, ground handling, etc).

yA vibrant airline industry plays a pivotal role in projecting a country, and improving itsglobal market image. Not so in Pakistan for reasons explained earlier. Our carriers,

airports, the personnel involved in public dealing within this industry, apart from the

retail outlets, hotels, restaurants, and transporters, etc., have all to play a part in this

important ongoing exercise. Of course, nothing can manifest itself on the ground unless

the government of the day ensures implementation and coordination of laws and

activities considered essential to achieve positive results in this regard.

y The national carrier has a long way to go in improving its service, image, and mostimportantly, its profitability. The government currently absorbs PIAs heavy losses on a

regular basis, apart from blessing it with concessions, some of which are not available toother airlines. Resultantly, PIA continues to monopolize the domestic market.

y No Pakistani carrier has made any significant contribution towards developing a decentcargo airline, or even bothered to undertake regular flights dedicated to carriage of

ever-increasing exportable goods and reciprocal cargo. As a result, foreign carriers are

the major beneficiaries of this business.


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AIRB

LUE

VISION OF AIRBLUE

To provide exceptional customer service at low prices

Established in 2003, Airblue is a private airline which offers passenger and cargo

transportation to both domestic and foreign destinations. There are nine destinations of

Airblue. It is credited as the first private carrier of Pakistan to operate the Airbus A320and

introduce e-ticketing, wireless check-in and self check-in kiosk facilities. The major

departments include: Human Resource, Marketing, Sales, Finance, Operations and SystemsSupport and IT.

The size of the organization is not as huge as PIA and mostly comprises of young employees. It

is the first airline to have employees trained according to international standards. It is

technologically advanced though the size of the fleet is not comparable to that of PIA. The

fleet size of Airblue is eight.

The organogram of the organization follows. It shows that the employees report to their

divisional heads that in turn are answerable to the Chief Executive Officer, catering to a nichemarket of corporate clients and the favorably rich, the aviation industry in Pakistan is invariably at the

cross roads of its life; having opportunities to jump on into as well as challenges that had to be taken

into account if any sustainable growth is to be expected.

The outcome of the open skies policy initiated by the government in 1992, the aviation

industry has come a long way in making a place for itself and needless to say is still in the

process of adjusting itself to the new realities and demands.

Airblue is fast becoming an airline of choice for the Pakistanis. Though PIA, the official airline is

still the premier one, but Airblue is rapidly gaining the ground. Though Airblue is not the best,


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its not the worst either. The good thing about them is that they are seemingly committed to

enhance their stature and are on continuous improvement path. It is for the first time in the

history of Pakistan that last year Airblue had placed orders for the purchase of ten new air

crafts amounting to one billion dollars and delivery of these aero planes will start in 2009 so

that a process of phase in and phase out of aircraft will begin in the Airblue.

Airblue has started flights for Manchester and they are soon to start operations for Jordan,

Kuwait and Scandinavian countries after they get the permission. Airblues fleet of next

generation Airbus A320 and A321 aircraft began offering world-class travel to many cities

within Pakistan with better facilities than the other carriers. Their domestic share is on rapid

rise and it has grown with each passing day and number of domestic flights has increased from

12 to 28 flights daily.

The credit also goes to Airblue for introducing latest technology and E-ticketing service in the

airline industry of Pakistan thus making all its offices paperless with the optimum utilization of

technology. Due to the carriers like Airblue, the air travel is no more a luxury now, as more

people prefer time and safety than money. Nobody wants to get looted on the roads, or got

blown up in bomb blasts in train or trains in Pakistan have got a habit of derailing and colliding

with sister trains.

If Airblue keeps the improvement flowing in their business, they are sure to spearhead the air

travel in Pakistan, and they should also facilitate the healthy competition and their approach

should always be passenger-oriented. Otherwise, we already have PIA to bear.

CULTURE

The distinguished culture is determined by the vision and values communicated throughout

the structure and amongst people. Since Pakistan International Airlines is bureaucraticorganization, so the culture is similar to that of any government organization. On the contrary,

Air blue is a privately held company and has an open-organization culture. The culture

determines the type of leadership, communication and group dynamics within the

organization. The workers perceive this as the quality of work life which directs their degree of

motivation. The final outcome is performance, individual satisfaction, and personal growth and

development.


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SEVEN CHARACTERISTICS OF ORGANIZATIONAL CULTURE

COMPARISON:

The results show that PIA focuses more on the goal rather than means to achieve it while

Airblue does the opposite. Therefore, employees are highly valued in Airblue. The

characteristics and values form the organizational structure which determines the behavior of

employees and the effectiveness of the organization

COMPARISON WITH THE HELP OF OFFICIAL RATINGS AND CUSTOMER FEEDBACK

PIA Pakistan International Airlines official 3-Star Ranking of Product and Service Quality

GENERAL RATINGS : PIA Pakistan International Airlines

Web Site : Ease of Use Age of Aircraft in Fleet

Web Site : Product

information Cabin Safety standards

Web Site : Online Check-In Cockpit Communications

Handling Delays/Cancellations Airline Onboard Magazine

Staff Grooming & Presentation

Assisting Families &

Children

BUSINESS CLASS : PIA Pakistan International Airlines

AIRPORT RATINGS : Karachi AirportCheck-In Services Arrival Assistance

Transfer Services Arrival Lounges n/a

Priority Boarding Baggage Delivery

BUSINESS CLASS LOUNGE : Karachi Airport

Lounge comfort, space Staff : Service Efficiency

Washroom, shower facilities Staff : Enthusiasm, Attitude

Dining options / Food Quality Staff : Problem Solving

Internet / WiFi options Staff : Language Skills

LONG HAUL

ONBOARD PRODUCT CABIN STAFF SERVICE

Seat Comfort Service Efficiency

Comfort : Blankets, Pillows Enthusiasm, Attitude


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Inflight Entertainment Interaction with PAX

Washroom Cleanliness Cabin Presence thru Flight

Cabin Cleanliness / Condition Responding to Requests

Quality of Meals served Language Skills

Dine-on-Demand efficiency Consistency amongst Staff

Newspapers & Magazines Personalisation of Service

SHORT HAUL / REGIONAL






Quality of Meals served Responding to Requests

Newspapers & Magazines Language Skills

Cabin Cleanliness Consistency amongst Staff

ECONOMY PLUS : PIA Pakistan International Airlines

AIRPORT RATINGS : Karachi Airport

Check-In Services Arrival Assistance

Transfer Services Arrival Lounges n/a

Priority Boarding Baggage Delivery

LONG HAUL






Cabin Cleanliness /

Condition Responding to Requests


Dine-on-Demand efficiency Consistency amongst Staff

Newspapers & Magazines Personalisation of Service


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ECONOMY CLASS : PIA Pakistan International Airlines

AIRPORT RATINGS : Karachi Airport

Check-In Services Arrival AssistanceTransfer Services Baggage Delivery

LONG HAUL






Cabin Cleanliness /



Quantity of Food served Consistency amongst Staff

Newspapers Personalisation of Service n/a

SHORT HAUL / REGIONAL






Cabin Cleanliness /



Quantity of Food served Consistency amongst Staff


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Customers point of view regarding the service ofAir blue

AIR BLUE review : by N Ahmed

Customer Rating :

1/5

I flew Air Blue for the first (and last) time. My flight from Islamabad to Dubai was late by

3 hours. The worst part was the attitude of the ground staff which was very rude and

discourteous. Whenever they were requested for any information about the reasons of

delaying, they will not give any proper answer and instead of showing any empathy

towards passengers , they were rude and showing attitude. One lady among the ground

staff even started passing nasty remarks and made fun of the waiting passengers. I have

made up my mind not to travel by Air Blue again and I advise all those who read these

comments that go for the better choices available.

AIR BLUE review : by H Janes

Customer Rating :

2/5Heathrow to Islamabad return. The worst travel experience I have ever had. Flight

delayed by 11 hours outbound and 2 hours on return. On both occasions no information

was given and staff repeatedly told us "15 minutes" and that there were "problems with

the plane" (not what any one wants to hear just before take off!). Staff were uniformly

rude and unhelpful and there was no in flight entertainment at all - even the route

screens were out of order. I will not be using air blue again.

Air Blue review - by D Knight

Customer Trip Rating :

LHE - DXB last week - boarding was a bit of an issue with a mini bus trying to ferry

everybody to the stand, but apart from that happy with service and will use again. Far

from the worst budget airline I have used

Air Blue review - by Saiqa Liaqat

Customer Trip Rating : n/a

Manchester to Islamabad in Business class. The check in has got to be the worst I have

experienced. They had three desks open, where 1 was meant to be for business class

customers. Passengers were so frustrated with the unacceptably long delays that they

were using all three desks. It took us 1.5 hours waiting in the shorter business class

queue to check in. The check in personnel were surly, tired and clueless. Despite the factwe had paid for business class seats he gave us economy tags for hand luggage and

check in baggage - (priority tags were added to all checked in baggage). He did not direct

us to any lounges or fast track and when questioned said they all closed at 7.30 pm and

therefore he thought it best we go to the gate. The flight left at 11pm, after demanding

some food or refreshments they started serving us in business class at 2am! Each

passenger was served one at a time. Once the first passenger had been served each

course and had finished each course and then coffee did she move onto the next


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passenger. At 3am we finally got served. We were stopped by the flight attendant from

using the toilets as they were for business class customers (remember she had served us

a meal not too long earlier). I wonder if Air Blue train their personnel? We had to

disembark for the re fuel in Turkey (this took an hour). At Islamabad despite having

priority tags on our luggage all business class passengers were left waiting until the end.

All of the economy passengers had left the airport before our luggage came through.Maybe priority in Air Blue language means send it out last? If you like us were concerned

about the service from PIA and were looking for better value for money, convenient

flight times and good service and therefore are thinking of Air Blue - DON'T. Air Blue

have got to be the worst airline I have ever flown. The service is appalling; the staff are

rude and should not be in employment. I recognise that Air Blue offer discounts, these

do not compensate you for the poor service, long delays and problems at both airports.

Air Blue review - by Zeeshan Shah

I flew on Air Blue for the first time during my recent trip to Pakistan from Karachi to

Islamabad, and then from Lahore to Karachi. Overall I had a pleasant experience as the

flights departed and arrived on time, the food was reasonable, and purchasing tickets

online was a breeze (as compared to PIA). I especially liked the service in the terminal

before I checked in as you are welcomed and directed to the counter you need to check

in at. The only complaints I had was the silly inflight entertainment which was being

shown as I would preferred seeing information with regards to the flight (location,

speed, time to distance, etc.), and the service in Business Class was quite similar to that

of PIA.

Air Blue review - by Kurt Mueller

Meal tasty and very nicely presented (real china!). Mobile phones already in use during final

approach. Flight on time and baggage on conveyor within a few minutes of arrival.

Air Blue review - by Omar Hassan

KHI to ISB on Airblue, on AB 204 21st Aug. The check in was a breeze due to the new

electronic check in system they have introduced. The plane was a brand new A-320, with

beautiful furnishing in blue decor. The flight attendents were all female and were fresh

young faces compared to the PIA crew I was used to before. A full meal was served in

custom made crockery, which is unheard of else where specially in economy. Flight leftkarachi on the dot and landed on schedule.


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Average Ratings for Airblue www.airblue.com

y Flight on time?y Customer servicey Comfort on flighty Quality of Entertainmenty Quality of foody Value for Moneyy Overall rating

Domestic routes War:AirBlue growth beats PIA

The number of domestic passengers who preferred travelling in private airline Airblue has

grown whereas the national flag carrier Pakistan International Airlines (PIA) is losing itspopularity, data compiled by the Civil Aviation Authority (CAA) revealed.

According to provisional aviation statistics for the year 2006-07, Airblue carried 1.4 million

passengers in 2006-07, up around 7.7 per cent from previous years 1.3 million it carried

between different cities of Pakistan. The PIA, faced with accumulated losses of more than Rs35

billion, lost domestic market share by 5.7 per cent as it carried five million passengers

compared to 5.3 million during the period under review. Airblue has capitalised on Aero Asia

clientele, said an industry official. Airblue, which started with only 22,320 passengers in 2003-

04, carried 1.4 million passengers in the last fiscal year.

Besides, PIA has suffered from a very bad punctuality record in the last couple of years. This

irregularity and financial woes of PIA have also worked to the advantage of Airblue. The private

carrier has also emerged as a leader in introducing innovation in the aviation industry of the

country. It brought the self check-in facility at its Karachis hub of Jinnah International Airport

whereby passengers with baggage obtain a boarding card through the touch screen menu

without needing to report to the counter.

The concept of booking-first-to-get-the-lowest-fare has also contributed to advance of Airblue

in gaining the market share. PIA is now following the suit and has adopted the same strategy.

Airblue with its six A320 and A321 aircraft was also able to ride the tide of rising fuel cost,

which bankrupted many airlines across the world.

On the international front, PIA carried 3.59 million passengers in 2006-07 & Airblue 237,170.

Except for the flag carrier, the two domestic airlines have registered growth in previous year.


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Above are the official ratings as well as feedback regarding PIA and AirBlue. But through our

personal findings, we can compare and rate both as below:

Attributes PIA AirBlue

Destinations 5 6

Punctuality 5 6Quality Food 5 6

Customer Service 6 5

Economical 5 5

Technological Advancements 5 5

Services 5 5

Corporate Image 6 3

Total Points 43 40

SWOT

STRENGTHS

1. LEADING MARKET POSITION

AirBlue is one of Pakistans leading air carrier, with more than 800 daily flightsto 8 destinations.

Around 100,000 passengers a month fly on AirBlue, making itone of the major operators in thedomestic market in terms of passengerkilometers. Its revenue growth was driven by stronger

yields per passenger, up2.8 percent year-on-year.

Its strong market position is driven by consistently low fares as well asreliable

service, frequent and convenient flights, use of new technologies like e-ticketing

and self check-in terminals, comfortable cabins and superior customer service.

2. BRAND RECOGNITION

AirBlue has high brand recall. It is recognized by travelers all over the country.

AirBlue commenced operations in 2004, and reached the milestone of serving

one million customers within two years. AirBlue earned the number one ranking in customersatisfaction for 2005, based on least number of complaints per passenger carried as reported to

the CivilAviation Authority (CAA). This strong market position gives the company a

scaleadvantage and helps it strengthen its brand image.

3. SUPERIOR OPERATING STRUCTURE

AirBlue has maintained its position as the low cost carrier for the last two years.

It has one of the lowest operating cost structures, being first in the Pakistani


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market to use the latest technology. AirBlue has continually achieved high asset utilization and

employee efficiency.Superior operating structure serves as the primary competitive advantage

of AirBlue

NETWORK PRESENCE

AirBlue enjoys a strong network in key domestic and international destinations.The companysnetwork includes three the major airports in Pakistan, as well asmajor international airport such

as Dubai International Airport. Having a strongnetwork means that AirBlue can generate traffic

feed for both its domestic and

international flights.

5. HUB AIRPORT AT KARACHI

AirBlue operates from its hub in Jinnah International Airport, Karachi. Jinnah

International is one of the worlds busiest airports in terms of number of

passengers carried. It is also one of the largest international gateways to Asia. It

is also the leading international air passenger (and cargo) gateway to Pakistan.The companys

strong presences in airports with heaviest traffic levels in Pakistangive it a competitive

advantage.

6. EFFICIENT USE OF TECHNOLOGY

AirBlue has successfully incorporated latest technology in all its systems, giving it an edge over

competitors.It was the first carrier in Pakistan to incorporate the e-ticketing system and the

second in SouthAsia to introduce self check in systems at the Jinnah International

Airport,Karachi. It also has an efficient intranet called AirBlue EDNET that helps itsuccessfully

maintain a paperless environment, providing managers and employees real time access to

information. It has also vertically integrated the intranet incorporating major strategic partners

such as American Express

WEAKNESSES

1. HIGH DEPENDENCE ON PASSENGER REVENUES

Passenger revenues accounted for 78 percent of the AirBlues total revenue in

2005. Cargo services allow airlines to generate additional revenues from existing

passenger flights. In addition, cargo revenues are usually counter cyclical to

passenger revenues and have lower demand elasticity than passenger business,

which allows airlines to pass on fuel price hikes to customers.

2. DEBT

AirBlue has a significant amount of debt. It has short term financing of Rs. 254

million. Current and future debts could have important consequences for stakeholders of the

company. For example, debt could impair AirBlues ability to make investments and obtain

additional financing for working capital, capital expenditures, acquisitions or general corporate

or other purposes. Debts could also put AirBlue at a competitive disadvantage to

competitors that have lesser debt and could also increase the companys vulnerability to

interest rate


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increases.

RELIANCE ON OIL PRICES

AirBlues sustainability, growth and revenues directly depend on oil prices. A

steep rise in oil prices can seriously damage the long term viability of any airline.

Recently many airlines around the world went bankrupt due to rising oil prices.Airlines need tohedge against this risk by taking proper measures. In case ofAirBlue, fuel prices also had an

impact as fuel cost increased from Rs. 519

million to Rs 1,475 million.

C. OPPORTUNITIES

1. ROUTE AND FLEET EXPANSION

AirBlue is planning to include more domestic and international destinations in its

network in 2005. Expansion plans are already in the pipeline with permission to start flights to

Manchester awaiting clearance whilst an application to start flights to Jordan has been

submitted. Other destinations included in their long

term plans include further cities in the UK and USA, India and Saudi Arabia.Route and fleet

expansion will positively impact the companys operations by increasing revenues and

expanding its network.

2. GROWING DEMAND FOR LOW COST AIRLINES

The growing demand for air travel is driven by lower fares and consumer

confidence. A survey by International Aviation Authority showed that ticket price

is the number one criterion for passengers when selecting a flight, well ahead of

the availability of a non-stop service.

3. EXPANSION OFFREIGHT BUSINESS

Though a late starter, AirBlues cargo revenue is developing. Cargo revenue

showed an increase of 32 percent, as it touched Rs. 41 million this year up fromRs. 31 million.

The current growth in AirBlues freight segment is aided by recentintroduction of scanning

technology, which meets the requirements privatecourier service providers operating in

Pakistan. Equipped with the right

technology, AirBlue is now in a position to cash in on increasing demand forreight and reduce

its business risk by reducing dependence on passenger traffic.

4. CUSTOMER LO YALTY

AirBlues frequent flyer and loyalty programs can help it retain customers.

AirBlues BlueMiles (frequent flyer program) was established to develop

passenger loyalty by offering awards and services to frequent travelers. Such schemes

encourage repeat travel on AirBlue, as passengers seek to accrue the benefits given to regular


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travelers. This enables the airline to retain customers and reduce costs, as it does not have to

spend money targeting new customers to replace those lost to other airlines.

5. SHIFTING CUSTOMER NEEDS

The needs of air passengers are increasingly changing, as they are becoming

more and more price sensitive. The effect of this has been that traditional airlinessuch as PIA have struggled, while low-cost airlines such as AirBlue have

experienced significant growth despite a turbulent industry, especially in the

short haul market in Pakistan. If AirBlue succeeds in making its prices more

competitive, then the company will be able to gain significant market share.

6. FURTHER ALLIANCES

AirBlue has entered in a number of bilateral and multilateral alliances with other

airlinese.g. with JS Air to enhance its market reach and serving customers onremote

destinations not covered by their own flights. Such collaborative marketing arrangements

typically include one or more of the following features:joint frequent flyer participation; code

sharing of flight operations (whereby one carriers flights can be marketed under the two-letter

airline designator code of another carrier); coordination of reservations, baggage handling and

flight schedules; and other resource-sharing activities.

AirBlue should attempt to expand the its alliances with other airlines to increaseits coverage

even further by participating in more markets worldwide that it doesnot serve directly.

7. INDUSTRY RECOVERY

Market analysts believe that the global airline industry will experience an upturn

in fortunes over the next few years. This represents an opportunity for AirBlue, asit could

generate increased revenues and command market share if it capitalizeson increases indemand

D. THREATS

1. HIGH INTEREST RATES

The past few years have seen State Bank of Pakistan impose high as well as lowinterest rates to

check inflation and the over heating of Pakistani economy.Inflation in Pakistan may see another

raise in the short-term. According toInternational Monetary Funds World Economic Outlook

2006, the Pakistan real

GDP growth could fall from 6.5 percent in 2005 to 5.5 percent in 2006. This

could depress consumer spending and offset some of the positive trends for

AirBlue, in Pakistan. The US and Eurozone are expected to be the key markets

for AirBlue in the near future. A slowdown in the US and Eurozone economies

could lead to reduced demand from corporate travelers.

2. ACCIDENTS


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Though AirBlue did not suffer any accident in past. It has to continuously ensure

utmost safety and security of its passengers. Accidents can adversely affect

customer confidence in AirBlue and result in declined revenuesintensif yi ng

competition.

3. STRONG COMPETITION

AirBlue is now competing against more credible low cost carriers such asShaheen Airline, AeroAsia and PIA Express. PIA remains AirBlues strongest

competitor because of the huge market it has gained over time, strong brand

image and customer loyalty.

AirBlue also faces competition from PIAs new low-fares subsidiary, PIA Express.

Moreover, major legacy airlines have been focusing on restructuring costs, which

has improved their competitiveness. With costs restructured, the legacy airlines

are becoming more formidable competitors in terms of increasing capacity,

matching prices and leveraging their frequent flier programs. Increasing

competition could adversely affect the companys margins

4. INTEREST, FOREIGN CURRENCY EXCHANGE RATES

Fluctuating foreign currency exchange rates can have a significant impact on

AirBlues earnings. For example, as AirBlue is planning to expand its services to

the UK. As a result, AirBlue can experience negative or positive effects arising

from exchange rate movements. Strengthening of foreign currencies against the

British Pound will positively impact AirBlue and vice versa

5. DECLINE IN AIRLINE INDUSTRY

A number of factors have caused the current decline in the airline industry. For

example, the threat of further terrorist attacks since September 11 and a fall in

the number of business travelers have both caused passenger numbers to fall.These and other factors may continue to affect demand for air travel in the future,

which will affect revenues of AirBlue. For example, global problems such as an

increased threat of terrorism in response to the coalitions war on terrorism couldhave an

adverse effect on AirBlue. The threat of terrorism may discourage peoplefrom traveling by air

and could espeically reduce the number of passengers

traveling on international flights.

PEST ANALYSIS

The macro-environment includes all factors influencing a company that are not within its

control. These include political social, economic and technologicalfactors. These are known as

PEST factors. A technique of analysis of the macroenvironment is PEST analysis. Environmentalanalysis should be continuous and precede all aspects of planning. Since the airline industry is

very much influenced by changes taking place in the environment and has undergone rapid and

dramatic changes during the last decade, this analysis is especially important for AirBlue


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SWOT PIA:

STRENGTHS

Leading Market Position

PIA is one of Pakistans leading air carrier with more than 800 flights daily. Around

150,000 passengers a month fly on PIA making it one of the major operators in the

domestic market in terms of passenger kilometers. PIAs international market share is

43.5% whereas in the domestic market it is 69.4%.

Its consistently low fares as well as reliable services, frequent and convenient flights, use

of new technology like e-ticketing and self check-in terminals, comfortable cabins and

superior customer service are the major drivers of its strong market position.

Brand Recognition

PIA has a high brand recall. PIA is a national airline, operating passenger and cargo

services covering eighty-two domestic and foreign locations. PIA has earned number

one ranking in customer satisfaction. This strong market position gives company a scale

advantage and help it strengthen its brand image.

Superior Operating Structure

PIA has maintained its position as a low cost carrier. It has been first class Pakistani

airline to use the latest technology. Factors contributing consists of different series of

Boeing and Airbus and an efficient, high utilization point-to-point route structure. Flyingone type of aircraft significantly signifies scheduling, maintaining, flight operations and

training activities. PIA has continually achieved high asset utilization and employee

efficiency. Superior operating structure serves as a primary competitive advantage of

PIA.

Network Presence

PIA enjoys a strong netwok in domestic and international locations. The netwoek

includes 3 major airports in Pakistan, as well as major International airport such as

Dubai International airport. Having a strong network means that it can generate traffic

feed for both its domestic and international flights.

Hub airport at Karachi

PIA operates its hub airport from Jinnah International airport which is the busiest airport

in terms of passengers carried. It is also one of the largest gateways to Asia. The

companys strong presence in airports with heaviest traffic levels in Pakistan gives PIA a

competitive edge.


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Effective use of Technology

PIA has successfully incorporated latest technology in all its systems giving it an edge

over its competitors. It was the second carrier in Pakistan to incorporate e-ticketing

system in second in South Asia to introduce self check-in system at Jinnah International

Airport Karachi.

Weaknesses

Formulation of Govt. Rules

The basic flaw of this organization is it consolidation that is its Centralized system. The

key policies, strategies and set of rules are designed by the upper management. The

centralized system is one of the biggest obstacles of long term success of PIA. PIA

centralized structure leads to battle between different level of management, desired

motivation, hard access of information.

High dependence on passenger revenue

Passenger revenue accounted for 87% of PIAs revenue in 2007. Cargo revenues are

generally counter cyclical to passenger revenues and have lower demand elasticity than

passenger business, which allows airlines to transfer fuel hikes to the customers.

Debt

PIA has significant amount of 42 billion debt. Current and future debts could be an

important consequence for the company e.g debt could impair PIAs ability to make

investments and obtain additional financing for working capital, capital expenditures,

acquisitions or general corporate or other purposes. Debt also puts PIA at a competitive

disadvantage to competitors with lesser debt and cou;d increase companys vunerabilityto interest rate rises.

Reliance on oil prices

PIAs sustainability, growth and revenues directly depend on oil prices. A steep rise in oil

prices can seriously damage long term viability of any airline. Recently many airlines

around the world went bankrupt due to rising oil prices. Airlines need to hedge against

this risk by taking proper measures.

Opportunities

Having the maximum route and fleet

PIA is having maximum route and fleet domestic and international destination network

in Pakistan as compared to its competitors. Route and fleet expansions will positively

impact the companys operations by increasing revenues.

Growing demand for low cost airline


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Growing demand for air travel is driven by low fares and consumer confidence. A survey

by International Aviation Authority showed that ticket price is the number one criterion

for passengers when selecting flight

Customer LoyaltyPIAs frequent flyer and loyalty programs can help it retain customers. PIAs award +

(frequent flyer program) was established to develop passenger loyalty by offering

awards and services to frequent travelers. This enables airline to reduce costs and retain

customers as it will not have to spend money on targeting new clients.

Shifting customer needs

The needs of passengers are constantly changing and are increasingly becoming price

sensitive. If PIA succeeds in making its price more competitive then company will be

able to gain market share

Industry Recovery

Market analysts believe that global airline industry will experience an upturn in fortunes

over the next few years. This represents an opportunity for PIA as it could generate

increased revenues and command market share if it capitalizes on increase in demand.

Threats

High interest rates

The past few years has seen State Bank of Pakistan impose high and low interest rates to

check inflation and the overheating of Pakistans economy. Inflation in Pakistan may seeanother rise in the short-term.

Accidents

There have been a couple of reported accidents by PIA causing a number of fatilities as

well.

Strong competition by AirBlue

AirBlue has evolved as PIAs largest competitor due to the huge market it has gained

over time, strong brand image and customer loyalty. PIA has started new low fares

subsidiary PIA Express to stop Airblue market share from growing too fast. Moreover

major legacy airlines have focusing on restructuring costs which has improved their

competiveness.

Interest and foreign currency exchange rates

Fluctuating foreign currency exchange rates have a significant impact on PIAs Earnings.

Strengthening of foreign currencies against British Pound will positively impact PIA and

vise versa.


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Decline in airline industry

A number of factors have caused the decline in airline industry such as the September

11 incident and a fall in number of business travelers has caused passenger number to

fall. These and other factors may continue to effect demand of air travel in the future

which effects the revenues of PIA. The threat of terrorism reduces the number of peopletravelling by air.

Conclusion

Pakistan has achieved some political stability in the recent times. If the PIAs

management believes that the present government will perform well then there could

be an increase in investments in the form of purchase of airplanes and latest

technology. PIA has a competitive advantage over its competitors because of its newly

acquired improved long distance aircrafts for Boeing which are fuel efficient and cover a

longer distance. The cost advantage is also a barrier to entry for new firms. The social

trend is also changing locally due to general public being more educated and pursuing

professional goals. Hajj also attracts a huge number of customers. There are also major

technological changes taking place in the industry. But PIA has had the lead when it

comes to technological innovations.


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Services Report Final

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