AVIATION INDUSTRY

PIA is in a much better position to resume services to India and in the Far East to substantiate its income

By SYED M. ASLAM
May 19 - 25, 2003
 

The thawing of ice in Pakistan-India relations and decision to re-establish diplomatic and trade contacts and communications links severed 17 months ago on January 1 last year would benefit the aviation industry like many other sectors of the economy.

India slapped a ban on state-owned national flag carrier PIA, the Pakistan International Airlines, to use its airspace on January 1, 2002. Pakistan's reciprocated the Indian move by slapping a similar ban. The ban resulted in suspension of 12 weekly flights to India, 6 each to Bombay and Delhi, and forced it initially to find alternate routes, and later suspend flights, to 13 destinations in the Far East by rendering them uneconomical.

While PIA lost millions of revenues every month due to closure of operations in India and other destinations in the Far East the ban hurt the Civil Aviation Authority (CAA) indirectly. CAA was losing around $ 3 million a month, the biggest portion of about 1-1.5 million of which came from loss of route navigation charges or fee paid by foreign airlines for using the national commercial air corridors. It also lost between 0.5-0.75 million dollars a month in landing and parking fee and another 0.2-0.25 million dollars a month in embarkation fee.

Though the competitive prices of jet fuel in Pakistan, claimed to be the lowest in the region by the authorities, helped CAA to offset the losses by attracting increased technical flights or stopovers for re-fuelling the lifting of the ban would help CAA to enhance its revenues.

It must be mentioned here that the ban boomeranged on India and actually hurt it far more than it hurt Pakistan. First of all, the Far East was not the most profitable sector served by the PIA and thus it was easier for it to cushion the loss than its Indian counterparts Air India and Indian Airlines. The later had to find alternate routes to international sectors resulting in increased travel time, fuel costs and additional fee to use space over new air corridors. The tit-for-tat measure by Pakistan also affected operations of domestic Indian Airlines which used Pakistani air space to ensure most economic routes.

Air India was using the Pakistani air space for some 200 flights a month while Indian Airlines, a domestic carrier, was using it for 90 flights a month compared to. The ban also forced Air India, the national flag carrier, to find alternative routes for 11 flights pushing operational costs, flying time and fuel charges.

However, the re-establishment of the air link and lifting of the ban on the use of respective national air space would benefit not only the PIA but also Civil Aviation Authority (CAA) which lost substantial business due to the ban. The decision has come at a time when PIA is in a much better position in terms of finance and fleet than it was year and a half ago.

PIA is in a much better position to resume services to India and in the Far East to substantiate its income. It is in the process of replacing its aging fleet and this month signed a $ 150 million loan agreement with Citi Islamic Investment Bank of Bahrain. The $150 million proceed would be used for pre-delivery payments towards the purchase of 3 Boeing 777 aircrafts. The Bank, a member of Citigroup, along with Jeddah-based Islamic Development Bank and Pakistan's United Bank is one of the joint arrangers for the three-year Islamic loan facility.

Under the ambitious fleet replacement plan the PIA would spend $ 1.5 billion to acquire 8 new Boeing 777 aircrafts and the payment for the first 3 of these aircraft above is the first phase of the deal. The first batch are scheduled for delivery in the first half next year.

PIA has also reverted back into black. It earned an operating profit of Rs 1.5 billion in the first quarter this year which depicted a 37 per cent increase over the comparative period last year. It has inducted additional aircraft and is expected to resume operations to India anytime now. According to reports the suspension of operations and closure of Indian air space cost Pakistan around quarter of a billion rupees while India has suffered five-fold more losses.

India has offered Pakistan to open its air space for Pakistani commercial air traffic a few months ago but PIA did not resumed operations to India and to Far East because the government did not reciprocated the Indian move. The national flag carrier, however, is busy in rescheduling its operations to destinations severed by the ban on the routes in the Far East. These destinations include Dhaka, Colombo, Tokyo, Jakarta, Kathmandu, Kuala Lumpur, Hong Kong and Bangkok.

The re-establishment of air links would not only help PIA and CAA to regain the business lost due to the ban initiated by India but would also help rebuild confidence necessary for conducting bilateral trade, commerce and most of all the social contact necessary for instilling public trust and goodwill between the two people which collectively represent almost one-fifth of the humanity.