Pakistan International Airline

Pakistan international Airline

(A case study on the ups and downs of Pakistan international Airline)

Muhammad Abdullah 116

Muhammad QurbanRafiq 121

MubeenMujahid 115

MBA 5th G-1

Department of Management Sciences

The IslamiaUniversityof Bahawalpur

Abstract.

 PIA’s Flight PK308 landed back on Monday after take-off from Karachi with over 390

passengers on board after its engine No. 3 experienced severe vibrations near Nawabshah,

forcing the pilot to recall the flight.To reduce such type of incident in future PIA takes much

steps. The arrangement with Turkish Airlines will benefit Pakistan International Airlines

(PIA) and also hugely facilitate Pakistani passengers, the flagship carrier’s Managing

Director Aijaz Haroon has said in an interview with The Express Tribune.

PIA is exposed to a variety of financial risks which involves the analysis, evaluation,

acceptance and management of some degree of risk or a combination thereof. The

Corporation’s aim is to achieve an appropriate balance and minimize the adverse impact on

financial performance

Pioneering in adoption of Information Technology and introduction of computers in the

country and fully promoting the sportsmen are just two of many initial contributions of the

airline. A step ahead, now PIA has institutionalized the practice of good governance by

establishing a Corporate Social Responsibility Committee. This high level and appropriately

empowered committee comprises of one Director, six General Managers / Equivalents and

one Deputy General Manager. Committee provides a platform to evaluate, update, and

recommend best practices

1. Pakistan International Airline.

Today‘s competitive environment demands that organizations achieve ever

higher levels of performance. Critical to improving performance is to know

what and how to measure. Measurement therefore is a key element in any

performance improvement effort and particularly to the development of long

and short term decision making. There are a number of organizations striving

and doing excessive research to identify the various factors which contribute to

the success or poor performance of not only their own organizations but also

other organizations in the industry for the purpose of benchmarking in case of

their success and avoiding similar mistakes by halting the influence of such

failure factors in case of their poor performance. The present study is therefore

designed in this context to identify the factors which may contribute to the poor

performance of organizations. A case study of Pakistan International Airlines

has been chosen to study the reasons of poor performance of the organization

during the past few years. It is now suffering losses but it has the capacity to

earn profit and contribute towards the GDP of country. Pakistan International

Airlines is the national flag carrier and was established in 1955.It not only

provides transportation services, but its operations extend to providing cargo

services and courier services also. Pakistan International Airlines serves two

markets – Domestic and International. In the domestic sector, it has

outperformed itself by stretching its networks to areas where other airlines do

not fly to. In the international market it faces severe competition, especially due

to the fact that these International organizations are providing fares much lower

than Pakistan International Airlines. Internationally also, Pakistan International

Airlines is encountered with a severe and strong challenge with many renowned

international names.

1.1. Financial Risk Management

PIA is exposed to a variety of financial risks which involves the analysis,

evaluation, acceptance and management of some degree of risk or a

combination thereof. The Corporation’s aim is to achieve an appropriate

balance and minimize the adverse impact on financial performance. Risk

management is carried out by Finance department under set out procedures and

in consultation with other departments. Financial risks are managed by

deployingquality human resources in key operational areas to ensureeffective

monitoring of the airline’s exposure in differentareas.

1.2. Fuel Prices Risk

PIA is exposed to volatility in the price of Jet fuel. The Corporation manages the risk through

fuel hedging programme that operates under the guidelines set by the Board of Directors.

During the year the Treasury department has been revamped and state of the art tools have

been added to aid risk management process. For the first time regular fuel price bulletin has

been started. Substantial savings were achieved due to in the money hedging during the

second half of 2011. Geographical risks, dominated by developments surrounding Iran, have

put upward pressure on oil prices, although the weak demand outlook has mitigated the

impact to some extent. Oil price forecast, shows that fuel pass-on, fuel efficiency and fuel

hedging measures are more important than ever. In this context the Corporation will continue

with its fuel price risk management program and fuel price increase or decrease being passed

on to passengers. Interest Rate Risk PIA manages the interest rate risk by targeting a balanced

portfolio approach. PIA’s loan book consists of a variety of loans i.e. against PIA assets,

against GoP guarantee, PKR denominated and Forex denominated. The Corporation’s

weighted average interest rate has been kept under 7% through these measures, despite the

average KIBOR being above 11%. PIA executed facility documentation for a $100

millionShari'a compliant financing facility during December 2011 to take advantage of lower

interest rates abroad. The deal received the prestigious “Asian Deal of the year” from Air

finance Journal. The facility was arranged by Abu Dhabi Islamic Bank, Al Hilal Bank,

Citibank N.A., and United Bank Limited as Mandated Lead Arrangers and Joint Book

Runners. The three-year facility reflects investor confidence in the airline and its strategic

importance to Pakistan. The facility represents the first syndicated commercial foreign

currency financing for a Pakistani obligor since 2007. The transaction is also important for

the aviation sector as it uniquely broadens airline corporate credit to regional Islamic

financiers

1.3. Corporate Social Responsibility

PIA is driven by the highest standards of corporate governance and social responsibility. As a

public sector organization and a business leader, PIA believes in building strong relationships

with customers, partners, employees, and the communities in which it operates. Having an

enhanced exposure to advanced world, PIA has been instrumental in bringing latest

technology and ideas and sharing the same with other cores of society in the country, since its

inception in 1955. Pioneering in adoption of Information Technology and introduction of

computers in the country and fully promoting the sportsmen are just two of many initial

contributions of the airline. A step ahead, now PIA has institutionalized the practice of good

governance by establishing a Corporate Social Responsibility Committee. This high level and

appropriately empowered committee comprises of one Director, six General Managers /

Equivalents and one Deputy General Manager. Committee provides a platform to evaluate,

update, and recommend best practices. CSR is woven into the fabric of daily operations at

PIA. Following recent and routine activities supporting the community reflect PIA’s belief in

contributing for the betterment of society.

1.4. Scouts Association

The PIA Boy Scouts Association is a provincial segment of the Pakistan Boy Scouts

Association. Through its various community and educational programmes, it contributes to

the education of young people and helps build a better world where individuals can play

constructive roles in society.

2. Incident of PIA

KARACHI: PIA’s Flight PK308 landed back on Monday after take-off from Karachi with

over 390 passengers on board after its engine No. 3 experienced severe vibrations near

Nawabshah, forcing the pilot to recall the flight.

What makes this incident more worrisome is that this is the same aircraft that had a two-

engine failure on July 30.

The Boeing 747-300, with registration AP BGG, had a two-engine failure on July 30 while

on the take-off run at Karachi which was aborted after the same engine No. 3 developed

severe vibrations with a warning and its temperature shot up above the limit of 800 degrees

celsius.

At the time, the cause was established to be a bird hit.  But at almost the same time, engine

No. 1 had a stall with engine oil pressure warning and engine parameters reported to be

indicating zero rotation by the crew while the ATC had observed smoke coming out.

An airline that is already reeling from heavy losses due to a go-slow protest by pilots is now

facing another headache due to the poor condition of its aircraft.

The bird hit was unfortunate. It is the responsibility of the Civil Aviation Authority to ensure

that the runway, both the take-off and approach paths, are clear of any birds.

Bird hazards today pose a great danger to aircraft operating out of Pakistan at almost all the

major airfields like Karachi, Lahore and Islamabad. The only exception is Sialkot Airport,

which is privately owned and operated.

It has no bird hazard, because its owners have strictly forbidden private houses from being

built near its periphery.

Coming back to AP-BGG, this aircraft has a history of repeated engine defects. Aviation

experts are perturbed over the alarming incidents of  technical failures in PIA, which should

raise alarm bells before a serious incident or accident occurs. On July 28, the day of the fatal

A321 crash at Islamabad, this aircraft (AP-BGG) had severe vibrations on engine no 2 while

flying from Karachi to Lahore at 36,000 feet. The engine was shut down and the aircraft

landed back.

On June 29, PK312 operated by the same aircraft had severe engine vibrations at 35,000 feet

on engine no 3. On June 30, engine no 3 of another Boeing 747 AP-BFU had an engine stall

during take-off roll which was aborted. It is a mind boggling list of alarming incidents which

point out to poor maintenance and overhauling.

The CAA’s AID, which oversees engineering and maintenance of aircraft registered in

Pakistan, seem to be sleeping or unaware of what is happening.

The Airblue crash should have resulted in more vigilance and strict regulatory controls,

instead of  the lax attitude being displayed by the regulators. It should have been

embarrassing for the CAA that its investigators had to wait for Airbus’ team of engineers

who helped them locate the flight data recorder and cockpit voice recorder within an  hour of

their arrival at the crash site, where the tail section debris was located.

This newspaper had pointed out in its report that the flight data recorder will be found where

the tail is, because that is where it is securely installed. There have been over eight engine

failures on PIA’s Boeing 747 fleet during the last two months, which is an unacceptably high

failure rate.

3. Joint venture with Turkish Airline

KARACHI: The arrangement with Turkish Airlines will benefit Pakistan International

Airlines (PIA) and also hugely facilitate Pakistani passengers, the flagship carrier’s Managing

Director AijazHaroon has said in an interview with The Express Tribune.

Haroon was defending his decision to sign an arrangement with Turkish Airlines because of

which, the PIA will end up losing at least seven destinations, including five in Europe and

two in the US.

The MD has recently come under heavy criticism from within his own organisation. Unions,

including the PIA Senior Staff Association, Pakistan Airline Pilots Association, Flight

Engineers National Association, Society of Aircraft Engineers of Pakistan and Aircraft

Technology Association of Pakistan, say that the deal spells ‘disaster’ for PIA. The Air

League of the PIA Employees also held a rally outside the Karachi Press Club on Thursday.

A Civil Aviation Authority (CAA) official said that, under pressure from dissenting voices,

the defence ministry has gotten involved and instructed the CAA to review and submit a

report into the deal. In its report, the CAA has opposed the PIA-Turkish Airlines deal, saying

that they were not consulted before the deal was signed.

Giving details of the agreement, he said that a ‘record of discussion’, not a memorandum of

understanding, has been signed between the two airlines. “When it is implemented,

passengers from any three destinations (Karachi, Lahore and Islamabad) in Pakistan will have

access to daily flights to 130 destinations in Europe, US, South America and Africa with only

one stop in Istanbul,” he said.

Currently, PIA offers only 40 international destinations, which is miniscule compared to

Turkish Airlines’ more than 130 spots. Without the new arrangement, a passenger flying to

New York from Islamabad would first have to take a domestic flight to Lahore and reach his

destination via Manchester.

“PIA will continue to maintain those 40 destinations. But I have also gained 130 destinations

(of Turkish Airlines) against selling only seven destinations,” he said. According to the

arrangement, the PIA will hand over to Turkish Airlines its passengers from Pakistan to

Frankfurt, Amsterdam, Milan, Barcelona, New York and Chicago after a stopover in Istanbul.

Haroon said that by offering seven destinations, he had given away only five per cent of

PIA’s market share out of the 5.5 million passengers that the airline caters to annually. “Now,

I am going to share destinations with an airline whose market in that area is 25 million

people. So they are five times my size in that area which is now available to me. So, even if I

take five per cent from that share, it’ll be a tremendous amount,” he argued.

PIA will continue operating flights to UK, France, Norway, Denmark and other European

stations directly. “After this agreement the whole world will be open to you. Nothing will

reduce. In fact, PIA will expand massively,” he said.

It is interesting to note that Turkish Airlines would discontinue its flights to Dhaka, Colombo

and Kathmandu and transfer its passengers for eastern destinations to PIA. “This is a great

advantage. For example, a lot of people from Western Europe, especially Germany and

Switzerland go to Kathmandu, but they never come on PIA.  But now these passengers will

be coming on board our airlines from Karachi,” he said.

The Air Service Agreement (ASA) has not yet been signed. Haroon said operations would

begin on a temporary operating permit basis. The commencement of flights under the code

sharing agreement would begin on March 28 and a month-long campaign by the PIA would

begin mid-February.

Both airlines will earn 15 per cent on a reciprocal basis. “Suppose Turkish Airlines sells a

ticket from Karachi to Berlin. So from Karachi to Istanbul, PIA will fly and on that Turkish

Airlines will get 15 per cent and Istanbul-Berlin would be Turkish Airlines’ complete share.

But if PIA sells the ticket, then Karachi to Istanbul will be our complete share, while from the

Istanbul-Berlin trip, we’ll get 15 per cent,” he said.

He said that Turkish Airlines was competing with Emirates and other airlines but Turkey

suited PIA more since it would earn more through the six-hour-long trip to Istanbul compared

with just two hours to Dubai.

He dismissed as baseless rumours the allegation that PIA was forced to go along with an

arrangement with Turkish Airlines in the interest of promoting closer relations with Turkey

whose president is known to be close to President Asif Ali Zardari. “There was no pressure as

such on PIA to go into this agreement. There are 21 flights, PIA is going to do 14, Turkish

Airlines is going to do seven. So had there been pressure, it would have been the other way,”

he said.

Haroon said that the agreement did not restrict PIA from operating direct flights anywhere in

the world. He clarified that PIA was not banned from flying to the US as some people were

claiming. “We knew that when we’ll say that PIA would no longer be operating in New York

and Chicago (its only destinations in the US), people will start saying that PIA has been made

out of bounds from the US,” he said, adding that because of this reason the airline was

looking into the option of flying to Houston. “We’re evaluating whether it is worth flying

there. But this doesn’t change the fact that there is no restriction on flying to the US,” he said.

Turkish Airlines offers four destinations in the US: Los Angeles, Washington, Chicago and

New York.

When asked why people within his organisation, especially pilots, are opposing the alliance,

he said they were just unhappy because their extra allowances will be cut. “When a pilot flies

to New York, he gets 600 dollars over and above all other allowances because it’s a long-

range flight. So he knows that the 1,200 dollars he would get for flying two flights to New

York per month would now be no longer coming into his pocket,” he said.

Also, he said, they won’t be able to go to New York for free anymore along with their

families to visit their child who studies there. “They are selfish. They are just looking at how

their allowances would be reduced. But I, on the other hand, am looking at the larger interest

of the airline and its passengers,” Haroon claimed.

He rejected the assertion that there would be widespread downsizing in PIA at its

international centres because of this arrangement. “There will be no retrenchment or

downsizing of any sort,” he said, adding that PIA might have to open up new offices, for

example in Berlin, to tell passengers that if you want to go to Pakistan from there, you can go

through PIA. Also, he stressed, the Chicago and New York offices will not be shut down.

“On the sector that PIA is not going to operate, I will get paid if I sell a ticket and I get net 15

per cent just by booking a flight. So what do you think I’ll do? Will I reduce my sales team or

will I enhance it?” he asked.

Haroon suspects that the lobby of Gulf Airlines is also behind the chorus against the alliance

between PIA and Turkish Airlines. “You know what killed PIA? It was these six carriers that

came into Pakistan,” he said referring to the Gulf Airlines, Emirates, Qatar Airways, Etihad,

Gulf Air and Air Arabia. He said the stiff competition given by these airlines would hurt most

when the new arrangement takes effect. “I wouldn’t be surprised if it is found out that this

lobby is also greasing the palms of some of our union leaders,” he said.

Haroon said he wasn’t worried about reports that the defence ministry is evaluating the

agreement. “They have to evaluate because it is their decision, not mine,” he said, adding that

once the two airlines informed their respective governments that they’ve agreed on a

commercial agreement, it is left to the governments to decide if they should proceed or not.

About reports that PIA was incurring losses, he said the fact was that “for the first time in

PIA’s history, we crossed the Rs100-billion mark in revenue figures last year. In 2007, it was

around 70 (billion),” Haroon, who joined PIA in 2008, said. His deputies say the unofficial

figure stands at Rs108 billion.

When asked whether Turkish Airlines would be able to cater to the comfort of passengers,

many of whom complain that it isn’t the best when it comes to that department, Haroon said:

“we’ve put a restriction on Turkish Airlines that on certain routes they will use only the 777,

A340 or C40 aircraft.”

More importantly, he says, visa will be on arrival in Istanbul. “For tourist visa, it’ll be airline

sponsored just like one gets through Thai Airlines when you go to Thailand. We’ll have our

cabin crew on these flights; there will be Pakistani food on the menu; there is an engineering

alliance also and we have also asked for in-flight entertainment like Pakistani dramas, and

PIA transit facility and lounge facilities in Istanbul,” he said.

4. PIA Crisis:

Muhammad Daheem the Pakistan International Airlines is suffering from severe financial

crisis. It is, in fact, passing through a critical phase because of poor management, lack of

maintenance, nepotism, corruption and financial issues. There are complaints of terrible

service, long delayed flights, emergency crash landings, cancellation of flights, shortage of

planes, unclean toilets that smell from distance and non-serious attitude of the administration.

These issues create frustration among the passengers. They feel fear and life risk while

travelling through PIA. The Airlines is at the brink of disaster. It needs exemplary leadership,

qualified and merit based staff and technically strong administration to improve its

performance and save it from the clutches of the wolves.PIA has, in all, 39 aircrafts in its

fleet comprising of 4 Boeing 777-200 ER, 3 Boeing 777-300ER, 2 Boeing 777-200 LR, 6

Boeing 737-300, 5 Boeing 747-300, 12 Airbus A310-300 and 7ATR 42-500. A number of

aircrafts have been grounded due to shortage of spare parts or overhauling. These include

Boeing 747s, Boisiseing 737s and Airbus A 310. It is generally believed that PIA high-ups

are responsible for the inconvenience of the passengers. The whole system needs

overhauling.PIA is facing serious problems. The major problems faced by PIA are increase in

oil prices, overstaffing, devaluation of local currency, political interference and its weak

financial position since the last decade. PIA has suffered huge loss of more than 64 billion

rupees from 2005 to2008. It has also suffered huge losses in 2009 and 2010 particularly due

to increase in the price of the fuel and devaluation of Pakistani rupee. It is, now, just like a

white elephant. The bad governance, poor performance and corruption are the major causes

of its failure. The Pakistan International Airlines is a big organization with more than 18000

employees. PIA was known all over the world for its excellent performance and superior

quality. That was the golden period for PIA. But now it has lost his luster. Flight delays and

cancellations have become the norm rather than the exception. Naturally this situation cannot

be tolerated for unlimited period. PIA will have to overpower its weaknesses. It has failed to

resolve issues of its organization. The average ratio of staff should not exceed 100per aircraft

while PIA enjoys more than 400 employees per aircraft. It is overpopulated and needs to cut

its coat according to its cloth. It needs some hard decisions by the administration to run the

system smoothly. Pakistan International Airlines should give primary importance to the

safety of the passengers and make efforts to avoid any untoward situation. Several untoward

incidents occurred in PIA in the last decade. It is necessary to tackle with such incidents

seriously to minimize the losses.

4.1. Background facts.

PIA’s growth outlook healthy in 2006

KARACHI: Pakistan Inter-national Airline (PIA) showed a healthy growth and positive trend

during the fiscal year 2006 in all indicators critical in evaluating an airlines performance. 

According to a press statement issued by the national airline Friday in Karachi, the data for

FY2006 and its comparison with FY2005 and FY 2004 are audited figures which have also

been approved by the board of PIA.  While revenue growth has been 11% and 10% in

FY2005 and FY2006 respectively, or in other words from Rs.57.7 billion to Rs.70.5 billion,

all this gain was neutralized by the tremendous increase in fuel prices in the last two years.

The situation was further aggravated by the increase in interest rates and interest payments

because of the induction of new aircrafts like the Boeing 777s and the ATRs into the PIA

fleet.  PIA would have posted a massive Rs 4.12 billion in profit in the last two years, if fuel

prices had remained constant at the FY2004 level. The volatile, unpredictable and almost

indifferent nature of the hike in fuel prices was a severe blow to the entire airline industry

which cumulatively cost it $46 billion extra in fuel cost in five years from 2001 to 2005. Most

airlines are still recovering from this unavoidable burden.  In PIA, this figure increased from

31% 2004 to 41% in 2005 going up to 47% in 2006 and this percentage is of the total

revenues earned. This phenomenal increase is much higher then the industry average of 31%.

In monetary terms, PIA spent Rs 34.1 billion on fuel in 2006 as compared with Rs 19.7

billion in 2004 and Rs 26.9 billion in 2005 showing an increase of 26.8%. Similarly,

compared to 2005, the interest cost increased by an additional Rs 2 billion to Rs 4.8 billion,

which again was a 71% increase over last year.  In addition there was a substantial cost

increases in aircraft chartered for meeting scheduled and hajj traffic, engineering and

maintenance, aeronautical and flight handling, selling and distribution cost. 

4.2. Dawn News Reported:

ISLAMABAD: Supreme Court on Tuesday issued notices to all pertaining parties in the

Pakistan International Airlines (PIA) financial corruption and mismanagement so motto

notices case:

A three-member bench led by Chief Justice Iftikhar Muhammad Chaudhry heard the case.

Chief Justice Iftikhar inquired about the conditions of PIA and whether had they become like

the conditions of Pakistan Steel Mills. PIA’s counsel Raja Bashir informed the court that

current management of PIA was attempting to improve the company’s conditions. He also

said that in the previous years, PIA had incurred a loss of PRs. 119 billion in total due to

delays and other issues. Justice Sheikh Azmat Saeed said that no PIA flight departs on time.

Chief Justice Iftikhar remarked that the PIA was the lone state-owned organization that runs

on public’s money. The court had taken so motto notice of this case but the petitions were

also filed pertaining to the case.

A letter by the Transparency International Pakistan was also read out at the hearing by Raja

Bashir, which affirmed that PIA’s conditions were indeed very bad. The report also stated

that PIA violated Pakistan Procurement Regulatory Authority (PPRA) rules in their

purchases; pilots and other staff constantly protested through strikes, causing great loss to the

company. According to the letter, PIA has incurred losses amounting to Rs. 141 billion. Due

to the non-availability of the petitioners, the court issued notices to all parties and adjourned

the hearing until Dec 4.

4.3. Failure and Causes:

The following causes of poor performance of Pakistan International Airlines have been

identified through the data collected from the organization. These are the factors which are

leading to the failure of PIA in terms of poor financial performance and decline in the

goodwill of the organization. Lack of experience relating to aviation industry for the top

management: This factor is one of the reasons of the poor performance of the organization as

indicated by 61% of the informants who were accessed for the purpose of the primary data

collection. Lapses in the management: The PIA’s management is ineffective to resolve and

plan at the right time. This is another cause of PIA losses as indicated by 51% of the

informants who were approached for data collection. Low scale advertisements and

awareness: A common Pakistani may even not know about Pakistan International Airlines.

No advertisements and awareness to the organization’s brands in such a modern era of

marketing. Cricket stars and sportsmen are hired on heavy salaries but with no profit to the

organization. Pakistan International already being an ethnic airline just confining itself to its

own country. No such efforts to enhance the brighter and soft image of the nation as well as

airline are made. As 45% of the respondents revealed that lower marketing and selling efforts

are causing poor performance of Pakistan International Airlines. Government’s and Civil

Aviation authority’ policies: Pakistan International Airlines has to pay a big amount as an

expense on its borrowings from banks. Already being in such a big crisis, the company is

getting no support in this regard like WAPDA is getting. Also civil aviation authority of

Pakistan’ policies are hampering PIA a great deal. Pakistan Journal of Law, Policy and

Globalization International Airlines being a national carrier have to go to those routes which

are going in loss. Routes such as, Swat, Bahawalpur etc. are called socioeconomic routes and

PIA has to get to those routes despite of great loss. On these airports, airport staff is greater

numbers as compared to passengers. The money which is received as for providing services

to passengers is taxed by the government at a very high rate. This is another factor as a reason

for PIA losses. Rising fuel prices in the World: 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 customer that’s dissatisfies the

customers. This is one of the factors of loss to PIA as indicated by 51% of the respondents.

Global impact of 9/11 on aviation industry: 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 towards traveling to other countries such as European countries. Air traffic

in Asia, especially in south Asia has decreased and therefore this was also considered as one

of the reasons of bad performance of PIA . 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 and

maintenance problem PIA has to pay higher amount in terms of insurance cost. This was also

found to be one of the factors contributing to losses of PIA. Maintenance problems: Besides

having a large number of engineers, there is always been a question mark on PIA’s fleet

maintenance. Corruption at its peak: Corruption is a sin that has hollowed Pakistani society

bases. Like all other departments of our country corruption is at its peak in Pakistan

International Airlines. 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 competitor such as Emirates and Qatar

airways has great capital. Theses Middle Eastern organizations are putting in newer and

newer technology and acquiring greater manpower. PIA being already in a financial crunch

faces a tough task and therefore it forms one of the factors of poor performance. Poor image

with already going in financial loss, 9/11 impact on the industry and above all incapability 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. This bad image is adding to decreased customer

base and hence causing loss to PIA. 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.

5. Conclusion:

The Pakistan International Airlines is suffering from severe financial crisis. It is, in fact,

passing through a critical phase because of poor management, lack of maintenance, aged

fleet, nepotism, corruption and financial issues. There are complaints of terrible service, long

delayed flights, emergency crash landings, cancellation of flights, shortage of planes, unclean

toilets that smell from a distance and non-serious attitude of the administration. These issues

create frustration among the passengers. They feel fear and life risk while travelling through

PIA. The Airlines is at the brink of disaster. It needs exemplary leadership, qualified and

merit based staff and technically strong administration to improve its performance. PIA is

facing serious problems. The major problems faced by PIA are increase in oil prices,

overstaffing, devaluation of local currency, political interference and its weak financial

position since the last decade. The bad governance, poor performance and corruption are the

major causes of its failure. PIA has problem of maintenance and repairs. Unfortunately PIA is

functioning with costs higher than returns. PIA claims that increase in oil prices and

devaluation of Pakistani currency are the major reasons behind its deficit. It needs remarkable

effort and money to improve its ranking in the world airlines.

6. Exhibition

6.1. Financial Analysis (Categories of shareholder).

Pakistan international airlines corporation categories of shareholders as at December 31, 2011.

Exibition.1  Share Holdings  

Serial No

From To Share Holders

Ordinary "A" Class Rs .10/-each total share held.

Ordinary "B" Class Rs .10/-each total share held.

1 1 100 12140 800,000 -2 501 500 30752 425,000 -3 1001 1000 4733 460,678 -4 5001 5000 4741 500,000 -5 10001 10000 803 500,500 -6 15001 15000 217 562,932 -7 20001 20000 153 567,504 -8 25001 25000 102 608,000 -9 30001 30000 52 630,067 -10 35001 35000 30 647,100 -11 40001 40000 27 700,000 -12 45001 45000 28 732,098 -13 50001 50000 44 867,500 -14 55001 55000 15 1,000,000 -15 60001 60000 13 1,020,740 -16 65001 65000 7 1,100,000 -17 70001 70000 12 1,157,500 -18 75001 75000 45443 2,508,575 -19 80001 80000 26 1,451,004 -20 85001 85000 5 1,470,000 -21 90001 90000 3 1,765,000 -22 95001 95000 2 1,800,000 -23 100001 100000 4 2,204,000 -24 105001 105000 3 2,300,000 -25 110001 110000 3 2,410,150 -26 115001 115000 2 2,497,778 -

27 120001 120000 3 3,000,000 -28 125001 125000 2 3,241,466 -29 130001 130000 4 3,916,884 -30 135001 135000 1 4,029,000 -31 140001 140000 1 5,010,500 -32 145001 145000 1 8,844,200 -33 150001 150000 1 9,212,000 -34 155001 155000 1 9,670,146 -35 160001 160000 1 13,374,500 -36 165001 165000 1 15,750,000 -37 175001 170000 1 16,876,347 -38 180001 180000 1 21,000,000 -

39 185001 185000 1 2,756,000 -40 190001 190000 4 1,765,000 -41 195001 195000 1 1,765,000 -42 200001 200000 1 1,765,000 -43 205001 205000 3 2,300,000 -44 210001 210000 2 2,410,150 -45 215001 215000 2 2,497,778 -46 220001 220000 1 3,000,000 -47 225001 225000 1 3,241,466 -48 245001 230000 1 3,916,884 -49 255001 250000 1 4,029,000 -50 270001 260000 1 5,010,500 -51 295001 275000 1 8,844,200 -52 305001 300000 1 9,212,000 -53 315001 310000 1 9,670,146 -54 325001 320000 1 13,374,500 -55 350001 330000 1 15,750,000 -56 355001 355000 1 16,876,347 -57 370001 360000 1 21,000,000 -58 375001 375000 1 231,855,493 -59 385001 380000 1 2,435,208,439 1,462,515

6.2. Exhibition.

UNCONSOLIDATED CASH FLOW STATEMENT

CASH FLOWS FROM OPERATING ACTIVITIES   2011 2010

Cash generated from operations39 3,686,004 12,509,338

Profit on bank deposit received   45997 20445

Finance cost paid    -8481499 -8072865

Tax paid   -566137 -391460

Staff retirement benefit paid   -461687 -334648

Long term deposits and prepayments-nets   149238 609579

Net cash (used in) / generated from operating activities   -5628084 3121243

CASH FLOWS FROM INVESTING ACTIVITIES      

Purchase of property plant and equipment   -3650542 -1429852

Proceed from the sale of property, Plant and equipment.   8149 10193

Purchase of intangibles   -3214 -

proceed from held to maturity investments   7289 -

Net cash used in investing activities   -3638318 -1419659

1.1. Exhibition.

6.3. Exhibition.

6.4. Exhibition.

6.4.1. Debt Management

Years 2005 2006 2007 2008 2009Debt to Asset Ratio 0.86 1 1.09 1.23 1.13Debt to Equity Ration 5.98 771.96 -10.9 -3.69 -3.69Long Term Debt to Equity 3.95 475.3 -6.52 -2.15 -2.28Times Interest Earned 0.63 1.6 -0.83 -3.75 -0.44

6.4.2. Profitability

Years 2005 2006 2007 2008 2009Gross Profit Margin 8.01 1 6.04 4.08 16.85Profit Margin -6.89 -18.08 -19.01 -40.22 -6.16Return on Assets -6 -12 -11.28 -25.69 -3.64Return on Equity -42 -9230 112.56 76.83 11.87

6.4.3. Asset Management

Years 2005 2006 2007 2008 2009Inventory Turnover 15.68 17.19 16.61 14.89 17.91Days Sales Outstanding 29.34 31.26 25.6 23.56 30.79Operating Cycle 45.02 48.45 42.21 38.45 48.7Total Asset Turnover 0.88 0.66 0.59 0.64 0.59