STUDY OF FINANCE DEPARTMENTS OF PAKISTAN INTERNATIONAL AIRLINES CORPORATION

Description
This report explains about the financial departments in pakistan airlines corporation.

STUDY OF FINANCE DEPARTMENTS OF PAKISTAN INTERNATIONAL AIRLINES CORPORATION (PIAC)

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PRESENTED BY:
WAHEED USMAN MBA(FINANCE) MOHAMMAD ALI JINNAH UNIVERSITY

PRESENTED TO:
GULZAR AHMED DGM(DISBURSMENT) EJAZ CHAUDARY MANAGER(PAX REVENUE) CO-ORDINATOR INTERNSHIP 2008(FINANCE) NAZEER TAHIR SENIOR ACCOUNTS OFFICER

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TABLE OF CONTENTS
TITLE
Acknowledgement Introduction History Introduction to PIA Vision Mission Values PIA Network Brief Introduction of PIA Department Board of Director Introduction of the report Finance Department ? Disbursement ? Revenue Accounting ? Accounting ? Payrolls ? Funds Management ? Budget SWOT Analysis Conclusion Recommendation / Suggestion Bibliography RAO WAHEED Page 3 21-22 23-28 29-37 38-39 40 41-44 45-48 49-61 62-65 66 67 MAJU

Page No
02 03-04 05 to 09 10 11 12 13-14 15 16-18 19-20

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MEMORANDUM OF TRANSMITTAL
TO: NAZEER TAHIR WAHEED USMAN (MOHAMMAD ALI JINNAH UNIVERSITY KARACHI) DEPARTMENT FINANCE DIVISION ) SUBJECT: FINAL PROJECT INTERNSHIP PROGRAM 2008 DATE: JUN 07, 2008 FROM:

Here is the report related to Finance units you assigned to me as my internship final project to be submitted on. I have outlined what I learned from the finance department and have tried to explain what I understand from different units of finance. I have tried to explain different units of Finance. These are the Fund management ,Payroll,Disbursement and Accounting. I have also tried to give an overview of FINANCE DIVISION as a whole. In the process of completion of the report there were several hands which directed and helped me. Firstly I would like to thank Almighty Allah who guided me through not only this difficult time but the ones before, and I sincerely hope that He will keep on guiding me throughout my life through good and bad. I would also like to thank our parents, siblings and friends who accepted me the way I am: busy and annoying! And special thanks to MR gulzar ahmed, Mr. Asif, Mr Moiz, Mr Nazeer Tahir.and I would also thank internees who helped me a lot to grasp the concepts. And last but not the least I express my most humble gratitude towards you, who led me by your guiding hand till the end and kept me enlightened professionally.

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INTRODUCTION TO AIRLINE INDUSTRY
Air travel remains a large and growing industry. It facilitates economic growth, world trade, international investment and tourism and is therefore central to the globalization taking place in many other industries. From a global perspective, the airline industry is making strides towards its goal of sustainable profitability, partly by improving the efficiency of business operations, but also by encouraging the public to return to the skies with a more desirable travel experience. In the past decade, air travel has grown by 7% per year. Travel for both business and leisure purposes grew strongly worldwide. Scheduled airlines carried 1.5 billion passengers last year. In the leisure market, the availability of large aircrafts made it convenient and affordable for people to travel further to new and exotic destinations. Governments in developing countries realized the benefits of tourism to their national economies and spurred the development of resorts and infrastructure to lure tourists from the prosperous countries in Western Europe and North America. The rapid growth of world trade in goods and services and international direct investment has also contributed to growth in business travel. Worldwide, IATA, International Air Transport Association, forecasts international air travel to grow by an average 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010. But, the most dynamic growth is centered on the Asia/Pacific region, where fast-growing trade and investment are coupled with rising domestic prosperity. Air travel for the region has been rising by up to 9% a year and is forecast to continue to grow rapidly. To meet the requirements of their increasingly discerning customers, some airlines have to invest heavily in the quality of service that they offer, both on the ground and in the air. Ticket less travel, new interactive entertainment systems, and more comfortable seating are just some of the product enhancements being introduced to attract and retain customers. Nevertheless, the aviation industry is characterized by strong nationalist sentiments towards domestic 'flag carriers'. In many parts of the world, airlines will therefore continue to face limitations on where they can fly and restrictions on their ownership of foreign carriers. Despite this, the airline industry has proceeded along the path towards globalization and consolidation, characteristics associated with the normal development of many other industries. It has done this through the establishment of alliances and partnerships between airlines, linking their networks to expand access to their customers. Hundreds of
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airlines have entered into alliances, ranging from marketing agreements and code-shares to franchises and equity transfers. The outlook for the air travel industry is one of strong growth. Forecasts suggest that the number of passengers will double by 2010. For airlines, the future will hold many challenges. Successful airlines will be those that continue to tackle their costs and improve their products, thereby securing a strong presence in the key world aviation markets.

AIRLINE INDUSTRY IN PAKISTAN Pakistan is an Islamic republic located in the heart of Asia. It lies on the northwest of the Indian sub-continent, with Iran on the west of it and Afghanistan in the north. In Pakistan the airline industry is growing day by day as new airlines have started their operations or are going to start their operations in the near future on domestic & international routes. But the major problems faced by aviation industry of Pakistan revolve round reduced volume of air passengers, undeclared price war on the domestic and foreign sectors, extremely poor financial health, absence of level playing field, and drastic increase in insurance costs & inflation in the fuel charges. To ensure safe and efficient civil aviation operations in Pakistan, the country facilitates operations in the domestic & the international market of the safest standards in conformity with ICAO standards by an optimum number of airlines to encourage competition without dissipating the market. In Pakistan the aviation industry is managed by the Civil Aviation Authority. The CAA’s mission is to provide for the promotion and regulation of Civil Aviation activities and to develop an infrastructure for safe, efficient, adequate, economical and properly coordinated Civil Air Transport Service in Pakistan. There are 42 airports in the country being managed by Civil Aviation Authority (CAA). Out of these, 5 airports via Lahore, Karachi, Islamabad, Peshawar and Quetta are international airports. The construction of Allama Iqbal Terminal Complex, Lahore has recently been completed at the cost of Rs. 10.3 billion. This terminal can handle 6.5 million passengers per annum. Rahim Yar Khan and Bahawalpur airports have been upgraded for operations of Boeing aircrafts. Recently the purgation of Gwadar & Turbat airports has been done. Construction of new Islamabad international airport on BOT basis is being finalized. The
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construction of Sialkot International Airport in the private sector is also in progress. The other main airlines operating in Pakistan except PIA are Aero Asia International, Air Blue, and Shaheen Air International. While four other private airlines; Raji, Hajviery, Safe and Bhoja, in the last after six years of operations, have already wrapped up their operations.

HISTORY
Pakistan International Airlines PIA can trace its beginnings to the days when Pakistan still was not a nation. In 1946, Muhammad Ali Jinnah, also known as Quaid-e-Azam, realized the need for an airline network for the forming country. He called upon the help of an experienced industrialist Mirza Ahmad Ispahani. On October 23 of 1946, Orient Airways, registered in Calcutta, was formed. In February 1947, three DC-3 airplanes were bought from a company in Texas, and in May of that year, the airline was granted a license to fly. Two months after this service began, Pakistan as a nation was formed. Orient Airways began relief flights to the new nation, and soon after, it moved operations to Karachi. Due to passenger demand, the airline increased its fleet before the end of the 1940s. The government of Pakistan asked the airline to merge into a new national airline that the government was planning. On March 11 of 1955, Orient Airways merged with the Government's proposed airline, becoming Pakistan International Airlines Corporation. Under the PIA name the same year the airline opened its first international service, from Karachi to London Heathrow Airport in London, United Kingdom, via Cairo International Airport in Cairo, Egypt and Leonardo Da Vinci International Airport in Fiumicino, Italy using Lockheed Constellations. The DC-3s continued operating the domestic services in Pakistan.

THE 1950s AND 1960s
In 1956 PIA ordered two Super Lockheed Constellations and five Vicker Viscount. In 1959, Nur Khan was named managing director. In March 1960, PIA became the first Asian airline to enter the jet age when Boeing 707 service
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was introduced. The aircraft was wet leased from Pan American and in 1961 services were

THE 1970s AND 1980s
In 1972 PIA applied to operate to Libya and an agreement was signed with Yugoslav airline JAT. In 1973, McDonnell Douglas DC-10s arrived and were used by the airline before they were replaced by Boeing 747s. In 1974 air freight services started, as well as a cargo service to New York. In 1976, leased Boeing 747s came into service, the first time the airline had such a type. In 1978, the airline bought their first 747 aircraft, which have since become a staple of the airline's fleet. Also in 1978 the airline provided help to Somali Airlines, Air Malta and Yemenia; and established a hotel management service in the United Arab Emirates. PIA also leased two of its own Boeing 720s to Air Malta during the 70s. The 1980s began with the opening of a cargo center in Karachi. In 1981, PIA was named most efficient airline to the Hajj operation, and a duty-free sales service was inaugrated. From 1982 saw the welcoming of Airbus A300 aircraft to the fleet. In 1985 the PIA Planetarium tourist attraction was inaugurated in Karachi and later in Lahore which had static Boeing 707s on display for the general public. In the same year, five Boeing 737s joined the fleet. At the start of 1987 and 1988 flights were introduced to Malé and to Toronto Pearson International Airport, respectively. In 1989, the first women pilots started to command passenger flights.

THE 1990s:
PIA received the first of six Airbus A310-308 aircraft on 25 June 1991 from Airbus Industrie. In 1992, flights started to Tashkent and in 1993, to Zürich, Switzerland. In addition, PIA became a user of the Sabre, Galileo and Amadeus global distribution systems or GDS. During 1994 PIA added more destinations to its route map with Jakarta, Fujairah, Balky and Al-Ain and for the first time air safari flights were launched using a Boeing 737. In 1995 a 747 flight simulation system arrived, and the purchase of a used Air France A300 aircraft. In 1996 the airline leased Tupolev Tu-154 aircraft, and re-opened services to Beirut International Airport in Beirut, Lebanon. In 1999 the airline leased five Boeing 747-300 aircraft from Cathay Pacific to replace its aging Boeing 747-200 aircraft.
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THE 21st CENTURY
In July 2002, PIA purchased six Boeing 747-300 aircraft from Cathay Pacific, five of which were already on lease with PIA. The Boeing 747-300s are flying mainly to the UK, USA and Saudi Arabia with a few domestic operations that include Karachi-Lahore and Karachi-Islamabad.

BOEING 777 ORDER
Later in October, 2002, the airline purchased eight Boeing 777 aircraft from The Boeing Company, including three 200 ER (Extended Range), two 200 LR (Longer Range) and three 300 ER versions. PIA has said that it may add three more 777-200LR to serve its North American routes. PIA became the launch customer of the B777-200LR when it ordered the Boeing 777 family of aircraft. In January 2004, PIA received its first 777-200ER from Boeing and by March all three 777-200ER were in service. The Boeing 777 aircraft are now serving international routes to UK, Canada and USA and domestic Karachi-LahoreKarachi and Karachi-Islamabad-Karachi routes. PIA also acquired six half life Airbus A310-300/ET from the Airbus management on a ten year lease agreement. The aircraft are flying on most international and domestic routes. On delivery of the first three Boeing 777s the airline introduced a new livery to all of its fleet. On 6 December 2005, PIA leased an additional new Boeing 777 from the International Lease Finance Corporation (ILFC). The aircraft will have the same specifications as the previous Boeing 777-200ER that PIA operates. The aircraft is due to be delivered in January 2007 and will be on lease to the airline for ten years with an option to purchase at the end of the term.

FRENCH ATR REPLACE FOKKER:
On November 3, 2005 PIA signed an agreement with the ATR company (Avions de Transport Régional) to purchase seven new ATR42-500. The agreement was signed by Mr Tariq Kirmani, Chairman & CEO of PIA and Mr Filippo Bagnato, CEO of ATR in the presence of the General Consuls of France and Italy. The aircraft will replace PIA’s aging F-27 aircraft fleet. The 7 48-seat ATR 42-500 aircraft will be delivered between 2006 and 2007 and indeed the first aircraft was delivered on May 31, 2006. The total value of the contract is approximately US $100 million. PIA is considering acquiring three brand new ATR 72 that have been delivered in 2007-2008.
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DELIVERY OF THE WORLDLINER 777-200LR:
On February 25, 2006 Boeing delivered the world's first longest-range commercial airliner to Pakistan International Airlines (PIA). PIA's first B777200LR Worldliner left Paine Field in Everett, Washington and flew to Manchester, England, where it picked up passengers before flying on to Islamabad, Pakistan. PIA started direct, nonstop flights from Toronto to Karachi, Islamabad and Lahore from March 3, 2006. PIA planned non-stop flights to New York City and other US cities with sizable Pakistani population centers, but was not given permission due to security reasons. PIA received the delivery of its second Boeing 777-200LR on March 23, 2006.

EU BAN AND RESIGNANTION OF CHAIRMAN:
On March 5, 2007, the European Commission banned all but eight planes of PIA's 44-planes fleet flying to Europe citing safety concerns. PIA was blacklisted by 27 European Union states. The remaining eight, namely the fleet of 777s, has been exempted from the ban. PIA claims that this is discriminatory and the bans are not justifiable. Because of the EU ban, Pakistan is losing dominance for flights from Europe to the Near-East or Pakistan because Etihad Airways and Emirates are winning passengers for this route. The airline is urgently seeking to wet lease wide body aircraft. It is currently operating longhaul services with its eight Boeing 777 aircraft and two wet leased Airbus A310. On March 26, 2007, Tariq Saeed Kirmani resigned after severe pressure from higher authorities because of the EU ban, including disagreements with the engineering department, as well as the poor findings for the July 2006 Fokker crash investigation. Zafar Khan has been appointed as new Chairman of Pakistan International Airlines; he was previously the chairman of Karachi Stock Exchange. A team from the European Union is due to visit Karachi in July, 2007, to check the condition of the planes at the time and review the ban. PIA has grounded 8 aircraft (5 A310's and 3 B747's) and is conducting maintenance work on them to bring them according to the E.U standards. EU ban on PIA airbuses may last till November, 2007. On July 4, 2007, the EU lifted the restriction on eleven aircraft that PIA could fly into Europe of which five were Boeing 747's and six Airbus A310s. The remaining fleet of similar aircraft will be reviewed in September and October timeframe, when full removal of the restriction will be considered

CURRENT FLEET:
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The Pakistan International Airlines fleet consists of the following aircrafts: Aircraft Type Airbus A310-300 ATR 42-500 Boeing 737-300 Boeing 747-300 Boeing 747-200Combo Boeing 777-200-ER Boeing 777-200-LR Boeing 777-300-ER Total Total Aircrafts 12 7 7 6 2 4 2 2 42 Passengers 184 48 118 433 298 329 310 393

FUTURE FLEET PLAN
As PIA fleet is growing old and with no orders during the 1990s, there is a great deal of pressure on the airline to replace its Boeing 747 and Airbus A310 fleet with more modern and high tech aircraft. According to relevant sources, PIA is planning to order two more Boeing 777-200LR that will increase PIA's fleet of Boeing 777-200LR to four. The airline is also planning to lease an additional Boeing 777-300ER that will increase PIA's fleet of Boeing 777-300ER to four. This plan is to make PIA's long haul fleet to one type and replace the Boeing 747 with Boeing 777. PIA is also considering buying new generation Boeing 747-8 to replace its older Boeing 747-300 and Boeing 747-200 Combi, however, nothing concrete has been announced. For PIA's short haul fleet, the airline is deciding a replacement for its fleet of Boeing 737. They will be replaced by either eight A320-200 or 737-800 aircraft. PIA is also planning to buy 3 new ATR 72 which may be delivered after the seven ATR 42-500 in 2007. Also, PIA earns a majority of profits from its cargo division and hence PIA is also planning to buy 3 new A310-300F for cargo operations to replace the Boeing 747-200 Combi.

INTRODUCTION:
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Pakistan International Airlines (also known as PIA), is the national flag carrier of Pakistan and the National airline of the country operating passenger and cargo services around the world. Its main hubs are Jinnah International Airport, Karachi, the Allama Iqbal International Airport, Lahore and the Islamabad International Airport, Islamabad/Rawalpindi. Pakistan International Airline serves 46 international destinations across four continents and 36 domestic destinations.

ACHIEVEMENTS AND RECOGNITIONS:
• First airline from an Asian country and the first airline from a Muslim country to fly the Super Constellation. • First asian airline to operate a jet aircraft. • First asian airline to be granted maintenance approval by the US Federal Aviation Administration (FAA) and the Air Registration Board, predecessor of the British Civil Aviation Authority (CAA). • First non-communist airline to fly to the People's Republic of China, and operate a service between Asia and Europe via Moscow. • First airline in Asia to induct the new technology Boeing 737-300 aircraft. • An IBM 1401, the first computer in Pakistan, was installed in PIA. • The first airline to introduce a second route to People's Republic of China over the mighty Karakoram mountains. • First airline in the world to operate scheduled helicopter services. • First airline to show in-flight movies on international routes. • PIA set up Pakistan's first planetarium at Karachi. • The first airline in South Asia to introduce auto-ticketing facility.

• The first airline in the world to fly to Tashkent, capital of the newly independent state of Uzbekistan. • First airline in the world to start Air Safari with jet aircraft.

• First Asian airline to start flights to Oslo, the beautiful capital city of Norway. • First airline in the world to induct Boeing 777-200LR, the world's longest range commercial airliner.
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• First airline in the world to take delivery of the Boeing 777-200LR Worldliner (Longer Range Variant). Pakistan International Airlines Flight Services Department was awarded the ISO 9001:2000 certification award during May 2006.
•

VISION OF PIA
PIA to be a world class profitable airline exceeding customer expectations through dedicated employees committed to excellence.

MISSION STATEMENT OF PIA
Employee teams would contribute towards making PIA a global airline-ofchoice • Achieving adequate returns for all stakeholders • Offering high quality customer services and innovative products using state-of-the-art technologies • Taking cost-effective measures in procurement and operations • Fulfilling Corporate Social Responsibility • Being an equal opportunity employer • Adhering to business ethics and zero tolerance for corruption
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•

Participating in global alliance compensation and a congenial working

• Providing competitive environment

• Linking remote regions of Pakistan

VALUES:
Customer Expectations Convenience, Caring, and Competitive Tariff Service Personalized and Courteous Innovation Cherishing New Ideas, Translated Into Action Cohesiveness Respect for Individuals, Teamwork, and Effective Communication Integrity Business Ethics, Accountability, and Transparency Reliability Loyalty and Consistency Safety Passengers, Employees, Environment, and Health
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PIA CORPORATE SOCIAL RESPONSIBILITY :
Committed to Creating a Better World SOCIAL SERVICES o Boy Scouts Association o PIA Planetariums o PIA Horticulture o Support for Non-Profit Organizations TRAINING AND EDUCATION o PIA Training Center o PIA Model Secondary School o PIA Industrial Training Institute MEDICAL SERVICES o PIA Employee Health and Medical Services PIA SPORT DIVISION SAFETY o Flight Safety and HSE o IATA Operational Safety Registration Award o Fire Safety in the Workplace and at Home EMERGENCY RESPONSE PLANNING

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PIA’S NETWORK:
INTERNATIONAL NETWORK

DOMESTIC NETWORK

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BRIEF INTRODUCTION OF PIA DEPARTMENTS
PIA is a huge organization with many departments within which there are many divisions / sections. Brief introductions of these departments are as follows: -

1.

ADMINISTRATION
• • • • •
•

• • • • • •

Security Division Legal Services Division. Public Affairs Divisions. Personnel Services. Human Resources. Industrial Relation (Employee Relation) Industrial Engineering. Organization Planning. Employment. Staff Development Section. Polices and Remuneration. PIA Training Center.

2.

FLIGHT OPERATIONS
• • • • • • • Planning & Scheduling Division. Crew Scheduling. Crew Planning. Technical Division. The Central Control Division Flight Control Center. Flight Dispatch Center.

3.

MANAGEMENT INFORMATION SYSTEM.
• Performance Evaluation. • Technical Evaluation. • Customer Relation.
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4. FINANCE
• • • • • • Funds Management. Revenue Accounting. Accounting Emolument / Payroll. Passenger Revenue (PAX). Cargo Revenue.

5. CORPORATE PLANNING.
• Fleet Planning Division. • Economy Planning Division.

6. MARKETING.
• • • • • • • • • • Tour Promotion. Cargo Sales Division. Pax Market Planning. Schedule Planning. Pax Tariff. CRC Central Reservation Control. Pax Sales Division. Marketing Intelligence. Advertising. Awards Plus

7. FLIGHT SERVICES.
• Flight Service • Catering Division.

8.

AIRPORT SERVICES DEPARTMENT.
• Traffic.

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• • • • •

Ram Operation. Pax Handling Services. Technical Ground Services. Baggage Services. Handling Agreements.

PIA SUBSIDIARIES
? ? ? ? PIA Subsidiaries are follows International Advertising (Pvt.) Ltd. PIA Hotels Ltd. (Dormant) PIA Holdings (Pvt.) Ltd.

ASSOCIATED (OVERSEAS)
1 . 2 PIA Investment Ltd. Minhal Incorporated Pakistan

COMPANIES

ASSOCIATED COMPANIES (PAKISTAN)
I Pakistan Services Ltd. . Pakistan Tourism Development Corporation 2 .

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HOTELS
Airport Hotel Karachi Airport owned by sky room (Pvt.) Ltd. A subsidiary of the airline.

PIA NETWORK
? Consist of continent ? Countries ? Cities served ? Off line stations 04 46 88 43

Board of Directors
Ch. Ahmed Mukhtar Minister for Defence and Chairman Mr. Mueen Afzal Syed Mohammad Fazal Agha Malik Nazir Ahmed Mr. Shahzad M. Husain Mr. Mubashir Iftikhar Mr. M. Hidayatulla Khan Khaishgi Maj. Gen. Mir Haider Ali Khan Additional Secretary-I, Ministry of Defence Mr. Javed Saifullah Khan Mr. Farrakh Qayyum Secretary Finance Mr. Farooq Rahmatullah Director General CAA

Mr. Muhammad Shoaib Secretary-PIA

Management
Managing Director Captain Mohammad Aijaz Haroon Director - Corporate Planning Mr. Shahnawaz Rehman Acting Director - Engineering and Maintenance Mr. M.Tariq Farooq Director - Finance & Chief Financial Officer Mr. Arif Majeed Director - Flight Operations Capt. Shuja Naqvi Acting Director - Information Technology Mr Shahid Sarwar Director - Human Resource & Administration Mr. Hanif Pathan Director - Marketing Mr. Salah uddin Director - Precision Engineering Complex AVM Muhammad Kamal Alam Siddiqui Director Procurement, Mr. Imran Ahmed Khan Logistics and Co-ordination

FINANCE DEPARTMENT
Finance is a field that studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. The activity of finance is the application of a set of techniques that individuals and organizations (entities) use to manage their financial affairs, particularly the differences between income and expenditure and the risks of their investments. An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. Finance is one of the most important aspects of business management. Without proper financial planning a enterprise is unlikely to be successful. Similarly, Finance Department in PIA is very large and most important department which deals with all finance and money related decisions and managing all the resources of the enterprise. This department is structured in a way in PIA that it is headed by Chief Financial Officer followed by Directors and Senior Vice Presidents whom General Managers, Deputy General Managers, Assistant Managers, Accounts Officers, Accounts Supervisors and Attendants report in a well organized hierarchy. Finance Department in PIA holds responsibility to perform thousands of functions and works to deal with countless papers and documents of such a large airline company. Thus, this department is divided into several sections and subsections which perform distinct functions. The division of finance department is as under: 1. Revenue Accounting a) Pax Revenue b) Interline Revenue c) Cargo Revenue

2. General Accounting a) b) c) d) e) f) g) h) Main General Accounting Section Payroll / Emoluments Disbursement Section Flight Services Technical Services Head Office Payment Finance Procurement & Logistics Corporate Taxes

3. Funds Management 4. Budget Section a) Revenue Expenditure Budget b) Costing c) Capital Budget

As PIA is such a big corporation therefore the internees were divided into different sections and according to their schedule the internees have to stay 3 weeks in the allotted section and then rotation started in the 4th week of the internship program. I was allotted the disbursement section where I have to stay for 3 weeks to learn and do the practical work. Below is the detail of the disbursement section and their process of work.

DISBURSEMENT
Disbursement is a section of finance in which POST PAYMENT AUDIT of D-15 reports and reconciliation of the stations both domestic and international is done. It has a separate bank account called imprest (27) all the settlements are made through this account. The Disbursement process starts with the entry of the vouchers and reconciliation statements send by different stations whether domestic or international to the Disbursement section. Then these vouchers and statements are used by the concerned staff to perform their task.

D-15
Monthly expenditure report is called D-15 which consist of Pay vouchers with relevant supports, payment book listing all the disbursements made at station during a specific month, disbursement accounting summary, staff payments register, budget control register, bank imprest reconciliation and bank statements.

D-15 Process:
• Station whether they are domestic or international do their expenditures within the month and prepare pay voucher against the payments of every expenditure. • At the end of the month they compile the information regarding to every pay voucher and prepare D-15 reports. • Then all the stations of both domestic and international send these reports along with pay vouchers to head office which then forward it to disbursement section. • These D-15 are received by disbursement and their entries are recorded in register.

• Then these P/V’s are forwarded to concerned staff for checking according to their assigned stations. • The staff then check the pay vouchers according to the following rules: ? Pay voucher is a basic document of our Disbursement system. It should be prepared against approval of competent authority and must be supported with all necessary documents i-e Bills, Invoices, Receipts e.t.c. ? Each invoice, bill, receipt must be certified by the concerned officer and approved by the station head. In cases involving corrections, wrong figures should be circled in red ink and correct figures written and duly signed by the claimant and approving authority before preparation of pay voucher. ? Each pay voucher must contain signatures of the official preparing payment voucher as well as the approving authority along with their staff numbers. ? Recipient’s signatures must be obtained on pay voucher. If cheque is dispatch, a dispatch stamp must be affixed. In such cases official receipt of the beneficiary should also be attached with necessary identification along with other support. ? All support should be photo copied and retained with copy of pay vouchers for reference and reply of queries. Original supports, except T.A form, must be send to H/O for checking and record purpose. Payee’s copy of T.A form along with copies of ticket jacket hotel bill and airport tax receipt should be attached with PV. ? No payment should be made on photocopies of invoices/receipts etc. This is the most important safeguard against duplicate payments and frauds prevention. • If any query is found “DISBURSEMENT OBSERVATION NOTE (DON)” has been prepared which is send to respective station to clarify the objections.

• Stations then sends reply/clarify through the same DON in their reply column. • If still any point does not satisfy the concerned staff so further communication is being carried forward through e-mail system. • When the inquiry is completed then the PVs are send for binding for making records.

RECONCILIATION
Reconciliation is the process of reconciling the stations both domestic and international with the help of reconciliation statement. Every station prepares their reconciliation statement every month and sends this statement along with the bank statement to the Disbursement section. Disbursement section has its own account which is IMPREST 27. The statement includes two parts “PART A” and “PART B.” the first part includes the opening balance of the current month then there is the amount of funds transfer after that there is the amount of D-15 and then the total of PART A, in PART B first of all the bank balance whether debit or credit is written after that there is the total amount of UPC (un presented cheques) after that the amount of unlinked debit and credit if any is written and then the total of PART B comes which is revolving fund closing balance. The total of both PART A and PART B must be same then this total is carry forward in the next month’s statement as a opening balance for that month.

PROCESS OF RECONCILIATION
The reconciliation process starts after receiving the ledger and the reconciliation statement of the respective station for the current month. The ledger we get from the GENERAL ACCOUNTING section which is prepared by the CRC section after getting the disk from the respective station. After receiving the ledger and statement we perform following steps:• First we check the list of funds transfer and the list of UPC. • If there is any stale cheque which is not reversed we note the cheque # and the amount then send e-mail to the concerned station about that cheque. • The amount of unlinked bank debit and credit is checked in the bank statement and then an e-mail is sent to the station to provide the detail if there is any unlinked bank debit or credit shown by the station in the reconciliation statement. • The amount of revolving fund closing balance is taken. • Then we match the amount of transfer and D-15 on reconciliation statement with that of ledger. • In case of any short or excess account a JV is made to match that amount.
•

If in any month the whole amount of D-15 is not came than we make provision for that month’s D-15.

• In case of international station the JV is made for the amount of exchange difference every month. • The JV’s of previous months which are still not reversed are carried forward in doing reconciliation of the next month. After performing all these steps correctly we get the same amount as of the ledger closing balance.

TASK ACCOMPLISHMENT
During my stay in the Disbursement section I was given several task and assignment which I have performed successfully. These tasks are as follows:? Post audit of several stations both domestic as well as international some of them are, • QUETTA • ISLAMABADz • MANCHESTER • BIRMINGHAM • LONDON • NEWYORK • DUBAI • TOKYO During the checking of the PV’s I found several errors and discrepancies in these stations.Therefore I made a DON and sent to these stations and stations have given a reply of these DON which is attached here. ? Reconciliation of all the stations both domestic and international for the month of January to May 2008 ? In reconciliation a special task was given to me which was to reconcile one of the biggest stations of PIA which are, • • • • • • RAWALPINDI LONDON. NEWYORK TOKYO ISLAMABAD TORONTO

I successfully complete this task without any error or mistake.

RECOMMENDATIONS
• Authority should be given to the employees of disbursement sections to visit the respective stations in order to check the discrepancies. • Number of employees should be increased so that work load may be distributed so that each station can be checked thoroughly. • Employees should be rotated in other sections so that they can increase their knowledge and skills as well as it will minimize the chances of frauds as employees would not be able to make strong relations with each other. • The system of D-15 should be launched online to reduce the consumption of time. • All the transfers, payments should be made accurately and in case of short or excess a/c the amount should be reversed immediately So it may not create any enmity. • A complete detail must be provided by the station in case of any unlinked bank debit and credit. • Related data from the stations should be sent on time.

REVENUE ACCOUNTING
Revenue Accounting is divided into: ? Interline revenue ? Cargo revenue ? Pax Revenue Revenue is divided into sub-sections: 1) 2) 3) 4) 5) 6) 7) 8) Domestic Counter Domestic Counter Refund Agent Sales Agents Refund International Counter Sales International Counter Refunds International Agents Sales International Agents Refund

CHECKING THROUGH OTHER SYSTEMS TCN Sales Balancing Pax Lift OTHER SECTIONS FOR PHYSICAL CHECKING General Refunds Documents Control Sales Report Control Tax Unit Reconciliation Unit Credit Control Unit

PAX REVENUE
DOCUMENT CONTROL UNIT Revenue unit starts from the availability of document. The main document for revenue section is ticket. Ticket is the comprehensive document that gives the complete information required to travel. SALES REPORT CONTROL UNIT Sales Report Control Unit is assigned to receive sales report from Domestic agents, Domestic Counters and International Stations. The sales report control unit receives report on daily, weekly and monthly basis. After the report has been arrived the international and domestic counter sales are upgraded and this shows the receipt of sales report. If one has to verify that whether the sales report has been arrived or not he can enter the IATA code that is INTERNATION AIR TRANSPORT ASSOCIATION and IATA code is assigned only to registered agents. INTERNATIONAL SALES UNIT International sales unit is a unit of Pax revenue. International sales unit is a unit where it receives revenue or sales report from international stations. There are two counters from where tickets can be sold: Through counter Through agencies DOMESTIC SALES UNIT Domestic sales unit is also a unit of Pax Revenue and it also performs the same activities as International Sales Unit performs. Domestic sales unit comprise of : Domestic counter Domestic agency

AGENCY SALES UNIT Agency sales unit is the subunit of Pax Revenue and this unit includes the sales from agents. This unit involves ASR that is Agency Sales Report and these reports include the tickets sold through agents and it gives the complete information of ticket fare, taxes, class and also shows the commission charged by the agent. TAX UNIT This is the payment which PIA pays to government and civil aviation. It is an impost for raising revenue for the general treasury which will be used for general public purposes. PAX LIFT Pax lift is the sub unit of Pax Revenue. Its main purpose is create earn. International and Domestic stations send utilize flight coupons on daily basis to Head Office of Pakistan International Airlines (PIA). STEPS PERFORMED BY PAX LIFT UNIT STEP 1: SHIP PAPER CONTROL STEP 2: PREP STATION STEP 3: SCANNING STEP 4: IBML STEP 5: TILE STEP 6: KEY VERIFY STEP 7: VQA STEP 8: COMMIT STEP 9: RELEASE STEP 10: EXPORT STEP 11: ETC

TCN TCN means Transaction Control Number or Ticket Control Number. This is the process in which error correction is done on tickets in which there some error exists while constructing them as when tickets are sold their data is recorded electronically in CRS (Computer Reservation System) errors in the tickets block the system and it stops the data to proceed further. For this data to precede these errors are corrected. SALES BALANCING UNIT Sales balancing unit is that unit of PAX revenue where unbalanced sales are settled and if there any shortfalls than raise a debit memo. When sales are generated the data pass to two units one is TCN and other Sales Balancing Unit

REFUND Refund is the claim against surrendered documents. Refund can only be made id revenue is earned. Refund for different types of ticket: 1) 2) 3) 4) Revenue ticket Army APW/ TAC Student Applicant Difference of Fares

5) Agent Refund 6) Bank Commission

RECONCILLIATION UNIT
In this unit reconciliation of revenue accounts is done and the agency sales report are collected from different stations on monthly and fortnightly basis and are then sent to Reconciliation unit which is also referred to as R10 unit

ACCOUTING FOR RECONCILIATION UNIT
DEBIT INCOME EXPENSE ACCOUNTS RECIEVABLE SALES CASH CLEARANCE ACCOUTN ACCOUNTS RECIEVABLE CASH CASH CLEARANCE ACCOUNT ***** ***** ***** ***** ***** ***** ***** ***** CREDIT

CREDIT CONTROL
PIA is an airline industry and it provides services but will receive the revenue later this is where credit control unit comes. Services extend on credit for which payment will be received at later point of time. Credit is extended by the marketing people; a person who extends credit is also liable for recovery. Finance managers plan meetings with station officer for recovery.

CREDIT PRINCIPLE
The authority extending credit is responsible for timely recovery whilst the finance department function is to ensure accounting reconciliation and up to date status outstanding.

CREDIT CARD UNIT
The facility of credit card by organizations to its customers is the most exciting feature which represents an organization. For an airline industry this means that the customer can buy the tickets on credit rather than cash.

INTERLINE REVENUE
Interline revenue is the revenue which is generated if the passenger travel on other airline but have the ticket of some other airline like if the passenger is having a PIA ticket but there are some destinations at which the flights of PIA does not go but it cannot loose its customer by refusing its demand so it issues him the ticket but the passenger will travel on that airline whose flight go to that place. The money is not directly transferred between the two airlines but through IATA clearing house The documents involved in Interline Revenue Flight coupons those coupons which are utilized MCO: Miscellaneous charges order This is the document which works as the claim and PIA does not pay its customer in cash but issue him the MCO. PTA: Prepaid Ticket Advice This is the ticket issue in one country but can be utilized in other country. In this type of ticket money cannot be transferred but tickets can be transferred. EBT: Excess Baggage Ticket This is the ticket which is issued when the weight of the baggage exceeds by the allowed weight. Interline revenue consist of two units Interline Receivable Interline Payable

INTERLINE RECIEVEABLE:
Interline receivable means PIA will receive the amount of the services delivered to the customers of other airline as they issue ticket of other airline but travel on PIA. The Interline Revenue Unit receives the Interline Receivable documents from Pax Lift Unit, and the revenue of PIA is calculated through Proration method (method of distribution of revenue between or among participating airline).

INTERLINE PAYABLES:
PIA has to pay the other airline if its customer travel on other airline for reaching its final destination and the account will be treated as Accounts Payable.

Documents
Lifted PK documents Summary of invoice Rejection memo

CARGO REVENUE

Cargo revenue section consists of four units Lift unit Sales unit Mail unit Pricing unit The main difference between lift and sales unit is that lift unit comprises of earned revenue whereas sales unit composed of unearned revenue.

LIFT UNIT
Lift unit comprises of earned revenue that the cargo is been loaded. The basic document for cargo is airway bill. in lift unit comes the lifted airway bill. The first step in lift unit is to CONTROL. PIA cargo unit must get the domestic airway bill within 24 hours and international airway bill with the next available flight. The second step after checking is that online punching is done. there are approximately 13 to 14 fields, all date on airway bill will be punched online. this would be done till the end of month and at month end reports will be generated.

SALES UNIT
Sales unit receive airway bills from different station. they have a standard called COSSAP.

Types of report:
R-2: this shows report from counter. Include sold copies of airway bill R-11: this includes agency report, shows full detail and gives net revenue. at month end credit period will be given including all remittances and airway bills on station. Finance manager will issue a receipt to the agent. R-3: this shows different consignments collection R-4: this includes miscellaneous revenue. Other activity than counter or agent like cancellation charges, lost ticket deposit

MAIL UNIT
The mail unit is concerned only with the post office. Different stations send CN38 (old name AV7) document. Here comes the airway bill document. The steps in mail unit are as follow: Control: In mail unit first is the control section that checks whether the document from flight is correct or not. Coding Sector wise Segregation Batch making Online punching Report from DPC

PRICING UNIT
The main function of pricing unit is to check whatever rates mentioned on air bill are in accordance with the approval given by marketing division of PIA or not. If there is any deviation in the rates means if they are not in accordance with the approval than through the software named FOXPRO the Cargo Pricing unit will follow up to the concern station. For this deviation the concern station will give justifications, if he fails to justify his act than the matter will be raised in front of higher management but if he gives good reason for that deviation PIA pricing unit will make adjustment on FOX PRO. The cargo commission is 5%.

ACCOUNTING
FUNCTIONS
• Suggest improvements in financial policies for the sake of efficiency to maintain the high professional standards and financial controls. • Supervise the preparation of month end accounting closing and preparation monthly financial reports coordinate with other sections of finance departments and data processing services to ensure at month end closing dates are respected. Ensure that yearly and half yearly ad quarterly reports are prepared accurately and on time. • Maintain the consolidated general ledger accounts Working with data processing service to improve efficiency of computer based accounting.
•

• Prepare special studies for top management government agencies and IATA (international airline transport association). Supervise the asset accounting coordinates with auditors (internal, external and government auditos) and get annual financial accounts.
•

WORKING:
Accounting system of PIA is decentralized. Every branch is responsible to submit its accounting report to the head office branch. Software named CSAP “CPORPORATE STANDARD ACCOUNTING PACKAGE” has been developed for branch accounting. Cash book and sales book are maintained on this software which records the revenues and cash disbursement branch wise.

COLLECTION ACCOUNT The purpose of this account is to record the revenues which are being generated by two major sources one is by the sale of tickets for the online transportation of passengers and second source is interline DISBURSEMENT ACCOUNT It records the cash payments for meeting the expenses. Checks are issued for the payment. On domestic stations this account is always remained zero. FIXED ASSETS PIA has the fixed assets of Rs.37000 and above. The fixed assets having value less than Rs.10, 000 do not charged depreciation. Straight-line depreciation method is being followed here

PAYROLLS:
FUNCTION: To provide salaries to the employees of P.I.A working either domestically or internationally. WORKING: The processing of payroll is performed by main frame (computer). PIA is maintaining its centralized payroll system in its head office Karachi. All the payrolls have also been allotted their codes are called "Sources codes". Which are as follows: • Source 50 (Appointment Advice) • Source 51 (Confirmation Advice) • Source 52 (Salary Change Advice) • Source 53 (Loans Deduction Advice) • Source 54 (Statistical Data Change Advice) • Source 55 (Amount Adjustment/Change Advice) • Source 56 (Change/Promotion/Demotion/Transfer Advice) • Source 59 (Termination Advice) Pay roll section is further divided into following sub sections. i) Domestic Payroll: This payroll is for the employees in Pakistan, payment is done through a local bank, e.g. Habib Bank, MCB. ii) International Payroll The employees working at overseas stations are paid in Local currency and the transaction is done through city bank. There are 530 foreign salary employees. iii) Reconciliation here all the salaries are reconciled

iv)

Payroll taxes

In this section tax are deducted from the employees’ salary. Some of the allowances are taxable, some are non-taxable and remaining allowances are partially taxable. The income tax department fixes all these allowances.

v)

Final settlement: This is the document prepared for the employees who are separated from P.I.A for any reason like death, retirement, Termination etc.

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Funds Management
PIA Bank Accounts Foreign Stations: ? 115 Bank Accounts in 41 countries dealing with 38 different banks & around 30 different currencies. Domestic Stations: ? 77 Bank Accounts in 33 cities. ? Primarily dealing with 3 local banks .i.e. HBL ; NBP & UBL Head office Composite Accounts ? 3 Foreign and 3 Local currency accounts. Foreign Stations Collection Accounts: ? All local receipts deposited into this account ? Transfer of required funds to Disbursement Account to facilitate local payments. ? All surplus funds transferred to PIA Head Office “US$ Composite Account” with Citibank New York by converting local currency into US Dollars with same day value (on Weekly / Fortnightly / Monthly basis). ? All remittances checked (online) via “US$ Composite Account” with Citibank New York and confirmed back to station. Disbursement Accounts: ? All Station related payments made from this account. ? Required funds recouped from the Collection Account. ? ‘NIL’/ Minimum balance held overnight. Domestic Stations (All accounts held at “NIL” balance overnight)

Collection Account: ? Held with HBL, UBL & NBP. ? Station/Booking Office receipts deposited to this account. ? Transfer of required funds to Disbursement Account to facilitate local payments. ? All Surplus funds transferred DAILY to Head Office Composite Accounts held at Karachi leaving NIL balance overnight. Disbursement Account: ? All Station related payments made from this account. ? Required funds recouped from the Collection Account. ? NIL balance held overnight

PIA Head Office Composite Accounts
Foreign Currency Accounts: US$ ACCOUNT WITH CITIBANK NEW YORK Surplus funds (other than “Euro” countries) remitted to this account in US dollars. Facilitates all Head Office US dollar payments. Surplus funds placed on short term deposits at best available rates. Online access.

? ? ? ?

EURO ACCOUNT WITH HABIB ALLIED INTERNATIONL BANK LONDON ? Surplus funds from “Euro” countries remitted to this account. ? Facilitates all Head Office Euro payments. ? Surplus funds placed on short term deposits at best available rates. Pak Rupee Accounts: PAK RUPEE COMPOSITE ACCOUNTS HELD WITH HBL, UBL & NBP ? Credit balances from all domestic stations remitted on daily basis.

? Facilitates all Head Office PKR payments. ? Surplus funds held in special savings/short term deposit accounts with reputable banks to maximize return and ensure adequate liquidity to meet working capital requirements Reconciliation (HO) Accounts ? Receiving bank statement ? Preparing analysis of Bank statement ? Preparing JV (Journal Vouchers) into Pak Rupees Accounts from Debit /Credit transaction. ? Prepare Reconciliation Operation of PIA Bank Account 1) 2) 3) 4) Collection Account (Station) Disbursement Account (Station) Current Account (HO) L.C Account (HO)

? Issuance of bank operating instruction ? Issue instructions to bankers nominated authorized Signatories list of PIA representative posted at station to carry out station business.

Bank Reconciliation
1) Receiving Bank statement 2) Summary of Cash deposit (R9) 3) Bank Reconciliation

Processing
? Receiving summaries of R9 (Aggregate of all the Revenues) from all the stations. ? R9 processed through station control allotting unique batch No. to each reports ? R9 data transmitted to main frame for posting the data into General Ledger Checking & Processing of Stations Bank Reconciliation ? Checking of station Reconciliation ? Prepare observation regarding discrepancies.
? 1st Page of Reconciliation

? Outstanding Deposit details ? Transfer to Imprest ? Transfer to Head office ? Transfer to Territories ? Transfer from Territories ? Bank Charges ? Interest received ? R9 Summary ? Date wise Deposit Details ? Report Wise Deposit Details ? Bank Statements ? Conversion of Bank transfer and Bank charges in Rupees

? Prepare JV and transmit to main frame for posting into general Ledger

BUDGET SECTION
WHAT IS BUDGET? Budget (taken from French word “Bougette”) generally refers to a list of all planned expenses and revenues. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. Budget is used at various levels almost in whole world mostly at personal level or family level or government and corporate level also. For a corporation, the budget of a company is normally compiled annually. A finished budget usually requires considerable effort and can be seen as a financial plan for the new financial year. While traditionally the Finance department compiles the company's budget, modern software allows hundreds or even thousands of people in the various departments (operations, human resources, IT etc) to contribute their expected revenues and expenses to the final budget. If the actual numbers delivered through the financial year turn out to be close to the budget, this will demonstrate that the company understands their business and has been successfully driving it in the direction they had planned. On the other hand, if the actuals diverge wildly from the budget, this sends out an 'out of control' signal and the profits could suffer as a result.

A budget deficit occurs when an entity (often a government or an organization) spends more money than it takes in. The opposite is a budget surplus when an enterprise spends less money than it had planned for that period. Cost overrun is defined as excess of actual cost over budget. Cost overrun is also sometimes called "cost escalation," "cost increase," or "budget overrun."

IMPORTANCE OF BUDGETING
With many of the organization’s unique goals, success will be dependent upon monetary means. To be successful in reaching these goals, the basic starting point will be creating a budget and living within that budget. A budget is the most effective financial management tool available to all of the companies. Whether it is earning thousands of dollars or hundreds of thousands of dollars annually, a budget is the most fundamental part of achieving the goals. A budget is the first step in maximizing the power of your money. A well developed budget is an important tool in your overall resources and expenditures management plan. The good and sound budget would not only help the organization keep track of its loans and debts, but it will also help you keep track of its other monthly, quarterly and yearly expenses. A budget can be as simple as it is powerful. The basic idea behind budgeting is to save money up front for both known and unknown expenses. The major benefits of budgeting are as follows:

? Knowledge about your monetary resources and expenses ? Control of the finances and expenditures ? Organization of organization’s expenses i.e. categorizing for departments, etc. ? Communication between finance or budget analysts with other departments and sections ? Saving Time in Future: Every expenditure is planned and organized which saves time in future if any discrepancy occurs ? Extra Money and Resources: Unnecessary expenditures can be identified easily.

BUDGETING PROCESS
Creating and closely following a carefully planned budget is an important component of the future success. To construct an expense budget for an organization or any department or any sub-section, you will need to estimate

the daily/monthly/annual costs of your needs. These costs include any type of expenditure which can be revenue or long-term expense. In most large and complex organizations, this task would be nearly impossible without budget analysts. These workers play the primary role in the development, analysis, and execution of budgets, which are used to allocate current resources and estimate future financial requirements. Without effective budget analysis and feedback about budgetary problems, many private and public organizations could become bankrupt. ? At the beginning of each budget cycle, station managers and department heads submit proposed operational and financial plans to budget department for review. These plans outline prospective programs, including proposed funding increases and new initiatives, estimated costs and expenses, and capital expenditures needed to finance these programs. ? Budget Department examines past and current budgets and research economic and financial developments that affect the organization’s spending. This process enables analysts to evaluate proposals in terms of the organization’s priorities and financial resources.
? After the initial review process, budget section consolidates individual

station and departmental budgets into operating (Revenue Expenditure) and capital budget summaries. ? Throughout the remainder of the year, budget officers periodically monitor the budget by reviewing reports and accounting records to determine if allocated funds have been spent as specified. If deviations appear between the approved budget and actual performance, station managers may write a report providing reasons for the variations, along with recommendations for new or revised budget procedures.
? Budget Department also involves in long-range planning activities such as

projecting future budget needs known as “Capital Budget”.

BUDGET SECTION IN PIA:
The Budget Section in PIA prepares budget estimates for the next or coming year in the mid of the current year. Budget Section prepares budget in many categories and organizes the budget in very effective manner i.e. it prepares budget estimates of the expenditures expected to occur in the next period separately for every domestic and international station where PIA operates.

Further, it helps to categorize budget estimates based on different departments or directorates, hundreds of nominal accounts, nature of

expenditure (i.e. budgeting revenue expenditures, direct costs and capital budget separately), etc. In PIA, Budgeting is done on basis of “Zero-Based Budgeting Concept”.

Zero-Base Budgeting :
is a technique of planning and decision-making. It reverses the working process of traditional budgeting. In traditional incremental budgeting, departmental managers need to justify only increases over the previous year budget. This means what has been already spent is automatically sanctioned. In case of ZBB, no reference is made to the previous level of expenditure. Every department function is reviewed comprehensively and all expenditures rather than only increases are approved. ZBB is a technique, by which the budget request has to be justified in complete detail by each division manager starting from the Zero-base. The Zero-base is indifferent to whether the total budget is increasing or decreasing.

SWOT ANALYSIS
A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a simple and powerful way to analyze your company's present marketing situation. SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The goal is to identify all the major factors affecting competitiveness before crafting a business strategy.

STRENGTHS:
Define areas the company excels in: i.e. ? Company’s Core Competency ? Resource analysis

WEAKNESSES:
Evaluate the company’s liabilities i.e. ? What could be improved at company and what should be avoided? ? Poor quality or damaged reputation

OPPORTUNITIES:
Analyze company’s customers and market attractiveness i.e. ? The favorable circumstances company is facing. ? Moving into new market segments that offer improved profits. ? Mergers, joint ventures or strategic alliances

THREATS:
Check out what company’s competitors are doing and assess other potential challenges i.e. ? A new competitor in company’s home market or what other competitor is doing?

? ?

Price wars with competitors. A competitor has a new, innovative product or service.

SIMPLE RULES FOR SUCCESSFUL SWOT ANALYSIS:
? Be realistic about the strengths and weaknesses of your organization. ? Analysis should distinguish between where your organization is today, and where it could be in the future. ? Be specific. Avoid gray areas. ? Always analyze in relation to your competition i.e. better than or worse than your competition. ? Keep your SWOT short and simple. Avoid complexity and over analysis. ? SWOT is subjective.

SWOT ANALYSIS OF PAKISTAN INTERNATIONAL AIRLINES
In order to analyze the strategic positioning of PIA and evaluate its strengths, weaknesses, opportunities and threats (SWOT analysis), a number of sources of information have been used: • • • • • • Group discussions with staff and managers Observation of people Experience of PIA’s passengers Customers research Travel agent research Desk research from accounts, and airline information.

This method ensures that balance of staff input and external analysis has been used.

By conducting interviews with staff at different levels of the organization and from different departments, the analysis provides insight into the different attitudes and priorities that exist.

• Senior managers, (directors now SVPs and General Mangers) put a greater emphasis on external hindrances rather than internal sources that stymie PIA’s progress • Managers at all levels see other departments as the primary source of problems; inter and intra-departmental integration is a major area of concern. • There is a greater understanding of departmental priorities than overall corporate goals; lack of uniform / common and shared goal • There is no understanding of corporate strategy or mission; attempts have been made recently to help sprout out such statements but it will take some time before they are evenly shared and understood. Our SWOT analysis is divided into three stages: The first includes the strengths and weakness of the airline based on business results-the measures of business (Profits, Seat factor, Yield, Market share). The Second stage takes the Strengths and Weakness back from on paper results to business and marketing issues that create the results in Stage one. The third stage strips the strengths and weakness down to the root causes of the airlines performance.

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BUSINESS MEASURE ANALYSIS
Business measures look at the strength and weaknesses of the airline based on business results-profitability, seat factor, yield market shares and other performances measures.

STRENGHTS:
• In addition, PIA has some clear strength on certain routes. • Auxiliary airline functions like hotels etc also augment this factor. • On some of the more competitive routes, PIA has seen restoration in market share; PIA has been successful with an enormous amount of effort going into resolving passenger complaints and grievances in order to built customer confidence and loyalty through its Complaint Management System.

WEAKNESSES:
There are a number of business measures which show some areas of concern in the airline’s performance: • Financial Position The accounts do not appear to show a relatively healthy financial position for the airline. The un-audited Profit & Loss account for the 1st quarter ended March 31st, 2006 shows PIA in loss and the loss figure for the 1st quarter 2006 is Rs. 3080435000. • Poor Yield On Many International Routes Whilst the gulf and central Asian routes record respectable yield, some routes achieve less than respectable yield (North America for example)

and other between half and two-thirds (Europe, batik and Africa for example).

• Losses On Domestic Routes Government controlled pricing leads to an obviously low yield on domestic route with a high seat factor, but resulting in break even seat factor of 250%. Not all domestic routes are price controlled and the recent price reductions i.e. the price war with other carriers have damaged the airline’s performance on prime domestic routes. • Low Seat Factor On Certain Routes A number of International routes consistently achieve below 60% seat factor (Europe, Middle East, for example). With new routes like Malaysia and Kenya being added this is compounding the problem; lack of aggressive marketing on part of the Sales Promotion team is also a major contributing factor. Due to this, the flights to Nairobi station have been suspended.

• Low Fare Paying Seat Factor In Business And Economy Plus Class Although Business Class and Economy plus Class are sometimes full, the seat factor for revenue passengers is relatively low. However, recently this issue is being addressed rigorously.

• Loss On Certain International Route Owing to continuation of low seat factor and poor yield, certain routes are running at significant losses and adding new sectors is not offsetting the loss but rather having a multiplier effect.

BUSINESS AND MARKETING ISSUES:
Behind the “on paper” strengths and weaknesses, there are business and marketing reasons for the results outlined above.

STRENGHTS:
• Ethnic Loyalty Research shows that there is a considerable loyalty for PIA from Pakistanis living abroad. This is particularly significant for traffic from the various ethnic communities returning to Pakistan to visit relatives (VFR). Not to mentioned blue collared workers of Pakistani origin working in the Middle East; their prime reason for flying PIA is a heightened sense of patriotism. • Routes (Global Network) PIA has a strong strategically positioned network of International routes as well as strong domestic Network. Apart from the fact that historically PIA enjoyed a good ranking / repute within the aviation community for safety, reliability and service standards, this however has dwindled over a period of time. • Flag Carrier PIA earns a sense of loyalty and pride as the national airline for Pakistan and hence leverages this strength to funnel in untapped customer potential. • Infrastructure

Base support and maintenance facilities reduce PIA’s dependency on outside help for keeping its fleet in fly-worthy condition.

• Capable & Competent Workforce One of biggest strength of PIA is its competent and capable employees (specialized in their fields) and induction of fresh talent help in leveraging the condition of the organization. • Market Expertise & Aviation Leadership PIA has some of the world’s firsts up its sleeve and it’s been in the commercial aviation business for good 48 years; this gives it an added advantage / edge over its rivals. • Reservation System There has been a major re-structuring done in the reservation system. There are a number of factors concerned with reservations that are improving ticket sales, which are illustrated by travel agent interviews. There is no need of Seat re-confirmation now. Moreover, e-ticketing is a major break through in this regard. • Diversified Operations PIA’s subsidiaries like the Precision Engineering Complex, the Roosevelt Hotel at NYC and joint partnerships provide it a cushion to swing its economies of scale and absorb losses to root out competition and face up to the challenges of increased operating costs due fuel price increase etc.

WEAKNESSES:
• Lack Of True Service Quality Measurement Although PIA produces considerable analysis of service from complaints analysis to quality measurement, the way the information is

gathered does not best lend itself to unbiased evaluation of customer service. Detailed analysis of the data collected is also a weak area.

• Weak Branding PIA products i.e. routes do not a have a strong brand image. Business Class in particular, suffers from lack of use by Executives. Business, Club, Sohni to describe the service (Menus, Tickets, Check-in etc) and First class labels are often used which do not yield positive or the intended results. • Historical Statistical Analysis A great deal of management time is spent in producing reports and analysis that look back on past performance. This is particularly reflected in the marketing plans which are primarily historical analysis with only a small amount of activities for the oncoming years. The emphasis on historical analysis is such that airline’s marketing plan is only finalized when complete figures for the previous years are available. However, a new business plan is being proposed which has been developed on modern lines. • Image In The Market Place Despite the “golden years” when PIA had a strong reputation in the market for service, the length of time over which the level of service has deteriorated has left PIA with a generally poor image. This will take a considerable time to overcome. • Lack Of Planning In All Areas Of The Organization Apart from the fleet plan, there is absence of planning at all levels of the organization which leaves mangers without a sense of purpose and there staff lacking a sense of achievement. • Instability To Resist Government Influence

There is a strong feeling from senior mangers that government interference is one of the main (if not the main) reason for PIA’S problem because government holds almost 89% of the company share. While outside influence is clearly an issue, due to various regimes. There seem to be time when the extent of the impact is greater than necessary, when history dictates the reaction.

• Lack Of Implementation Through The Organization Considerable effort is taken up by managers in PIA writing reports, memos and analyzing why problems have occurred. The same level of activity does not seem to apply to implementing change to prevent reoccurrence of the problems. This is illustrated by lack of true implementation resulting from the Quality Assurance reports from MIS - frequently action is regarded as writing a memo or paper pushing. Some other organization weaknesses have been enumerated as under in order of priority: 1. 2. 3. 4. 5. 6. 7. 8. Over-staffing Unethical Work Practices and Commission Culture Fast Deteriorating Infrastructure and aging fleet Politicized work environment leading to low morale Marketing Arrogance – The notion that PIA is way to big for any competitor to bring it down Top Heavy Management Inefficiencies in operational processes Lack empowerment of employees and Zero Trust Culture

ROOT CAUSES
The third stage of stripping back the reasons behind ‘on paper’ results, exposes the most basic strengths and weakness at the root of the issues facing the airlines.

STRENGHTS:
• Dedication Of Many Staff Although staff morale is generally low / poor and there are high levels of frustrations, there are still a significant number of staff-members that are genuinely committed and loyal to the company. • Talent In Many Areas Of The Company PIA has a huge amount of experience / expertise in the organization and some staff member’s considerable talent to offer to the company. This is more often then not under utilized due to poor career planning and weak management skills. • Desire To Be Successful For Many Staff For staffers who remember “the good old days” or those who see the potential, there is a great sense of willing the airline to succeed. This core of strength in the people of the company could form the foundations of its future prosperity. Providing these strengths are suitably harnessed and channeled in the right fashion. • True Corporate Strategy

Since the original PIAC its initial setup and organization there had been no formalized corporate strategy to direct the organization or reengineer to meet the challenges of times but now there is a true corporate strategy with well-defined vision, mission statement and values giving a clear picture of its goals.

• Training Of Employees
For many staff, apart from the on-the-job-training the technical training in some areas is also given. And for the newly hired employees different criteria for training is set and followed. In this regard the PIA Training Centre (PTC) plays a very important role. The training to existing employees is given to prompt their skills and abilities and to newly hired employees for training them according to the requirements of the jobs for which have been hired.

WEAKNESSES:
• Lack Of Effective Planning There is a marked lack of either long or short term planning beyond day to day activities. The credibility of the PIA’s fleet plan and its attrition planning is doubted by many staff, but it’s this plan that is the only long term plan that seems to exist. The lack of real plans, goals or objectives at any level of the organization adds to the lack of a sense purpose.

• Departmentalization The career paths of most staff up to General Manager level are exclusive in one department. While providing very experienced managers in their own discipline, this creates barriers between departments due to a lack of a profound understanding of others work areas. • Non-Merit Based Organization

Generally, merit is not a factor that, in theory or practice, holds much value in PIA’s organizational structure-particularly in terms of rewards / punishment and career planning or progression.

• Management Of Staff Issues There are some significant issues in staff morale, communication; appraisal (ACRs) system has been replaced by new system Bell Curve System evolved recently, recruitment, selection, decision-making, career planning and empowerment of staff. • Bell Curve System In PIA, grading now is done according to the Bell Curve method of assigning performance grades designed to yield a desired distribution of grades among the employees of the organization. And this method is also known as forced performance review method. In this the scale of grading is fixed prior grading. In PIA the grading is as Out Standing, Very Good, Good, Needs Improvement and Inadequate Performance.

Bell curve grading assigns grades to employees based on their relative performance in comparison to the performance of employees' of the same division/department. The term "bell curve grading" came, by extension, to method of assigning grades that makes use of comparison between employees' performances. The supervisors can decide what grade occupies the center of the distribution & the supervisors can also decide what portion of the frequency distribution each grade occupies and whether or not high

and low grades are symmetrically assigned area under the curve In a system of pure curve grading, the number of employees who will receive each grade is already determined at the beginning. The main drawback of this can be the biased decisions of the supervisors or grading done by other superiors of a different department or division.

OPPORTUNITIES:
The opportunities in the SWOT analysis review are external to the environment and hence reflect as opportunities for the airline in the future. • New routes Houston Chicago Glasgow Singapore Urumqi Kuala Lumpur Los Angeles Hajj & Umra Operations

• Additional flights • Fleet replacement

• Improvements in domestic facilities outside Karachi • Sub contract work Food / Catering Engineering Technical Ground Support

• Expansion of business traffic • Greater involvement in control of domestic airport facilities • Tourism in Pakistan

THREATS:
The external factors that my pose a threat to the future progress of the airlines have been carefully considered. These areas could have a significant impact on the airline’s profitability, particularly those relative to revenue and cost.

• Future operating cost of the airline (upgraded fleet requirement and higher fuel prices, insurance cost, maintenance costs, etc) • Increase competition in both service and price. It is apparent from travel agent research that PIA is facing improving service levels from competitors as well as very competitive pricing. This is clearly undetermined PIA’s competitive position. • New carriers in (domestic and international) • Political instability • Increasing education of second and third generation Pakistanis living overseas • Government / political environment of Pakistan • Frequent changes in leadership (Chairman & MD)

CONCLUSION OF SWOT ANALYSIS:
Current Position “Surviving in spite of itself” The accounts do not appear to show a relatively healthy financial position for the airline but shows loss. It has certain market strengths in certain sectors and enjoys reasonable seat factor on many flights but also faces competition from the other airlines operating domestically and internationally. However, the airline is facing obstacles by fundamental weaknesses in strategy and people issues. These core problems lead to number of weaknesses in the underlying business performance. Future Position - “Declining without essential change” The airline’s operating cost will unavoidably increase in the future if only due to the need of fleet. Future European environmental laws, in addition to the age of the fleet, and US regulations will force changes.

CONCLUSION
Air travel remains a large and growing industry. From a global perspective, the airline industry is making strides towards its goal of sustainable profitability, partly by improving the efficiency of business operations, but also by encouraging the public to return to the skies with a more desirable travel experience. Worldwide, IATA, International Air Transport Association, forecasts international air travel to grow by an average 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010. But, the most dynamic growth is centered on the Asia/Pacific region, where fastgrowing trade and investment are coupled with rising domestic prosperity. Air travel for the region has been rising by up to 9% a year and is forecast to continue to grow rapidly. Yet there are undoubtedly problems that still need to be addressed if the gap is to be bridged. Twenty-nine percent of airlines in the region are still 100% paper tickets, despite a campaign spearheaded by IATA to convert the industry to 100% e-tickets by the end of 2007. To ensure safe and efficient civil aviation operations in Pakistan, the country facilitates operations in the domestic & the international market of the safest standards in conformity with ICAO standards by an optimum number of airlines to encourage competition without dissipating the market. In Pakistan the aviation industry is managed by the Civil Aviation Authority. There are 42 airports in the country being managed by Civil Aviation Authority (CAA).Out of these, 5 airports viz Lahore, Karachi, Islamabad, Peshawar and Quetta are international airports. The other main airlines operating in Pakistan except PIA are Aero Asia International, Air Blue, Shaheen Air International. Pakistan International Airlines (also known as PIA), is the national flag carrier of Pakistan and the National airline of the country operating passenger and cargo services around the world. The core values of PIA are Customer Expectations, Convenience, Caring and Competitive tariff. Pakistan International Airline serves 46 international destinations across four continents and 36 domestic destinations. The current fleet of PIA is 42 aircrafts. Recently, a CSR Committee has been constituted to bring an

increase in the company's commitment in the area of social responsibility. PIA is working on the guidance of the Chairman and CEO to perform these activities in a planned & organized manner.

Emirates classify itself as First Class whenever passengers fly. Emirates Airlines is the international airline of the United Arab Emirates, based in Dubai. Its current fleet is around 92 aircrafts. British Airways is the largest airline of the United Kingdom. It is also the second largest airline in Europe (behind Air France-KLM), with more flights from Europe across the Atlantic than any other operator. Its current fleet is above 221 aircrafts. While, Air India is India's national flag carrier with a network of passenger and cargo services worldwide. It is one of the two state-owned airlines in the country, the other being Indian Airlines. Air India and its low-cost subsidiary Air India Express currently operate a current fleet consisting of 42 aircrafts. The major results identified in its SWOT Analysis of PIA are: 1. Managers at all levels see other departments as the primary source of problems; inter and intra-departmental integration is a major area of concern. 2. There is a greater understanding of departmental priorities than overall corporate goals; lack of uniform / common and shared goal. 3. Poor Financial Position, Poor Yield, Weak Branding, Lack of Planning, Over-Staffing, Politicized work environment, Non-Merit Based organization are the major weaknesses. 4. Ethnic loyalty, Global Network, Flag carrier, Infrastructure, Competent Workforce, Reservation systems and training system are major strenghts. 5. New routes, Additional flights, Fleet replacement, Sub-contract works and Tourism in pakistan create major opportunities for PIA. 6. Future operating cost of the airline, increase competition in both service and price, Political instability, frequent changes in leadership are major threats.

While, the SWOT Analysis of HRM reveals the following: 1. PIA considers its human resources as the only asset that appreciates with the passage of time. 2. Organizational Development, Personnel selection process, Employee leadership teams (ELT), Cross Functional Teams, etc are major strengths for HRM department.

3. One of the main weaknesses of the department is that the set rules and regulations are not being followed in the true spirit which can cause great problems in the future. 4. Job hopping, insignificant changes and inadequate communication process are major weaknesses. Training and exposure in multinational globe will produce opportunities for employees to work at international level crossing the cultural dimensions and thus helping them to work under diversified cultures. 6. One of the major threats for HRM in PIA is that the competitor airlines are offering PIA employees many times more of the package they were getting at PIA.
5.

The survey of the employees’ perception about PIA was also conducted to make our research more practical-based on real figures. Thus, we have conducted our survey through Sampling. We have collected data from 50 employees only. Thus, our results are generalized for all on basis of our sample comprising of 50 employees working in Pakistan International Airlines (PIA). There were 39 males and 7 females among our 50 member sample and 4 people didn’t mention their gender. Some other interesting facts revealed from questionnaire based survey are following: • Majority of the employees preferred Emirates Airline with British Airways following it and the third most preferred airline was PIA.

• 94% of the employees advised that recruitment and selection process at PIA needs improvement.

• Only 28% of the employees believe that there are open lines of communication among the superiors and subordinates of PIA. • 20% of the total population agrees that PIA training center is fulfilling its role in providing the quality training to the employees working in PIA. • 38% of the sample population agreed to some extent that HR department is playing its part in the efficient working of PIA and 36% were in complete favor.
HR Department
20 Responses 15 10 5 0 NO YES Options TO SOME EXTENT

• Only 24% of the employees responded positively that PIA is following the international standards in providing the services.

30 25 Responses 20 15 10 5 0 NO

International Standards

YES TO SOME Options EXTENT

NO RESPONSE

• Majority of the people in PIA showed their satisfaction towards the overall package offered to them at PIA. • According to the survey in PIA majority of the people i.e. 58% of the total sample population prefers the overall package as their motivational force while 16% of the total sample voted for promotion, 10% for increment in salary, and 2% for the delegated authority. While, 4% did not respond to this question.

BIBLIOGRAPHY
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http://www.piac.com.pk/ http://www.ptc.piac.com.pk/ http://www.piac.com.pk/fleet/fleet.asp http://www.airindia.com/ http://www.emirates.com/ http://www.emirates.com/pk/ http://www.britishairways.com/travel/globalgateway.jsp/global/public/ en_ http://en.wikipedia.org/wiki/Encyclopedia

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