UNREGULATED DOMESTIC AIRFARES

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
June 21 - 27, 20
10

While the aviation industry of Pakistan is said to have been deregulated, the benefits of this deregulation that should have been reflected in the airfares is yet to be passed on the masses, the people who have to endure mental and physical hardships while travelling through scantly means of road transportations within cities, districts and towns in absence of economical air means.

Air transportation remains to be a mode of transportation of special strata of the society. The only reason of this is exorbitant fares that majority of people in the country with rising poverty incidence cannot afford. It is worthwhile to note that National Aviation Policy 2007 that waits to be materialised in letter and spirit envisages air transportation services to people at large at an economical rates. Its non-implementation is termed as a reason of dominance of anti-competition forces in the aviation market.

Unlike airline business in western and developed countries where non-commercial passengers have the highest portion in domestic air travelling, in Pakistan domestic air flights are services predominantly used by commercial travellers or business class. In other words, high airfares dissuade the economisation of airlines business for the benefits of local population.

Pakistan's aviation market is mainly dominated by foreign airliners, which generate substantial revenues from international flight operations.

Only three airlines handle the domestic operations. These scheduled airlines not only handle local but also international flights operation. One of them is PIA while two are private-owned airlines. Shaheen Air International was the pioneer from private sector and started its operation in 1993. It has nine aircrafts. Air Blue has eight airliners fleet and it began its flight operation 2004.

People belonging to airline business give quite a convincing justification of high domestic airfares, saying given the unstoppable volatility in prices of oil and other economic downsides that stir the cost of operation, no airline can hold on to claim of offering low cost air travelling. It is also said that due to limited number of airlines handling domestic operations cost of air travelling is beyond the reach of common person. Proponents of high fare also say that since business of airlines is not ordinary in its expenditures incurring magnitude, it has to keep price of its services up.

When asked about airline's domestic fares' fairness, chief spokesperson Pakistan International Airline, which has 75 per cent share in the total domestic traffic, say they are completely in accordance with the international standards. Talking to Page, he however did not explain what does it mean by international standards.

Civil Aviation Authority does not regulate airfares, a source in the authority tells this scribe. So, whose prerogative it is to rein in airlines that are chalking up money or trimming operational losses through 'predatory fares'? There is even no explanation of why the airfares factor in inexplicit charges and levies. Such cases have been reported widely in local media. Reincarnated Competition Commission of Pakistan had extended its nose in to the aviation market after grabbing unfair practices in some sectors habitual of unfettered plundering last year. It gave a detailed report on the aviation industry of Pakistan and compared it with regional aviation industries. The report which is available on its website perhaps is the first attempt to dissect Pakistani aviation market. The commission had after a survey and over some strong clues about practice of PIA of imposing unjustifiable charges on tickets called the flag carrier in its dock. The report said CCP was alarmed over what was dubbed as unique formula of calculating penalties for late ticket cancellations or changes as a percentage of ticket price paid. This was in contravention to the normal practice of charging fixed fee or no fee on tickets booked in more expensive fare classes. CCP that was previously called monopoly control authority did not impose any penalty on PIA for this aberration, but it had the PIA changed the formula from percentage calculation as of January 2010.

When people lash out domestic airfares of PIA, they come up with arguments that often aircrafts fly with many seats vacant and advice the airline can bring down its price by keeping occupancy full. On this, Syed Sultan remarks "it is a thing of past". Occupancy issue occurred when there were allocated tickets' quotas for travelling agents, he says. "But, now there is modern telecommunicated ticketing system to ensure sale of all tickets before takeoff." He says passengers need to book tickets three hours before scheduled flights, if they do not then seat or seats may be vacant otherwise there is now no such thing as flying with unoccupied seats.

Sultan Hasan is sure that PIA's domestic airfares are competitive to other two rivals, whom he does not consider rivals. When asked to rank PIA's domestic fares with fares of domestic airlines, he said there is no comparison between PIA and other domestic airlines. PIA's frequency of domestic flights is far larger than that of domestic airlines.

"We have not designated any special plane for domestic flight operations. When it is not in use for international flights, we use them for domestic operations." PIA has 40 aircrafts fleet. Of that, 26 are widebody jets, six are newbody, and seven are turboprop regional airliners.

According to the Competition Commission of Pakistan, in a fully deregulated aviation industry, there is likelihood that airlines develop techniques to "dissuade entry, exercise their relative dominant positions, and generate revenue to offset decreased yields due to lessened market power". Pakistan International Airline that is one of the hot-topics of local as well international media has been in to financial mess for years. Its operational losses count in billion. It is one those lose making public sector enterprises which are bull eye of the government privatisation programme despite apparently strong resistance against the plan. Prime Minister Yousuf Raza Gilani said PIA is one of those eight public sector enterprises which are going to be restructured, reported Gulf News on Wednesday. He said lose-making PSEs were gobbling up the government subsidies worth Rs220 billion. Sultan Hasan says minister of defence clarified that PIA would not be privatised. He says it is up to the government to decide whether privatisation is good or bad. People expect low fares after increasing numbers of airlines for domestic flights.