The CAA is almost entirely dependent on aeronautical revenue


By Syed M. Aslam
Mar 24 - 30, 2003




Technical flights, landings made by the commercial airlines for the specific purpose of refueling, contribute substantial revenue to Civil Aviation Authority, the regulator of civilian air traffic in Pakistan. In recent months CAA has managed to better its earnings from these technical landings as an increasing number of foreign airlines opted to buy jet-fuel at the major international airports. The preference on the part of the foreign airlines to buy the jet-fuel in Pakistan can be contributed to one single reason, jet-fuel prices in Pakistan are lowest in the region. Another incentive which also helped in attracting foreign airlines to refuel in Pakistan was the slashing of technical landing charges by 50 per cent by the CAA back in September 2000.

Though CAA does not sell jet-fuel itself- it is done by the three oil marketing companies, namely Pakistan State Oil, Shell Pakistan and Caltex Pakistan- it is a direct beneficiary of the increased technical landings because it helps it supplement its earnings from such aeronautical charges as landing. Just how important a role technical landings are playing to help CAA better its income is evident from an advertisement ran by the Authority in the national press to announce the inauguration of the expanded Lahore Airport, now named Allama Iqbal International Airport, recently. The advertisement offered a number of "Exceptional privileges for the Airlines" a significant part of which was "The lowest fuel rates in the region." This 'exceptional privilege' was meant to attract the foreign airlines to buy jet-fuel in Pakistan with two specific purposes. Number one, to help CAA better its own revenue and number two, to turn Pakistan into a hub of international aviation thereby to push jet-fuel sales for the overall benefit of the economy.

Just how important is revenue from technical landings for the CAA is, is evident from the fact that unlike the other civil aviation authorities elsewhere the CAA is almost entirely dependent on aeronautical revenue. Aeronautical charges like landing, parking, housing make up about 85 per cent of CAA's income while non-aeronautical charges like rental from spaces within and around the airports contribute just 15 per cent to the overall income of the CAA. Globally, the ratio of aeronautical and non-aeronautical revenues of CAA's counterparts elsewhere in the world is almost equal.



The preference of the foreign airlines to buy fuel in Pakistan can be attributed to one simple factor it offers an immense potential for huge savings since jet-fuel is the single biggest expense incurred by any airline anywhere about one-third of the total expenses. That also explains why jet-fuel sale at Karachi International more than doubled despite the situation in nearly Afghanistan last year.

The civil aviation air corridor of Pakistan is divided into two Flight Information Regions (FIR); the Karachi FIR and the Lahore FIR. The Karachi FIR has been handling around 75 per cent of the air traffic while the Lahore FIR has been handling the remaining 25 per cent of this civil air traffic. The Quaid-e-Azam International Airport at Karachi has been the hub of the aviation industry and it has helped it to contribute the bulk of the revenue from technical landings for the CAA. However, things may change with the opening of new airport at Lahore as evident from the advertisement.

The increased touchdowns by the foreign airlines to refuel in Pakistan, be it at Karachi or Lahore, hardly makes any difference for the CAA as irrespective of the place it stands to benefit from such flights. It thus comes as no surprise that the CAA is offering 50 per cent reduction on landing charges specifically for technical landings at the Allama Iqbal International.

There are, however, news that the fast-changing scenario in the region with the beginning of US attack on Iraq on the 19th of this month may have a negative impact on the technical landings. Initially, Iran has announced to close its air corridors but at the same time there are news that Baku may emerged as the aviation hub for many airlines. The question is: what impact would the situation have on the CAA?

Talking to PAGE, the Deputy Director General of CAA, Air Vice Marshal Arshad Rasheed Sethi said that the Authority has developed a contingency plan to keep the national corridors open and safe. "The plan will help the CAA to offer such necessary services as landing, refueling, parking and even housing facilities to the foreign carriers in case there is a disruption of routes. The contingency plan also includes issuance of clearances even at very short notice. In addition, specific arrangements can also be made if a foreign commercial airline so desires. We aim to offer the best services to keep the technical landings coming feeling sure that the lowest jet-fuel prices would keep attracting the foreign airlines."

Are the jet-fuel prices in Pakistan the lowest in the region? Yes, agreed the Managing Director of private Shaheen Air International (SAI), Air Vice Marshal (Retd.) Syed Ataur Rahman. "However, jet-fuel prices have been on a continuous rise and have registered a sharp increase of 30 per cent in last three months rising from Rs 12 to Rs 16 a litre."

Asked to comment on the beginning of the war in Iraq, the MD SAI said that 'it all depends on the duration of the war. If the war continues for a month or over it would push jet-fuel prices to such an unaffordable level that many airlines would just not be able to sustain."