The rise and fall of PIA
Submitted by: Muhammad Atif Iqbal

KSBL MBA2015
GSBD II
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Introduction
With the inception of Pakistan it was divided into two parts. East and West Pakistan and the link between the two parts was possible through air only because between the two parts lied the second country that came into being with Pakistan i.e. India. So to connect the two parts of the country Air-Travel was the only convenient option. To serve the purpose Orient airways owned by the Isphahani’s was providing services but the it failed to serve the purpose effectively because of limited resources and losses incurred due to poor economy and other issues prevailing in the country at that time so in 1954 Govt. of Pakistan decided to launch a National Aircraft Carrier with the name of Pakistan International Airlines. Which grew very quickly and launched international travel only a year after its formation and the destination of the flight was London via Cairo. PIA took over and consolidated the operations of Orient airways in 1955 which increased the capacity of PIA with an increase in the fleet available. And it was the time when PIA expanded and exploded in terms of size, assets, revenues and profits. PIA has bagged many achievements as well like the first Asian company to add a jet airplane to its fleet and enabling the operator to enlarge its network and expand services across many borders. It was also the first non-communist airline to offer flights to Shanghai, China.

History of PIA’s fleet and routes
During the 60s-90s PIA was considered the leading airline of the world offering the best services and the most decent and well-mannered staff, it was a name that every Pakistani would proudly mention his name with. The growth of PIA has been explained according to each decade

1960’s
During the 1960’s PIA under the leadership of Air Marshal Nur Khan who was the Managing Director of PIA, PIA bought the first jet-aircraft1 and became the first airline of South-Asia to have a jet aircraft in its fleet and started offering flights to New-York’s JFK Airport. Also during the 60’s PIA bought several other planes and helicopters like Boeing 720s,
Foker F27s and Sikorsky Helicopters. PIA also holds the world record for the fastest commercial aircraft which still holds today2. In the 1960’s PIA achieved to become the first non-communist airline to travel to
Air Marshal Malik Nur Khan

1
2

http://www.historyofpia.com/firsts.htm http://www.fai.org/fai-record-file/?recordId=7679 1

People’s Republic of China3 and also served Pakistan Army for logistics and supplies during the 1965 War. Which basically brought a short blow to PIA’s operations due to sanctions imposed by other countries over Pakistan due to war.

FOKER F27

1970’s
In the 70’s the sanctions were removed and transatlantic flights were resumed which brought in huge revenues and Air
Marshal Nur Khan was selected the
Managing Director for the second time.
Pakistan International Airlines as usual expanding and adding new planes and routes to its operations some of the new destinations added during the 70’s were
Tripoli, Libya4, Abu Dhabi, Amsterdam,
Muscat Oman etc.5 The new Palnes
Bought included McDonnell Douglas DC10s and Boeing 747’s, the latest Planes of the time.

McDonnell Douglas DC-10

During the 70’s PIA also started offering
Cargo and Freight services and technical and management consultations to other smaller Airlines of the time like Air Malta and Air Yeminia. In late 1970’s PIA also entered into Hotel Industry and by setting up a subsidiary which started offering hotel management services in United Arab Emirates.

1980’s
1980’s is the golden era when PIA set-up Emirates
Airlines an achievement indeed, PIA leased out 2 planes to Emirates and provided administrative and

3

http://www.historyofpia.com/firsts.htm http://en.wikipedia.org/wiki/Pakistan_International_Airlines#Pre-Independence 5 http://corporateambassador.net/Page-87.htm 4

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technical assistance to Emirates as well. During the 80’s PIA got its first Female Pilot who flew her first commercial flight in 1990.
Besides these achievements PIA continued to grow by adding more planes to its fleet and even diversified its fleet by adding Airbus A300B4-203 and Boeing 737-300s and became first Asian airline with such diverse fleet, and PIA started to offer flights during the night and offers these at cheaper rates as opposed to the flights during the day and called these flights the night coach service.
During this period fights to even new destinations like Male and Toronto were introduced further increasing revenues and travel destinations in PIA’s brochures. PIA also set up duty-free shops and a proper cargo handling hub at Karachi Airport and improved its safety and maintenance standards by introducing several security and maintenance protocols.

1990’s
With increasing competition from private airlines set up on the country PIA ordered 6 top of the line AirBusA310-300, with new airplanes PIA started offering flights to Tashkent and Zurich. In 1993 Air Vice
Marshal Farooq became Managing Director of Pakistan International Airlines and further increased destinations offered by PIA including 6 new Gulf and Common Wealth Countries and also introduced the very amazing trip over the Karakorum ranges giving passengers a bird’s eye view of the Himalayas, K2 and several other famous Peaks, and named it Air Safari6 this step added a lot to PIA’s revenues and added a major attraction to tourists as well. The new offered routes and this attractive Air-Safari flight and nonstop flights to New York and Toronto increased the revenues of PIA and it made an impressive profit of 55 million PKR in 6 months, in March 1996 PIA was handed over to another MD and PIA’s glory started to diminish, it started making losses and problems started to show up in management and services. Although there have been problems PIA being backed by the Govt. of Pakistan kept on growing and passenger traffic continued to grow as well so to coupe up with increasing number of customers and passengers PIA bought
Flight Simulator for Boeing 747 to train its pilots.

2000’s
During the 2000’s besides making considerable losses PIA kept purchasing new palnes like 8 Boeing
777s, 5 Boeing 747s were ordered, during this time PIA also bought
Airbus A300, and no new routes or destinations were added to the PIA’s list. The downfall of PIA kept eating up PIA’s reserves and losses increased by every passing day. PIA added Airbus A310-300 and ATR42500 to its fleet after the Foker incident7. 6
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http://www.piac.com.pk/pia_about/pia-about_destinationpak.asp http://www.historyofpia.com/accidents.htm 3

Financial History
PIA since its start has been a very profitable institution under the great leadership of its Managing Director
Nur Khan, the first financial loss experienced by PIA was in 1971 when Pakistan was divided and half of the Pakistan separated and Bangladesh came into the world map. This incident cut down the sales of PIA because most of its flights were from East-Pakistan to West-Pakistan, after losing money in 1971-72, PIA made a profit of about $3 million in 1974 and contributors of these profits was the Cargo service started by PIA and new routes like flights to Libya which were added to the destinations offered by PIA. Its auxiliary services like consultations administrative and technical services to other airlines brought in $4 million a year to PIA’s income statements. Operating profits reached $5.5 million in 1975-76 on revenues of $206.6 million as new planes were added to the fleet of PIA and also PIA was regarded as Asia’s Best Airline as it gained popularity.
PIA bought 20% shares of Air Malta in April 1977 and provided it with technical staff and consultation, PIA helped set up flight kitchens for Air China also. PIA had suffered a couple of serious aircraft mishaps planes were crashed which put toll to its financial performance and hurt passenger traffic as well, PIA with its committed management and dedicated staff was soon back on its track and started making profits and became a major contributor to economic indicators of Pakistan bringing in foreign reserves by providing services in many countries and to many nations, while this growth and reputable era PIA was making profits, but was certain government policies and mandates hampered its performance and profitability, such as artificially low domestic fares which cut down its margins and reduced the profit percentages, high taxes on jet fuels increases its costs, and a ban on serving or selling alcoholic drinks during flights reduced its customer base considerably. A couple of years later while PIA was still trying to retain its customers and increase its margins through hedging the prices, cutting costs by managing its employees and reducing expenses to the minimum, the government increased duty on aircrafts and parts as well as increased airport fees which proved to be another blow on the financial performance of PIA.
PIA made loss during economic year of 1991 mainly due to the point in indemnity premiums and an abnormal increase in fuel prices caused by the Gulf War. It lost an estimated $40 million on domestic service alone during 1991 but some major restructuring and initiatives taken by its Managing Director PIA made record profits of $41 million on revenues of $880 million in the next year. Air Marshall Farooq Umar, managing director, introduced another restructuring program during the year 1993-94 when the financial performance of PIA started declining again and net profits slipped to $4.5 million.
The financial summary8 of PIA for the previous 10 years has been shown in previous Table.

8

http://www.piac.com.pk/PIA_About/pia-about_corpreport.asp

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Table 1
Revenues
Year

Revenues (PKR in Million)

Profit/(Loss) (PKR in Million)

Employees (Ave.)

2014 Q1

28,000

(1,980)

-

2013

95,771

(44,531)

16,604

2012

112,130

(33,180)

17,439

2011

116,551

(26,767)

18,014

2010

107,532

(20,785)

18,019

2009

94,564

(5,822)

17,944

2008

88,863

(36,139)

18,036

2007

70,481

(13,399)

18,149

2006

70,587

(12,763)

18,282

2005

64,074

(4,412)

19,263

2004

57,788

2,307

19,634

PIA has suffered losses of more than 64 billion rupees from 2005-2008, the primary reason of these losses is said to be the increase in global fuel prices and devaluation of Pakistani Rupee

Downfall
After enormous growth of Pakistan International Airlines it experienced problems and started making losses and receiving complaints. The downfall of PIA started when its Managing Director handed over the office to is successor in 1996 and the company started to make losses and the crew’s morale plummeted.
The problems with PIA like many other Pakistani Institutions and company is intervention of Political
Leadership in its affairs. If we look closely into the history of PIA we can see that the Prime ministers of
Pakistan has been appointing several incompetent Chief Executives and Managing Directors of Pakistan
International Airline, taking the airline downhill and is almost buried now with consideration by the govt. to privatize the company. Since its inception Pakistan International Airline has been under the control of
Defense Ministry and Govt. owns 85% shares of Pakistan International Airline9. Different Political regimes had been involved in influencing the management of Pakistan International Airlines like Ms. Benazir
Bhutto has been accused of giving unjustified employments in PIA which put a strain on the finances of the company like salaries and wages expense. Only recently it has been found that about 235 employees of PIA had fake credentials and they had climbed the hierarchy of PIA with time. Besides having fake credentials and incompetence PIA has been making efforts in the past to lay-down employees but the management and leadership could not be successful in doing this because the staff and crew refuse to work and carry out operations10. Unlawfully giving out jobs give rise to many other problems as well, as these employees will not be loyal to the organization and motivation and performance of all other people around will suffer as well. Besides these people with political connections have other motives as well because we can see that some managers of PIA have set up their own maintenance companies and give
9

http://www.piac.com.pk/PIA_About/pia-about_corpreport.asp http://www.ptudc.org/workers-struggles-mainmenu-36/409-strike-at-pakistan-international-airlines.html 10

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out maintenance contracts to these companies regardless of the fact that they are all sub-standard companies and these companies don’t have a record of doing good maintenance or any international recognition from any regulation authority what so ever which really destroyed the standards of PIA’s fleet and the planes have been grounded or been barred to fly from several airports and countries11. Besides these issues under the guidelines of PIA employees are entitled to are medical facilities for self and family,
Leave quota, Health Insurance, Retirement Allowance, Pension and free tickets for self and family, every new employee PIA hires means extra burden of salaries and also of all these benefits as well but besides giving all this to its employees and staff PIA fails to deliver good services to its customers, perhaps PIA is too busy in catering its own employees of about 18000 people. The ratio of employees to planes in PIA is bizzerk according to international standards airlines have no greater than on average 100 employees per aircraft while PIA has about 776 people working per airplane and the numbers get very shocking when you check the number of pilots, currently PIA have about 37 aircrafts and it has about 600 permanent pilots on duty. All these issues are adding up to financial losses of PIA, poor performance of the organization and poor service by the employees.

Incidents
During the time span of 50+ years PIA have had a number of plane crashes and other incidents some of the main crashes are,







The crash of Boeing 720-040B on Cairo Airport on May 20 , 1965. It was first major accident of
PIA. The crash killed 106 passengers and 13 crew members however 6 passengers miraculously survived the crash12.
November 26, 1979 PIA’s Boeing 707 experienced fire on-board shortly after taking off which engulfed the cabin and cockpit was filled with smoke taking the plane down and crashing it into a mountain near Saudi city of Taif killing 156 people on-board.
August 25, 1989 PIA lost its AP-BBE somewhere in the Himalayan Mountains, the wrecked of the plane is still not found so are the 49 passengers and 5 crew members.
Airbus A300 stuck hill while it was landing at Katmandu Airport on September 28th, 1992 killing all
167 people on board.

The incidents and mistakes done by PIA’s crew have earned a very bad name for PIA. Recently Pakistan
International Airlines plane was detained at French Airport due to safety reasons, according to the report the plane had 39 problems with the palne including fuel leakage on the engine and several fire seals were damaged after this incident EU imposed a ban on all PIA flights which was eventually lifted off when PIA met the security standards, the reasons of such problems is giving contracts to sub-standard maintenance companies which fail to meet the international standards and don’t follow regulations of the CAA standards. Other incident happened when a PIA pilot was arrested for flying a plane while under the influence of alcohol for a flight from Bradford to Islamabad13. In another incident a PIA airhostess along with her husband was caught while carrying 8 kilos of cocaine trying to smuggle it to Muscat, and a very shameful incident happened when 3 male flight crew member sexually harassed a british female passenger who were later arrested for doing such shameful act. All these incidents along with rattling
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http://www.nation.com.pk/Politics/09-Sep-2011/PIA-Airbus-flights--face-another-EU-ban http://www.historyofpia.com/lostairliner.htm 13 http://tribune.com.pk/story/606878/another-scandal-drunk-pia-pilot-arrested-at-leeds/ 12

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state of planes take away the trust of the customers and they are now unwilling to fly in PIA maybe that’s why PIA changed its tagline from “Great People to fly with” to “Come fly with us”.
This is how PIA gained all the glory and fame and how political leadership and unfair appointments took away the name and pride of the nation.

Table: Fleet of PIA
Aircraft

Total

Orders

Option

Passengers

Notes

J

Q

Y

0
12
0
0

203
195
227
180

Tot al 203
215
227
180

Airbus A310-300

6

0

0

Airbus A320-200

2

11

0

0
0
0
0

ATR 42-500
Boeing 737-300

6
3

0
0

0
0

0
0

10
0

40
118

50
118

Boeing 737-800

2

0

0

0

0

189

189

Boeing 747-300
Boeing 777-200ER
Boeing 777-200LR
Boeing 777-300ER
Total

3
4
2
3
37

0
0
0
5
16

0
0
0
0
5

0
35
35
35

0
54
60
54

503
240
215
304

503
329
310
393

Business class being reintroduced
2 leased* until May 2014
Arriving till October 2014
To be grounded in 2014
Replacement: Airbus A320200
Leased* until May 2014
Replacement: Airbus A320200
One leased from ILFC
Entry in Service 2015

Table: Former Fleet
Aircraft
Airbus A300B4-200
Boeing 707-340C
Boeing 720B
Boeing 747-200B
Boeing 747-200B Combi de Havilland Canada DHC-6 Twin Otter
Douglas DC-3
Fokker F-27 Friendship
Hawker Siddeley Trident 1E
Lockheed L.1049 Super Constellation
McDonnell Douglas DC-10-30
Sikorsky S-61N
Vickers Viscount 815

Introduced
1980
1960
1962
1976
1979
1970
1955
1961
1966
1954
1974
1963
1959

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Retired
2005
1992
1986
2000
2011
1992
1967
2006
1970
1969
1987
1967
1966

Table: The Countries and Cites where PIA is operating:
Country
Bahrain
Bangladesh
Canada
China
Denmark
France
Germany
India
Italy
Japan
Kuwait
Malaysia
Nepal
Netherlands
Oman
Qatar
Saudi Arabia

Thailand
Turkey
USA
UAE

UK

Cities
Bahrain
Dhaka
Toronto
Beijing
Copenhagen
Paris
Frankfurt
Bombay
Delhi
Milan
Tokyo
Kuwait
Kuala Lumpur
Katmandu
Amsterdam
Muscat
Doha
Jeddah
Dammam
Riyadh
Medina
Bangkok
Istanbul
New York
Abu Dhabi
Al-Ain
Dubai
Sharjah
Manchester
London Heathrow
Glasgow
Birmingham
Leeds Bradford

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Served Since
1967
1976
1988
1973
1974
1966
1962
1957
1957
1957
1969
1966
1972
1983
1971
1971
1967
1966
1965
1984
2011
1967
1966
1961
1971
1994
1967
1982
1989
1955
1989
1987
1999