chk this out

2. Nature of Business: Airline Service

3. Ticker: PIAC

4. Net Premium Comparison

5. Net Premium CY 07 PRs 70,480,734,000

6. Net Premium CY 08 PRs 89,201,257.000

7. Share Price (Average) PRs 3.17while closing for 2009 was PRs 2.61

8. Market Capitalization: 6,703,472,884

10. Using state-of-the-art technologies

11. Ensuring cost effective measures in procurement and operations

13. Technology

14. Philosophy

15. Self-concept

16. Concern for people

18. Frequent flyer program allows passengers to receive free tickets, excess baggage vouchers, cabin upgrades, and rewards and special deals. Awards +Plus offers three tiers of membership to frequent flyers - Emerald, Sapphire and Diamond. A+ mile can be earned by flying PIA, and by using the products of PIA's partners.

19. Livery has been with PIAC since its creation. It regularly changes the look of the planes the average aircraft look remains for 3 years approximately. This gives it a new feel to travel in PIA plane. Especially the four tail design has been quiet popular with customers, as it signifies the four provinces of Pakistan.

21. Huge financial advantage being 89.1% shares with GOP

22. Younger planes as compared to competition

23. Reach to international destinations

24. Brand advantage

25. Experience curve advantage

26. Broader target market

28. High amount of debt

29. Dysfunctional and inefficient organizational structure

30. Uncooperative and non-professional crew

31. Hold of union (Union has higher than average power)

32. Inefficient use of resources (Human and Technological)

33. High influence of Government officials on rules and regulations

34. Offer free travelling to most of government officials, supporters, MPAs, MNAs, and other government guests. (lack of business professionalism in revenue generation)

35. Overstaffing in last 10-12 years

36. Low rewards and appraisal

37. High fares when compared with domestic competitors

39. Ability to have maximum route and fleet reach

40. Demand for low cost airlines is growing due to global crisis

41. Shifting customer trend to national airline due to racism in various countries

42. Industry recovery for airlines is predicted in couple of years

43. Better recruitment policy

44. Speed ex which is domestic can be international

46. 5 major accidents involving PIA’s planes

47. Technical failures have started growing in planes increasing customer distrust for safety

48. Strong competition by Air Blue

49. Dollar to PRs rate is increasing (money is devaluing)

50. EU is expected to restrict planes from entering air without Euro2 standard emission system.

51. Government may capitalize this sector; in this case their biggest advantage of holding monopoly would end.

52. Fluctuating fuel prices

53. Terrorism

54. Time taken by embassy to accept visa

55. Open sky policy and single euro sky policy

57. Political distress in our neighboring country like Afghanistan has an adverse effect on our international airline industry.

58. Government’s policy to continue support in “war against terror” has increased insecurity level in Pakistan which means fewer visitors come to our country and hence les revenue for PIAC, as its main reliance is on customer revenue.

59. Government has already announced it is going to privatize PIAC if this happens in near future things may look bright.

60. As this is a political government hence higher officials and management are basically supporters of this particular government, if there is a midterm election which would mean a change in government this also mean change in higher management.

61. Defense ministry has already announced its intent on allowing small route planes to travel within cities, this can decrease the customer reach for PIAC.

62. As the above Pie chart shows one of the biggest market of PIAC is Europe and UK (32%) hence current intent of EU to implement standard of euro 2 emission for all flights crossing Europe may make most of PIAC aircrafts useless.

63. Government’s current release of educational barrier for parliamentarians means less educated owners for PIAC hence decreasing its chances for profitability

65. Pakistan’s per capita income has decreased and is expected to decrease even more in coming years hence decreasing consumer’s buying power.

66. Interest rate in Pakistan is very high hence making it hard for investors to invest in PIAC.

67. Pakistan’s stock market is graded at B3 level that means a market risk premium of 14.25, hence decreasing the involvement of capital from stocks.

68. Inflation has decreased from record high 25.3% average in August 2008 to 8.87% in October 2009 and expected inflation this year is expected to go to 11% as revised by IMF after deliver 7.6billion in reserves, which will in turn decrease the buying power of PIAC customer; this is to talk about core inflation. This can have both good and bad effects. The bad part is local travellers would decrease and may go to cheaper travelling with Air Blue. The good part is this will increase the customer travelling to international destinations.

69. The non-food inflation stood at 19.3 percent, against 5.9 percent in the corresponding period of last year. The non-food inflation is also high because of hike in transport group, fuel and lighting group and house rent index. The downward adjustment of petroleum prices in the month of November is neutralized by frequent hikes in electricity and gas prices. Hence the decrease in petrol price is ineffective for PIAC customers.

70. Population below poverty line is expected to go below 23% as measured for 2001 it was 35% of population according to CIA world fact book. This means an increase in customer demand and base.

71. The World Bank (WB) and International Finance Corporation’s flagship report ‘Ease of Doing Business 2010’ ranked Pakistan 85 among 181 countries around the globe, that is very low as compared to other countries, hence decreasing good financers coming to Pakistan.

73. Due to instability in Pakistan more and more people are immigrating to better countries hence PIAC being among three carriers and being monopoly in international travel to Pakistan can benefit from this

74. There is an ever growing number of people for Hajj and Umrah, in last couple of years PIAC has lost in this easy ground as well increasing prices when the petrol prices are lowering purchasing power of customers is decreasing is a fatal move for this type of opportunity. The estimates show an increase of 15% per year in people wanting to go to religious travels. This may be viewed as an opportunity for PIAC, if dealt with properly.

75. Pakistan’s Major population is now in 25-45 years limit hence this being the biggest chunk should be considered most important in strategy formulation. Some of the good things about this is PIAC’s periodic change of look that may be used as an appeal in this respect.

76. As described above major population of Pakistan is in 25-45 years limit. The age of brand development hence this can also be viewed as an opportunity to develop strong brand loyalty for the prospective customers. As in coming years more and more people above this age would perish and new ones would enter.

77. If we observe the level of checking for PIAC customers on international airports, it is fairly visible that travelling on PIAC means an hour wasted in extensive search and verifications. People are more and more connected as compared to yesterday hence this type of news for educated people means bad for the business.

79. GOP is considering reviving Railways, introducing more modern tracks. If this is done then the sole profit taker of PIAC the cargo service called “Speedex” will face a threat.

80. Air blue is currently buying 6 new air busses for its international fleet this will also become a serious threat to PIAC.

81. PIAC currently has planes from Boeing, which is considered as a fuel guzzler when compared with air bus used by air blue.

82. Most of the successful international airlines have gained success through introducing rebate on internet purchases in order to cut down charges on employed agents. This is absent here, though online ticket purchasing is present but they lack giving rebate on those tickets.

83. America is now developing air highways for its domestic users this means PIAC has to purchase new planes to coup with this advancement as well.

84. Introduction of new holographic calling may lead to lower number of people returning to homeland to meet their relatives.

85. In order to meet current trend of people toward emission Laminar Flow is considered a Key to reducing emissions in future aircraft, this technology is due in coming six-seven months.

87. There has been an increasing distress over global warming and this is clearly shown as discussed above by EU’s intent to restrict the air to emission standards.

88. UK being the top market of PIAC, the environment in UK is rapidly changing for last few years, last winter they hit their lowest degree in 25 years, same was the case with Spain, which observed lest temperature recorded in 32 years. This year is expected same and hence providing PIAC another delay in flights.

90. IATA has already warned PIAC on two occasions for its technical failures during flight and once during takeoff, one more failure and according to the law PIAC will be facing fines for its behavior.

91. Introduction and empowerment of Judiciary has given way to “Musabqati commission” which is now closely watching PIAC’s moves.

93. PIAC also has occupational segmentation with his customers. As the “ war against terror is increasing threat to our country and safety, the number of tourist coming to Pakistan are decreasing

95. There are only three service providers including PIAC that’s very low competition when compared to other countries

96. Due to current terrorist threats, most of world’s leading airlines have stopped operating from Pakistan.

97. There is only one substitute for air travel that is by sea and most people do not prefer that as it’s pretty time taking

99. The agents working for PIAC are large in number as compared to other airlines but not many are interested in replacing them

100. Oil companies are already giving fuel on debt to PIAC hence making them strong and reducing our bargaining power against it

102. This is a business which requires high starting capital, and slower returns

103. Market in Pakistan is very limited

104. Market in Pakistan in terms of travellers is already saturated to some extent

105. Pakistan ranks on 139th position out of 190 countries based on buying power of people hence making it less attractive for these tertiary level services.

108. PIAC has its fleet of 40 airplanes which is something to boast about in Pakistan market.

109. Maintenance of these planes as well as ground checking operations (checking of planes before takeoff) are owned by PIAC itself and very well trained and well equipped

110. In terms of engine renewal and checking facility PIAC has following ground realities the department name is PK-MRO. It has capability to have maintenance as follows.

111. Boeing 747-300 RR RB211 (A, C, and D base checks)

112. Boeing 747-200 CF6/JT9D (A, C and MBC/inter D)

113. Boeing 777 GE90 (A and C)

114. Boeing 737-300 CFM56 (A and C)

115. Airbus A300B4/B2 GE CF6 (A, C, QBC, MBC, and D base check)

116. Airbus A310-300 GE CF6 PW4152 (A, C, MBC, and D base check)

117. ATR 42-500 PW127 (A and C)

118. Having fully functional maintenance facility “PK-MRO” has saved company $20Million in 2009 for not offloading engines to KLM.

119. PIA takes planes mainly from Boeing and currently the fleet is fully capable.

121. Have departure control system (Sabre) on 14 airports and in 2009 extended it to 7 new destinations

122. Enhanced flight monitoring system in comparison to domestic competitors adding to flight processing

123. Currently installed graphical user interface of check in system at major domestic airports (KHI, LHR and ISD) hence improving check in response and shorter passenger queues at check in

124. Centralized load control setup named “SABRE steady state” or “Load Manager” hence load sheets of all domestic and international stations can now be prepared in KHI decreasing processing time (time of service).

125. CLC (central Load control is now working in 16 out of 36 stations this load sheet preparation is done by most domestic competitors by handling agents at certain cost.

126. Superior flight system as discussed above has resulted in better resource utilization and improved flight punctuality (flight delays decreased from 337 in 2008 to 208 in 2009)

127. This has also resulted in improvement of baggage revenue which has been 80 million greater than the target revenue of PRs 1 billion.

128. PIAC has the most advanced simplified and standardized maintenance program.

129. To insure smooth sailing of operation introduced “Lean Six SIGMA” for best practices and techniques in industry.

130. Reduction in material expenses according to 2009 financial report due to these operational practices

131. To drive down operational cost from 2010 June PIAC would use new Boeing 777 by agreement with Thales. It has the capability of full flight simulator. It also has reduced carbon foot prints of device due to this agreement PIAC has been certified by “European Aviation Safety Agency (EASA)-part 145” in accordance with its new rules

132. During Hajj operations PIAC engineering provides one spare B747 at Jeddah for any unforeseen delay hence improving technical reliability which was in 2009 shown at 99.5%

133. In 2009 for distinguished passenger handling and operational techniques Saudi Authorities awarded a shield to PIAC.

134. To improve the practice during Hajj operation now direct flight are sent from major cities hence improving time taken for service.

136. Most marketing if any is done by advertising in newspapers.

137. PIAC’s main focus of marketing its product is through two main tactics

138. Sponsorship. As described earlier PIAC sponsors a number of teams and groups both for games and social cause.

139. Sales agents. PIAC has a vast network of sales agents who convince people to buy their tickets.

140. PIAC‘s pricing as described earlier is not of much appreciation. It is not only high priced as compared to the utility the consumer gets out of it but also it is against the rules. “Details are given above”. The pricing strategy is done by manager director. Under him “SVP Sales”, “SVP finance”, “Director Finance”, “Deputy managing director”, “SVP IT “and “SVP Monitoring and Appraisal” comes the joint effort of all these departments give PIAC its pricing.

141. PIAC’s recent joint venture with “Pakistan Remittance Initiative” allows customers to send money to Pakistan through legal channel and also win tickets for free in achieving a minimum remittance slab.

142. PIAC frequent flyer program aka “Award+Plus” program has main focus on corporate clients. This is done by decentralizing redemption process. This has not only gathered corporate clients and retained them but also has saved 1.5 million per annum by introducing an in-house online redemption system.

144. It is coordinating with the help of a central information system PIAC personal (SIS)

145. The kitchen and catering have been privatized as separate bodies

147. PIAC takes IT products from private organizations again through bidding. It is done by IT department and is responsible for smooth flow of their information system.

148. Engineering supplies department of PIAC is the purchasing authority for procurement of aircraft parts, non-aircraft parts (e.g. simulators or spares) to support aircraft maintenance and operations. This is done through tender notices as well. And it is directly in relation with PKMRO.

150. The head office is in Karachi so every operation is done in the head office, but all the regional offices take orders and do their work as assigned by the Head office

151. The decision making is done at higher level of organization. The detail will be discussed ahead in the role of corporate governance

153. Introduction and success of Pakistan Remittance Initiative (PRI)

154. Increasing market share by 5%

156. Add related products and services for existing customers

157. Add new products and services for new customer base

158. Underserved Niche (very small)

159. Market domination

160. Strategic partnership

162. Product development through “ concentric diversification”

164. logistics - inbound and outbound

165. production ( process ,time and work study, maintenance ,automation)

166. energy

167. human resource ( out sourcing )

168. sales & marketing

170. A hybrid custom designed structure which is a mixture of mechanistic and organic model of organization

171. The 3 rules for conquering complexity

172. Introducing “fun” element in operations and work environment

173. Person does best when he is doing what he is made for or he believes so

174. Departments remain the same

175. Our structure will only define approach and factors on those departments

176. Distribution of power will be discussed

178. Middle level management

181. Move fast and change faster

182. Find Humor In Tense Moments

183. Think Logically and in benefit of internal people and customers

184. Celebrate everything

185. Quick respond to feedback

186. Take the competition seriously but not yourself

188. Empathy

189. Creativity

190. Motivation

191. Love

192. Supportive

193. Flamboyant

194. Outrageous

196. If the proposed model is implemented properly the information flow down and up will be open and efficient

197. If the proposed model is not implemented properly the information levels will not be open, in this case find out why and where communication is blocked

198. Test through sigh sound and feel that system being used is stable and suitable for the required tasks. The model proposed is self-sustainable due to the introduction of “change” and may be modified to tailor according to task. If values are not working at all align the system to proposed model properly.Strategy Evaluation<br />The proposed strategy should be evaluated twice a year using balance score card and if change is necessary the situation must be viewed with De Bono’s six thinking hats in the following order<br />Blue, Red, White, Yellow, Black, Green, Red, Blue<br />Following balance score card is proposed for the evaluation<br />