Competition heats up in the airline industry

By Syed M. Aslam
Dec 27, 1999 - Jan 02, 2000

Until 1990 the state-owned Pakistan International Airlines (PIA) enjoyed a complete monopoly on the domestic sector and a large share of the international business. With the deregulation of the aviation sector in the early 1990s a number of private airlines commenced operations in Pakistan.

Until recently three private airlines— Shaheen Air, Aero Asia and Bhoja Air— are operating on the domestic sector as well as on international sector in the Gulf region primarily. Recently, two additional private airlines, Safe Air and Raji, announced to commence domestic operations.

Safe Air is a new airline while Raji which terminated its operations over four years ago has also announced to resume its domestic operations. While the increasing number of private airlines has made the PIA lose a portion of its domestic operations to the private airlines the competition in fact is really a blessing in disguise as it allows the Airline to concentrate its energy on the more lucrative international sectors.

According to high placed sources in the Civil Aviation Authority (CAA), the primary civil aviation agency of Pakistan, the number of aircraft with the private airlines in Pakistan has increased from 13 to 16. Safe Air, PAGE was informed, has brought two Russian aircraft on wet lease while Raji Air has brought another Russian aircraft TU 154 on similar lease. Wet lease means that the cockpit crew is supplied by the leasor.

Of the three private airlines operating on domestic and international sectors Aero Asia has the biggest number of eight aircraft. Aero Asia fleet comprises four Romanian made BAC-111, three Russian Yak 42 D and one Boeing 737. Shaheen Air has a fleet of three Yak 42 D while Bhoja Air has a fleet of two Yak 42 D aircraft.

Observers attribute the increasing volume in the domestic air travellers on the presence of private airlines which not only offers a competitive airfares on the domestic routes, particularly the most frequent ones, but also pushing the PIA not to resort to frequent increase in fares.

The private airlines offer low airfares on the domestic route by providing an opportunity to potential travellers, the majority of whom felt it was unaffordable prevously. The competition has helped lower the domestic airfares to a level where it is only slightly higher than that of the most expensive ticket offered by the Pakistan Railways.

Sources in the CAA confirmed that Raji Airlines owed millions to the CAA in unpaid dues and its aviation license has been renewed on the condition that it will clear its dues in installments through the court.

But the major portion of the CAA’s uncleared dues is owed by the state-owned PIA. PIA has never paid CAA any dues for the use of the Avro bridge at the Karachi Airport and refuses to pay any increases in aircraft landing and housing charges as well as rentals from leasing of ticketing counters and other airport spaces beyond 1992. The PIA is refusing to pay the increase in landing and housing charges of the CAA beyond 1992 though all foreign and domestic airlines have no qualms to pay it, the sources added.

At present, sources informed PAGE, PIA owes a huge amount of Rs 3 billion to the CAA under various heads including those mentioned above. PAGE informed that the induction of more private airlines would help CAA to better its revenues. It would help CAA to generate more from the increased revenues from landings, housing and flying charges from underutilise resources. For instance, during 9 pm to 6 am the frequency of domestic flights from the Karachi Airport, the hub of Pakistan’s civil aviation, is just two takeoffs. This indeed is a gross underutilisation of CAA’s resources the manager of over 44 civil airports including the multi-million Quaid-e-Azam International Airport at Karachi.

On the other hand any increase in the private airlines also create a number of direct employment as well as a bigger number of indirect employment in a country which is facing a chronic unemployment problem.

The fact that the private airlines offer a highly competitive fares on the domestic routes does not only encourage domestic air travel for the overall benefit of the economy, commerce and trade but also create a genuine competition for the benefit of air travellers.

Similarly, a study conducted by PIA in 1998 projected that its international traffic, including Haj, is expected to grow at an average annual rate of 5 per cent from 2.3 million to 3.6 million by 2007. PIA, the bulk of whose revenue from the international operations come from the Gulf and Middle East operations has to face growing competition from domestic airlines, three of which are operating on this particular sector at present. In fact, Shaheen, Bhoja and Aero Asia has continuously increasing their operation in the Gulf region to keep on enhancing their share at the ultimate cost to the PIA.