"Up Above The World So High Like A Diamond In The Sky" Or Is It? - Pia'S Predicament As The Competition Grows From Private Airlines

"Up Above The World So High Like A Diamond In The Sky" Or Is It? - PIA's Predicament As The Competition Grows From Private Airlines

Assistant Professor Zeenat Jabbar prepared this case solely to provide material for class discussion. The author does not intend this case to serve as endorsement, source of primary data, or illustration of either effective or ineffective handling of a management situation. The author has disguised certain names and other identifying information to protect confidentiality.

Copyright © 2006, NUST Institute of Management Sciences IBM 06-251

His eyes were taking in the busy view outside the window but his mind was miles off on the pressing agenda at work. Shumayel Tariq is the man responsible for developing Business and Marketing strategy at Pakistan International Airlines Corporation (PIA). He was heading back to Islamabad after a series of hectic meetings with his team and other stakeholders in Karachi. While waiting in the Executive Lounge of Jinnah Terminal, he pondered over the recent happenings in Pakistani Airline Industry - How things could never be taken lightly in this market!

Thinking about AirBlue's powerful arrival in the market, which was wrongly taken so lightly by many, Shumayel knew that PIA, on the other hand, could easily strike back with its huge power but this too had to be done with thoughtfully devised strategy. A strategy which has to be successful in the long run as well. He thought it was high time for PIA to wake up!

PIA in Retrospect

PIA's origins can be traced back to the time even when Pakistan was only a dream! On October 23, 1946, Orient Airways was set up, by the well-known and seasoned industrialist of the time, Mr. M.A.Isphahani. Two months after its service began, Pakistan became a realisation. By the end of 1940s, the airline suffered heavy financial losses, the Pakistani government realizing this, asked Mr.. Isphahani to merge Orient Airways with the new national flag carrier that the government was planning to establish. Eventually, on March 11, 1955, Orient Airways merged with the Government's proposed airline, becoming Pakistan International Airlines Corporation. It was incorporated on April 18, 1956 under the PIAC Act, 1956 and its shares were quoted on the stock exchange in Pakistan.

PIA, over the period of time, became highly bureaucratic. Like other government organizations it was more of a self centered company rather than customer oriented one. "Great People to Fly With" became a mere slogan. Internally PIA lacked the zeal and zest which any top notch airline must possess. The company itself was the king and scored badly in terms of customer dealings and relationship building. It knew very well that consumers have no other option as there was no other airline providing the full bouquet of services like baggage handling, in-flight meals and other services like these. 1

PIA has one of the highest fleet-employee ratio, which is around 416 employees to manage each of the 48 aircraft on the average. With this structure, PIA faces a gigantic task of making a significant change in attitude of its workforce.2

PIA had no choice but to compete against private airlines, when the local airline landscape expanded. PIA initiated a work plan to include six A-310s by 20083, and to dispose off Fokkers in order to increase its fleet efficiency and to compete with the competition (Exhibit 1).

PIA decided to change its logo to give it a more professional touch. The old logo had PIA in light and dark shades of green and written in bold letters which was replaced by PIA written in black and in normal font. The new logo was given a yellow background instead of the previous white one. This yellow and black combination was used in order to give a fresh image and to depict joy, happiness energy and power. This change was taken favorably by the customers because they had an image of PIA as the national flag carrier and the new loge depicted style along with elegance. Tail of the planes had Pakistani flag flying on it (Exhibit 2).

In its efforts to change its corporate image PIA outfitted its planes with white tail and small Pakistan flag. The two tone beige white scheme on the fuselage was eye-catching with the words Pakistan written behind the cockpit windows.

In order to compete effectively with other airlines PIA launched its e-ticketing system. This system not only helped PIA in offering quality-conscious travelers value for their money but also helped them in eradicating the back-dating system associated with manual ticketing that costs airlines millions in losses every year.

1 PIA website

2 PIA website

3 PIA website

Competitive Dynamics of the Pakistan Airline Industry

Aero Asia started off its operations in May 1993. A subsidiary of "Tabani Group of Companies" (an established and prestigious business house), it made history by being the first private airline of the country and till date has the largest fleet in the private sector. It has more than 650 flights per month. It commenced its operation from Karachi and so it has its hub over there. Its fleet includes DC 9-51 and 737-200. Having been in the market for such a long period, it is well aware of the market trends and consumer behavior patterns, thus Aero Asia is well known as a low cost no frills airline operating in the country. PIA found Aero Asia not a threat as it believed that Aero Asia is focusing on a different market segment4.

Shaheen Air: December 1993 Shaheen Air emerged in the skies of the country. Through expertise in aviation and other supporting factors it was accorded the status of Second National Carrier of Pakistan. It had its operations abroad as well and had the objective of making it a leading customer focused regional and international airline. In June 2004 it came under the management of TAWA International of Canada. Its fleet of aircraft

include Boeing 737s and Airbus A-320. It has also experienced a growth rate of 9% last year (2004) in its total passenger travels, therefore, Shaheen Air has planned to increase its flight frequency to cater to a wider segment of the market5.

More or less they both Aero Asia and Shaheen served the same segment of the market competing against each other. Rather than taking the market share of PIA they increased the overall customer base