Introduction of discounted airfares would help PIA take away a sizeable portion of business from the private airlines


By Syed M. Aslam
July 22 - 28, 2002


The national flag carrier PIA is not known to offer discounted airfares, at least not till recently and that too not only on domestic sector but more recently on the international sector as well. The airline introduced a low-priced night-coach service between Karachi and Lahore, the top two urban centers of the country, a few weeks ago at prices affordably higher than the train fare. This week it announced heavily discounted fares on two of the most frequented international sectors Karachi/Lahore/Islamabad/Peshawar-Dubai/Abu Dhabi and Karachi/Lahore/Islamabad-London till August 15 for travel up to August 25.

It is clear that PIA means business and has chosen the traditionally busy summer season to boost its revenue. It also means that PIA is going all out to compete not only with the two private local airlines on both the domestic as well as the Gulf sector but also with the foreign airlines, many of which are based in the Gulf and enjoys a substantial penetration here.

PIA's one-way night coach fare between Karachi and Lahore costs around Rs 2,800 including the taxes which is only marginally more than the similar night coach service offered by one of the two private domestic airline, Shaheen Air International, at Rs 2,715. The introduction of the night coach has drawn sharp criticism from the private airlines who say that it is not fit for the airline of international standing like the PIA to restrict itself by competing to small operators like them. Instead, they emphasize, that the airline should compete with foreign national carriers to bring in the much needed sense of competition, service and timings.

The introduction of discounted fares on the two most frequented sectors overseas is seen by the observers as an attempt by the PIA to take the best advantage of the otherwise busy summer season to neutralize the impact of drastic reduction in the air travel worldwide after September 11, the affect of which were also felt heavily in Pakistan. The imposition of restricted visa policies in the developed world, the acute reduction in inbound traffic after 9/11 and more profoundly after the bombings in Karachi in May and June and the overall fear of travel have all taken a heavy toll on the Pakistani aviation industry of which PIA is the most prominent player. The introduction of low-priced services on the domestic sector and the discounted fares on the international sector, thus, makes all the more sense. In addition, the travellers can hardly be expected to complain about introduction of discounted fares.

The introduction of discounted services and fares show a big shift in PIA's strategy as the airline was charging premium prices on domestic and foreign sectors compared to the private local airlines. However, the airline has brought the fares almost at par with the domestic private airlines while still enjoying an edge over them having a fleet of wide-bodied aircraft compared to the fleets of competitors whose fleet comprise limited and smaller planes.

For instance, PIA is offering discounted Karachi-Dubai/Abu Dhabi return fare at all inclusive price of Rs 10,280 which is only Rs 1,020 more than that offered by Shaheen to the same destination. It may be mentioned that PIA's regular return Karachi-Dubai/ Abu Dhabi airfare is Rs 11,310 and thus the airline is offering a 10 per cent discount to the gateway of Middle East. The airline is offering an even bigger discount on Karachi-London return ticket at an all inclusive Rs 36,240 which is 15 per cent less than the regular fare of Rs 42,780.

So PIA seems to be going out for an all out price war which will benefit the travellers but is not expected to go well with the two domestic private lines, both of which fly the domestic as well the Gulf sector. In the past the private domestic airlines used to compete among each other and never viewed PIA as their competitor. However, the recent developments have changed their views to start regarding PIA as one of their competitors. However, the two airlines despite their inherent weaknesses still enjoy a number of advantages over the PIA comparatively much smaller overheads, operational costs, tighter schedule and much smaller employees-to-aircraft ratio.

One of the major concerns of the private domestic airlines center round certain advantages enjoyed by the PIA which are not available to them. They say that insurance cost has increased by an unaffordable 70 per cent in last ten months. Unlike PIA the private airlines are not allowed to buy insurance locally from the PIC like the PIA instead of buying it from the international markets which is costing the private airlines dearly. In addition, while the private airlines are made to pay their dues to the Civil Aviation Authority promptly, PIA continues to enjoy the best of services despite owing billions in dues to the Authority.

Observers feel that the introduction of discounted airfares would help PIA take away a sizeable portion of business from the private airlines who keep on feeling the blow delivered to the aviation industry worldwide of which they are the part. There are others who say that while PIA enjoys no more monopoly in the aviation sector, it has devised a way to still dominate the market through its sheer size and benefits it still enjoy from the relevant quarters.

The private domestic airlines say that the merging competition from the PIA and the foreign airlines allowed to lift passenger traffic from Pakistan under the Open Sky policy is expected to weaken the base of private aviation in Pakistan. More so, as open sky policy allows the foreign carriers to pick up the traffic without bilateral agreement ensuring benefits in return to the domestic carriers. The small private airlines, they say, can hardly compete with these local and foreign giant airlines and it is imperative that policy makers should devise ways to safeguard the interests of the private national flag carriers.