Tough competition amongst the airlines has brought down the fares despite hike in fuel prices.

Jan 09 - 22, 2006

Aviation industry has registered an impressive growth during 2005 in Pakistan as reflected in robust growth of air traffic which grew by over 42 percent.

This booming momentum indicates a record growth which was never witnessed before in the aviation history of this country. There was 28 percent growth recorded in the aviation sector when the private airlines in the country were first allowed.

Another significant development in the year 2005 was the opening of international routes to the three airlines operating in the country. This led to an impressive growth of Shaheen, Aero Asia and specially the newly set-up Airblue Airlines. Despite significant growth in their business the airlines in the private sector are, however, not satisfied and blame the national flag carrier, Pakistan International Airlines (PIA) for taking away a heavy chunk of air travelers previously allured by the private sector airlines because of their low fares. PIA also reduced its fares to ensure that it does not lose all its business on the routes on which private sector airlines were also operating.

It may be recalled that the beginning of the year was not as positive for the sector. The year started with a price war waging among the private airlines. This was intensified when the PIA entered the fray by announcing heavy discounts on all those routes that were being operated by the private airlines as well.

To compete with the extra ordinary low fares offered by the private airlines, PIA introduced a new fare structure and reduced fares by up to 40 percent on all those domestic routes that were operated by the private airlines as well. It antagonized the private carriers and they lodged complaints with the Ministry of Defence and CAA, the aviation sector regulator. The airlines alleged that the new PIA fares have been introduced just to bulldoze the private carriers out of business.

The minimum differential between the fares charged by the national carrier and private airlines as demanded by private airlines has still not been decided. The private carriers continue to raise a hue and cry. PIA drastically cut the fares effective from May 16, on all the domestic routes being operated by the private airlines. Moreover, it is not going to announce new fares for Dubai also.

The new fare chart of PIA had got the managements of all the three privates airlines Shaheen International, Aero Asia and Air blue in a fix. Fearing being pushed out of business, the thrust of their strategy has been to lobby with the MoD and CAA with the demand to play their role as regulatory and surveillance bodies.

This time tested marketing strategy of PIA comes with the change of mantle at the airline. The new Chairman, Tariq Kirmani, seems to be in a hurry to wipe out competition. Shahid Khaqan Abbasi, the Chief Executive of Airblue and a former PIA Chairman himself had alleged in a press statement that PIA was selling tickets at below cost just to bulldoze its competitors. "With a huge capacity and back-up of unlimited government financial aid, PIA has no right to raze the aviation industry in the country," he commented. Other market players agree that "if the situation is not checked promptly, it will lead to PIA reestablishing its monopoly in the country," Khurshid Anwer, the MD of Aero Asia, and a former Chief Executive Officer of PIA, said. In a press statement Khurshid Anwar supported Airblue Chief and urged the Ministry of Defence and Civil Aviation Authority to immediately attend to their complaints.

When contacted by this correspondent sources in the Ministry of Defence confided that the Ministry has no intention to interfere in the matter. It is an age of competition and the government has been supporting a policy of open competition deregulation and least interference.

This tough competition amongst the airlines has brought down the fares despite hike in fuel prices, providing a big relief to the public at large. This has not caused any losses to the airlines as the unprecedented increase in the number of air passengers has covered up most adequately the losses, if any, caused because of low fares.

PIA is also a commercial airline and is free to adopt its own strategies to survive in this open competition, the source said, adding that this practice was being followed all over the world. When the private airlines have been allowed to operate even on international routes hitherto monopolized by the PIA, how you can deny the freedom to the PIA to formulate its own strategy to successfully compete in a competitive environment, the source added.