PIA being a Mid-Range carrier with multiple hubs serving more than 50 domestic and international destinations with fleet of 35 state of the art airplanes is currently operating on point to point business model. however some of the PIA flights are scheduled with hub & spoke system as well.
Typically PIA has eight international stations in the country which are Karachi, Lahore, Islamabad, Peshawar, Sialkot, Multan, Faisalabad, and Quetta. Serving all these stations with very less number of airplanes is costly business and selling number of seats on particular route is another hectic job.
In this article I have explained 5 reasons why PIA should switch to Hub & Spoke Business Model.
1. INCREASED FREQUENCIES TO INTERNATIONAL DESTINATION
If we consider that Karachi becomes the operational hub for PIA and all the international flights flies from Karachi, I believe there would be increase in frequencies of the international destinations as well as domestic destinations. For example currently PIA operates 4 flights weekly to Toronto from 3 different stations, if PIA adopts Hub & Spoke System it can be a daily connection through the hub connecting with convenient connections from the other domestic stations. Increased frequency to international stations is only a convenience for passenger.
2. INCREASED NUMBER OF INTERNATIONAL PASSENGERS IN A SINGLE TERMINAL
If Karachi becomes the gateway for PIA, there would a huge amount of revenue to be earned through the airport. Since gulf carriers also breath on hub & spoke system due to which most of the travelers from Pakistan as they find it convenient because the tickets are cheap, and they prefer a 2 or 3 hour long layover in some gulf airport rather flying directly to the same destination with PIA. Since travelers behavior shows that they are comfortable with the layover and transit, what if we provide same services, duty free shops, rest rooms, smoking lounges at Karachi airport, the airport will generate a huge amount of revenue which will dramatically remain inside Pakistan.
3. CHEAP TICKETS & MINIMIZED OPERATIONAL COST:
If and only if PIA adopts this business plan, the sales teams might be able to offer cheap fares which may attract the traveler who is frequent flyer with gulf carriers. The reason behind why gulf carriers offer cheap tickets is, they fly from Destination A to their Hub C and fills out another plane which goes to destination B. The cost of operation flight to destination B lets suppose breaks even at 70% of load factor, and the carriers fills more than 80% of its seats carrying passengers from different ‘A’ destinations. The flight already breaks even at 70% and rest becomes the profit. If PIA also flies the passenger from all its local stations to a single hub, they can fill out their loads and if flight breaks even at 80% of load factor, with more than 18 local stations PIA must be able to fill 80% of the load factor from one hub to the final destination which will turn out an easy job for marketing team as well to sell as many seats as they can from local stations filling out one single flight from hub. Since the traveler behavior is comfortable with layovers, they could also do layovers in their own country.
4. INCREASED PRODUCTIVITY
If PIA adopts hub & spoke system, The staff productivity will dramatically increase. Currently when PIA operates from one point to another, staff generally closes the flight with what ever number of passenger they get. If PIA also had Hub & Spoke operations, staff should have had more responsibilities on their shoulders to depart the flight with least number of no show passengers, and also on time. This will not only have increased PIA on-time departures but also encouraged faster rotations which may result in cost minimization.
5. CUSTOMER VALUE ADDITION
Since, hub & spoke business is very sensitive and not a piece of cake, but If operations runs smoothly customer satisfaction with PIA would surprisingly increase in terms of, on-time departures, easy and frequent connections to their final destination than Gulf Carriers etc.
In my next article I will explain what will be the key measures and the night mares for PIA if they adopt hub & spoke business plan.
Photo Credits: Moeen Haider Shahzad
