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  1. 1. 1
  2. 2. “One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man”. 2
  3. 3. Pakistan International Airlines is Pakistan’s national and international AIRLINE. Eventually, on March 11 of 1955, Orient Airways merged with theGovernments proposed airline, becoming Pakistan International Airways. InMarch of 1960, PIA became the first Asian airline to enter the jet age whenBoeing 707 service was introduced. In 1978, the airline bought their first 747aircraft, which have since become a staple of the airlines fleet. In 1996, the 3airline leased Tupolev Tu-154 planes, and re-opened services to BeirutInternational Airport in Beirut, Lebanon.
  4. 4. Pakistan International Airlines (also known as PIA), is Pakistan’snational and international AIRLINE . Its IATA call code is PK. In Pakistan itsinitials are sometimes jocularly said to stand for "prayers in air".History:PIA can trace its beginnings to the days when Pakistan still wasnt a nation. In1946, Muhammed Ali Jinnah, also known as founder of Pakistan, realized theneed of an airline network for the forming country. He called upon the help ofan experienced industrialist, Mr. M.A. Ispahani.On October 23 of 1946, Orient Airways was set up, registered in Calcutta. InFebruary of 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. Services werestarted in June, from Calcutta to Akyab and Rangoon. This was the first postwar airline flight by an Indian registered airline company.Two months after this service began, Pakistan as a nation was formed. OrientAirways began relief flights to the new nation, and soon after, it movedoperations to Karachi, where it began the important route from Karachi toDacca. In addition, their initial domestic route in Pakistan was established, fromKarachi to Lahore to Peshawar, and from Karachi to Quetta to Lahore.Due to increasing passenger demand, the airline increased its fleet before theend of the 1940s, and this caused financial trouble to the airline. Thegovernment of Pakistan, realizing the operation was failing economically, asked 4
  5. 5. the airline to merge into a new, national airline that the government wasplanning on creating. Eventually, on March 11 of 1955, Orient Airways mergedwith the Governments proposed airline, becoming Pakistan InternationalAirways.History Overview: • The first airline from an Asian land country and the first airline from a Muslim country to fly the Super Constellation • The first Asian airline to operate a jet aircraft. • The 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). • The first non-communist airline to fly to the Peoples Republic of China, and to operate a service between Asia and Europe via Moscow • The 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 Peoples Republic of China over the mighty Karakoram mountains. • The first airline in the world to operate scheduled helicopter services • The first airline to show in-flight movies on international routes. • PIA set up Pakistans first planetarium at Karachi. • The first airline in South Asia to introduce auto-ticketing facility. • First Asian airline to start flights to Oslo, the beautiful capital city of Norway. 5
  6. 6. Boeing 747-300 6Boeing 747-200 4Boeing 777-24ER 3Airbus A-300-B4 6Airbus A-310 12Boeing 737-300 7Fokker F-27-200/400 8Twin Otter 2Total Aircrafts PK Airways Contains = 48 6
  7. 7. MISSIONConsidering its mission statement to be a world class airline with adistinctive Pakistani character, that is customer driven and caringemployer, Pakistan International Airlines is committed to providing topquality service and endeavors to achieve total customer satisfaction.Therefore we, at Customer Relations Division,look forward to receivingfrom our customers their comments and suggestions regarding anyaspect of Pakistan International Airline Services.It is our belief that comments and suggestions made by our valuedcustomers are of a vital information source, which enable us toevaluate the services and to take appropriate measures forimprovement. Ultimately, this will lead us to achieve our mission.We hope that Pakistan International Airlines will always acquire yourconfidence every now and then. 7
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  9. 9. “. . . Man is still the most extraordinary computer of all.” 9
  10. 10. Various ratios are used by managers andinvestors to analyze and forecast theprofitability and efficiency of a company.Listed in this section are the ratios used forthe financial analysis of Pakistan 10International Airlines.
  11. 11. Ratio AnalysisFinancial Statement Analysis uses a primary tool a ratio which relates two figures applicable todifferent categories.Without ratios, financial statements would be largely uninformative to all but the very skilled. Withratios, financial statements can be interpreted and usefully applied to satisfy the needs of the reader.In order to assess the performance of a business, it is necessary to analyse and interptret the businessfinal accounts. Analysis involves a detailed review of the information provided in the final accounts.The results of this analysis are interpreted to assess the performance of the business. This mayinclude a comparison with previous years, a comparison with targets or budgets, or even acomparison with other similar businesses.For comparison to be meaningful, it is used to express results in terms of accounting ratios. Thewording accounting ratios is used to describe all the calculations involved in interpreting accounts,even though some of the calculations are expressed in terms of percentages & time periodsUsers of Ratios: There are vast numbers of parties who are interesting in analyzing financialstatements, including share holders, lenders, customers, suppliers, employees, government agenciesand competitors.Ratio Analysis is a first step in assessing an entity. It removes some of the mystique surroundingthe financial statements and makes it easier to pinpoint items which it would be interesting toinvestigate further. 11
  12. 12. Short Term Liquidity Ratios for Pakistan International Airlines.ObjectiveTo measure the solvency, or the ability, of Pakistan International Airlines tomeet its short-term financial obligations and to assess the liquidity, or theability, of PIA to convert current assets to cash to reduce current liabilities.The RatiosThe most widely used financial ratios for establishing the short-term liquidity ofa company are highlighted in the below chart.The short-term liquidity ratios are used in the evaluation of short-term liquidityto convert current assets into cash in order to reduce the financial obligations ofthe company as they become due. These ratios are particularly significant to 12
  13. 13. the creditors and potential lenders of a company because they determine theability of that company to meet current payments of a debt.Quick Comparison Financial Ratio 2005 2004 Current Ratio 2.657 2.038 Quick Ratio 1.415 1.781 Financial Ratio 2005 2004 Current Ratio 1.932 1.817 Quick Ratio 0.893 0.865AnalysisAs shown in the above comparative table, Pakistan International Airlines short-term liquidity has various over the past decades and has consistently remainedbelow a 2:1 ratio, which could be perceived as less than optimal. The quickratio also has remained under 1:1, which is considered to be the benchmarkvalue for this ratio. However, relative to the Finn air airlines, Finn air airlineshas maintained a higher current ratio and PIA’s quick ratio has remained Lower 13
  14. 14. than its competitors. These trends indicate PIA has been in a poor position thanits competition to meet its short-term financial obligations.Financial Leverage Ratios for Pakistan International Airlines.ObjectiveTo apply ratio analysis to assess the debt levels of Pakistan InternationalAirlines.The RatiosThe most commonly used ratios by financial analysts for determining the long-term solvency of an entity are shown in the following table: Financial Ratio Numerator Denominator Debt-to-Equity Total Debts Equity Debt-to-Total Assets Total Debt Total AssetsThese ratios are used for solvency evaluation. The main focus of these ratios isthe entity’s ability to repay long-term creditors. Both creditors and shareholdersare equally interested in these ratios. Typically, these ratios should be as low aspossible. These ratios indicate the entity’s ability to withstand relatively sourbusiness conditions without suffering net losses or insolvency. Although, theseratios should not be taken at face value since they are dependent on manyfactors, these ratios are most useful for making apple-to-apple comparisons inthe industry.Quick Comparison 2005 2004 14
  15. 15. Financial Ratio Debt to Equity 1.992 1.792 Debt to total Assets 0.435 0.308 Financial Ratio 2005 2004 Debt to Equity 1.205 1.556 Debt to total Assets 0.515 0.608AnalysisAs evident from the above table there is a decreasing trend in all of the aboveratios from December 2004 to September 2005. This shows the DecreasingTrend of PIA and this shows the poor ability of the entity to meet its long-termobligations unsuccessfully with being in danger of encountering net losses orinsolvency. In short this above table shows that the PIA is totally dependent onthe debts.Profitability Ratios for Pakistan International Airlines.ObjectiveTo determine the profitability of Southwest Airlines using various financialratios.The Ratios 15
  16. 16. Profitability ratios are used in an effort to evaluate management’s ability tomonitor and control expenses and to earn a profit on resources committed tothe business. The ratios assess Southwest Airlines’ strengths and weaknesses,operating results and growth potential. These ratios are used to measure howefficiently the assets are being used to generate net income and sales. Thehigher the ratio, the more effectively a company is using their assets. Theratios also allow comparison of the profitability of Southwest Airlines to that ofsimilar airlines within the industry.Listed in the table below are the primary ratios used to determine profitabilityRatio. Financial Ratio Numerator Denominator Gross Profit Gross Profit Net sales Net Profit Ratio Net profit Net sales Operating Profit Ratio EBIT Net salesQuick Comparison Financial Ratio Sep.2005 Dec.2004 Gross Profit 64.92 % 62.53 % Net Profit Ratio 43.67 41.45% Operating Profit Ratio 49.86 % 47.55 % 16
  17. 17. Financial Ratio Sep.2005 Dec.2004 Gross Profit 99.2 % 56.% Net Profit Ratio 2.558 % 0.290 % Operating Profit Ratio 3.87 % 0.65 %AnalysisGross profit and gross profit percentage are used to assess whether the profitswill cover operating expenses. The gross profit rate has remained unstable inthe periods. Pakistan International Airlines has a relatively Low gross profit ratethis year, primarily because of High operating costs. High operating costs is oneof the main threats for this firm, “By keeping costs High, we can’t keep ourfares low. This, in turn, gives customers to fly with other Airlines.”Activity Ratios for Pakistan International Airlines.ObjectiveActivity ratio are used to determine how quickly various accounts are convertedinto sales or cash.The Ratios Financial Ratio Numerator Denominator Receivable turnover Credit sales Receivables Payable turnover Credit Purchases Payables Inventory Turnover Cost of Goods Sold Average InventoryOver all the Liquidity ratios generally do not give an adequate picture of acompany’s real liquidity, due to differences in the kinds of current assets and 17
  18. 18. liabilities the company holds. Thus, it is necessary to evaluate the activity orliquidity of specific current accounts.Quick Comparison Financial Ratio 2005 2004 Receivable turnover 10.27 times 9.88 times Payable turnover 3.53 2.08 Inventory Turnover 58.93 56.54 Financial Ratio 2005 2004 Receivable turnover 6.29 times 7.64 times Payable Turnover 0.225 0.278 Inventory Turnover 43.28 46.95AnalysisPakistan International Airlines contains a nominal Debtors turnover changefrom previous year. PIA can turn its accounts into sales 9.88 times but if wecompare it with Finn Air then we will find that Finn Air can turn its debtors intosales faster than PIA.The total asset turnover of PIA increases and it is a positive response as assetsare utilizing more significantly by the organization. If we compare with the Finn 18
  19. 19. Air then they are also utilizing their assets. Both company’s use to assets arecomparatively good.Interest Coverage Ratios for Pakistan International AirlinesObjectiveThe interest coverage ratio reflects the number of times interest expense iscovered by earnings or cash flows.The RatiosListed in the table below are the primary ratio used to determine InterestCoverage Ratio. Financial Ratio Numerator Denominator Interest coverage Ratio EBIT Interest chargesThe ratio reveals the magnitude of the decline in Income that a firm cantolerate and still be able to meet its interest payments.Quick Comparison Financial Ratio Sep.2005 Dec.2004 Interest coverage Ratio 0.617 1.051 19
  20. 20. Financial Ratio Sep.2005 Dec.2004 Interest coverage Ratio 24.85 5.4AnalysisThe decline in interest coverage from 2004 to 2005 is a negative indicator forPakistan International Airlines. This drop in the ratio in the second year wouldbe of concern to creditors, but if we compare it with Finn Air then we will findthat Finn Air has increase in Interest Coverage Ratio from 2004 to 2005 is apositive indicate. 20
  21. 21. Summary of Financial Ratio Ratio Formula Dec. 2004 Sep.2005 Evaluation Trend Dec. 2004 Sep.2005 Evaluation TrendNWC Current assets – Current Liabilities 0.0092 (0.093) Deteriorated 0.006 0.012 ImprovedCurrent Current Assets / Current Liabilities 1.038 0.657 Deteriorated 1.017 1.032 ImprovedQuick Cash + Cash Equivalent 0.415 0.781 Improved 0.465 0.493 Improved +Receivables / Current LiabilitiesDebt equity Total Liabilities / Shareholder Equity 3.946 3.792 Improved 1.556 1.605Debt T.A. Total Debt / Total Assets 3.308 4.817 Deteriorated 0.608 0.615Total Total Debt / Total Capitalization 1.039 1.054 Deteriorated 0.437 0.445CapitalizationDebt Ratio Total Liabilities / Total Assets 0.789 0.773 Improved 0.609 0.616Gross Profit Gross Profit / Net Sales 15% 08% Deteriorated 100.096 % 99.2 %Net Profit Net Profit / Net Sales 02 % (6.7 %) Deteriorated 0.290 % 2.558 %O. Expense Operating Expense / Net Sales 102.6 % 97.9 % 102.6 % 97.9 %O. Profit EBIT / Net Sales 04 % 03 % 0.65 % 3.87 %Debtors T.O. Credit Sales / Receivables 10.27Time 9.88 Time 2.01 Time 1.80 TimeT. Asset T.O Net Sales / Total Assets 2.08 3.53 0.278 0.285NWC T.O. Sales / Net Working Capital 56.54 6.80 8.80 19.30Interest Operating Income / Interest Charges 1.051 0.617 5.40 24.85Coverage 21
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  24. 24. Horizontal analysis is used toevaluate the trend in theaccounts over the years 24
  25. 25. “The real danger is not that computers will begin to think like men, but that men will begin to think like computers”. 25
  26. 26. Stages of Group Development 26
  27. 27. There are five stages for group development • Forming stage • Storming stage • Norming stage • Performing stage • Adjourning stage .Stages of Group Development 27
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  29. 29. “The scientific theory I like best is that the rings of Saturn are composed entirely of lost airline luggage”. 29
  30. 30. External conditions are imposed on a work group.There are external conditions which influence theperformance of the groups in Pakistan InternationalAirlines. 30
  31. 31. Toward Explaining Work-Group Behavior. 31
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  33. 33. In PIA group’s performance are predicted by assessing the knowledge, skills, and abilities of its individual members.Group Member Resources 33
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  35. 35. All groups have norms “acceptable standards ofbehavior that are shared by the group’s members.” 35
  36. 36. Norms tell members what they ought and ought not todo under certain circumstances Group Structure 36
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  39. 39. Group Processes 39