AVIATION BUSINESS TAKING A TURN AROUND

Aviation industry is expanding its flight operations, fleet besides achieving better financial results

By AMANULLAH BASHAR
May 10 - 16, 2004

Contrary to the depressed economic conditions confronted to the aviation industry around the world especially in the wake of terrorist attacks of 9/11 which consequently brought the tourism activity to the stagnation, the aviation business has produced tremendous operating results during the current year.

Not only the national carrier has posted handsome profits to the tune of Rs1.7 billion but other private sector airlines have also produced positive financial results.

Apart from positive financial results shown by the airlines operating in Pakistan, the national flag carrier PIA has inducted three state-of-the-art Boeing 777 into its fleet and has decided to increase its flying operation to over 50 destinations by the end of the current year. The arrival of more private airlines in the aviation business was again a strong indicator about the turn around the aviation sector was taking in Pakistan.

A jet air strip was being developed at Gwadar port to accommodate growing traffic on that routes and the air traffic was expected to take a quantum jump as soon as the port becomes operative sometimes next year.

The understanding reached between China and Pakistan to cooperate on the international routes was another important development which is likely to give jump into the traffic handling of the national airline.

According to a traveling agency, the air traffic between India and Pakistan where the revenue has already increased by ten percent is likely to take a big leap after normalization of visa facilities in India and Pakistan.

London-based Airfinance Journal has recently awarded PIA "Asian deal of the Year" for the launch delivery of three Boeing 777-200ER. The magazine recognized the innovation of first ever pre-delivery payment financing being done under an Islamic financial lease and $341 million Exim bank guaranteed notes being issued for the first time for a Pakistani issuer in the US 90 day paper market.

Paying compliments to the PIA management, the Editor of Airfinance said "it was a creative solution for the airline that allowed it to raise cash at a time when many other airlines were struggling to find financing. Islamic aircraft financing is still developing and this deal has pushed the technique further, he added.

According to Ahmed Saeed, Chairman PIA, the three Boeing 777-200ER have been inducted into PIA's fleet due to total focus and commitment of PIA's dedicated management team and of course the Government of Pakistan. They did whatever was necessary to reach a successful finance close including significant equity injection and signing of the Capetown Convention, a strong commitment of Exim bank, the only export credit agency on cover for Pakistan and a number of national and regional banks who participated in the Islamic financing.

All this was structured with the concerned financial institutions by PIA's team.

In a tough global industry and even tough regional political environment, PIA has done a complete turn around. PIA is a profitable airline and poised to post a profit of over Rs1.4 billion at the end of the current financial year .

The 777's have been inducted into the long haul routes, starting with London, Chicago and Toronto and PIA has set its eyes on expanding further and expect to start flying to 50 destinations including Houston on May 23 and Los Angeles by the end of the year.

Airblue is yet another domestic airliner to share the aviation business from May 14, besides PIA and two other private sector companies i.e. Shaheen Air and Aero Asia operating in Pakistan.

The arrival of the third private sector airline is expected to ease the traveling hassles because of heavy rush on other carriers especially PIA on the domestic routes.

Initially, Airblue will be operating on Karachi-Islamabad-Karachi, three flights daily and three flights between Karachi-Lahore-Karachi. Subsequently, it will start operating Sukkur-Multan-Peshawar flights from June 1.

Airblue had acquired three Airbus planes, which would be pressed into service on these routes. The average age of these aircraft is about 5 years and they are as good as new.

The airline has experienced staff, who have further been trained with the British Airways.

The new entity has given special emphasis on a highly sophisticated IT network to compete effectively with the existing airlines in the market.

To differentiate from other the competing airlines, Airblue besides offering high standard in ticketing procedures, is focusing on special care in providing quality services on board as well as on the ground to the travellers.

Shahid Khaqan Abbasi, who carries a rich aviation background especially being the chief of the national carrier PIA, is the Chief Operating Officer of Airblue.

SITUATION

It is heartening to see that our aviation industry is expanding its flight operations, fleet besides achieving better financial results. However, the financial growth and expansion in the fleet of the airlines would become meaningful only when the benefits of the progress reach to the people. It is the matter of the fact that the cost of travel especially on the domestic route is not affordable even by the middle income group which means a huge market still remains untapped only because of high tariffs of the airline. Actually, while fixing the tariff we usually compare it with international standards but unfortunately ignore that low GNP level in the country.

We should not ignore the living standards of the 90 percent of the people in Pakistan.