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Tough competition in airlines business

  1. CBR introduces CTI scheme
  2. Revenue collection target
  3. Tough competition in airline business

Private sector airlines fighting for greater market share

Oct 11 - 17, 1999

A market of over 4 million travellers on domestic routes has become the bone of contention between the national carrier PIA and competing airlines in the private sector of Pakistan.

In order to grab the maximum share of the market, the airlines operating in the private sector are offering much improved services to the customers on attractive lower fares on domestic routes.

Well placed sources in a foreign airline said that actually the trend of cut throat competition was already going on globally. Growing competition among the leading international airlines has created a free-for-all situation grossly violating compliance to the IATA rules.

Aviation experts feel that the re-entry of Raji Airlines into aviation business with better equipment and management, studded by new fleet of aircraft, has added fuel to fare war. Raji had earlier wounded up its operations in 1994.

Since a number of private sector airlines including Bhoja, Aero Asia, Shaheen and now Raji have come into market, the stiff competition is of course a natural outcome.

According to a prominent Travel Agent, the travellers must the real beneficiary of the tussle between the airlines. He predicted that there was a possibility that the fare war might further bring down the fare level. Possibilities are also strong for breaking the Rs2000 barrier between Lahore-Karachi sector for a one way ticket in near future, he remarked.

Analyzing the situation, he said that despite economic recession and other factors like permission to foreign airlines to operate their service stations upcountry and introduction of Motorways resulted a 15 per cent decline in the airline business. However, the market continues to grow in Pakistan which promises feasible economics for airline business even with minimum charges but larger turnover of traffic on domestic routes.

The most important, which is the safety of life and quality of services, however, should not be neglected in the heat of war for making more business, he remarked.

He said that public sector owned airline, PIA has a control over 70 per cent of the market share on domestic routes while private sector airlines including Aero Asia have a 17.5 per cent share, Shaheen Airlines 5.5 per cent while Bhoja Air is under 5 per cent.

According to an estimate, annual domestic passenger traffic has doubled to over 4 million in 1998 from 1982 and is expected to go upto 5 million by year 2000.

The government's policy to allow private carriers has two-pronged benefits. Firstly, they have given passengers a viable domestic alternative to PIA through better service, timings and more attractive fares.

Secondly, the private carriers have also managed to give a strong competition to the international airlines grabbing PIA's share on the Pakistan-Gulf sector. The induction of the private carriers has also served the economy by saving precious foreign exchange as majority of Pakistani passengers prefer to travel on Pakistani flag carriers instead of taking a foreign airline as an alternative to PIA.

Pakistan International Airlines, which currently enjoys 70 per cent share of the domestic market, has also reduced its fare on entire domestic operational network from last week. In order to maintain its leading position, the national carrier also decided to reduce fare to give a tough time to competing airlines charging much lower a fare than that of PIA.

The special package of fare concession is available to senior citizens above 60 years of age, families comprising at least four members and to the students.

The fare between Lahore and Karachi will now be Rs1,900 in addition to excise duty of 20 per cent, Rs100 as airport tax and Rs25 as provincial government tax. The total amount comes to about Rs2400 as against Rs2850, the existing fare for this journey.

The concession in fare will be available to passengers who will purchase tickets at least three days before their scheduled travel. As for students, they will have to produce their bona fides from their educational institutions to become entitled to a concession on one-way fare of Rs1650 in addition to usual federal and provincial taxes.

PIA's competitors like Aero Asia and Bhoja are charging about Rs2200 and Shaheen Rs1900 for the same air travel. Since PIA was losing business to these airlines, the reduction in fare was decided by the board of directors.

PIA has also abolished the first class and has upgraded its business class. Passengers of the business class will enjoy the same facilities and services as are being given in the first class. With this modification, PIA now has only two classes i.e. economy class and business class.

People travelling in economy and business class will be given a facility of purchasing five to 10 tickets in the format of a booklet for travel till March 2000 and they will be allowed a special discount on unrestricted trips.

Players in air travel business expect that CAA, responsible for providing ground services to airlines, would ensure an even ground for all the airlines whether in public or private sector.