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International routes opened for private airlines
IQBAL MIRZA
KARACHI (July 28 2005): The monopoly enjoyed for decades by national carrier Pakistan International Airlines to fly to the United Kingdom, the United States and Scandinavian countries has ended.
In a landmark decision the government has permitted all Pakistani private airlines to operate to destinations in the UK, the US and Scandinavian countries in addition to extra flights to Gulf countries.
The government’s decision was conveyed to the three private operators, ie Air Blue, Aero Asia and Shaheen Air International, on Wednesday.
These airlines will now be competing with each other and with PIA and foreign airlines on these routes. The competition, according to aviation circles, will not only ensure timely availability of seats but might also lower the fares, to the benefit of the travelling public.
The private airlines have also been permitted to operate to Saarc and Asean countries, subject to permission from these countries.
The government has directed Civil Aviation Authority (CAA) to contact these countries on fast track basis and complete the process by December 31.
The decision of the government follows a number of factors. Firstly, PIA was unable to meet the demand of the travelling public, particularly to destinations in UK and North America, leaving the vacuum to be filled by foreign airlines, ie, Emirates, Gulf Air, Qatar Airways, Kuwait Airways, Saudia and Turkish Airlines.
These foreign carriers carry passengers first to their own country and then switch them over to another aircraft flying them to their desired destinations. The hassle of change of aircraft in a third country, and sometimes long waiting periods to board another aircraft, created frustration and revulsion among the travelling public.
Aviation circles commented that PIA had been crying foul against foreign airlines carrying passengers from and to Pakistan via third country, but made no serious efforts to increase its capacity to meet the growing needs. Through its influence in the government over a period of last five years, PIA did not let private airlines operate to countries where it enjoyed monopoly, ie Far East, India, Sri Lanka, Bangladesh, Saudi Arabia, Europe and North America. Thus, by default, the restrictive policy of the government not only created difficulties for the travelling public but also benefited the foreign airlines, they said.
However, with the change of PIA Chairman and Defence Secretary, the situation also changed. The decision of the new Chairman, PIA, to lower the fares on those domestic routes on which private airlines were operating resulted in a price war among Pakistani airlines. Private airlines termed this move an attempt by PIA to wipe out private airlines.
The worst hit was Air Blue, which had no international routes to cross-subsidise its losses on domestic routes. Air Blue sought the help of CAA to intervene. Although CAA decided to let the airlines compete with each other, as was the global trend, but agreed to provide all private airlines a level playing field. Accordingly, it approached the government to allow Pakistan’s private airlines to operate on all international routes as per their commercial judgement.
Subsequent to a series of meetings held among CAA, Ministry of Defence and private airlines, the airlines submitted their business plans to CAA Director General on July 14. The private airlines were finally permitted by the government on July 19 to go ahead with their business plans.
The government has imposed a number of conditions on the private airlines, which should be met to avail additional international routes and frequencies. One of the conditions pertains to registration of their entire fleet in Pakistan by June 2008. This had caused serious problems for CAA as private airlines tend to hire foreign aircraft, crew and maintenance facilities, resulting in almost closure of flying clubs and maintenance facilities and/or their development in the country.
It also resulted in joblessness for the pilots, engineers and technicians. The flight of capital from the country and insurance of passengers flying by foreign registered aircraft by Pakistani airlines were yet other areas of serious concern.
In the event of an accident of foreign registered aircraft being operated by a Pakistan private airline the victims are likely to face serious legal problems in receiving insurance money or due compensation, etc.
The government, like many other countries, has, therefore, decided not to permit foreign registered aircraft to be operated by Pakistani airlines except in extraordinary circumstance and that too for a short period of three months. The government has also directed CAA to put an effective mechanism in place to ensure safety, security and efficiency of the aviation industry in Pakistan.
Shahid Khaqan Abbasi, Chief Executive Officer of Air Blue, told Business Recorder here that negotiations with aircraft manufacturers for acquiring new-generation long-range aircraft “are in an advanced stage” to meet the CAA conditionalities. The new aircraft would be registered in Pakistan and would have all Pakistani crew. Within four months, Air Blue would be able to add these aircraft to its existing fleet, he said.
Air Blue has decided to invest about $1 billion in acquisition of new fleet.
Shaheen Airways is in doldrums because of poor management and lack of understanding of airline business.
Aero Asia has yet to register its fleet in Pakistan.
At present, no private airline has equipment suitable for operation to Europe and North America. It may take minimum of three to four months for any private airline to commence operation to Europe.
Aero Asia is also reported to be aiming to add modern Boeing and Airbus to its existing fleet and planning to start operation to Manchester, London and Birmingham. They have been permitted to operate 12 flights per week to these destinations.
Aviation circles said that liberalisation of aviation industry has taken place in most parts of the world. It started off in USA in 1978 quickly followed by Europe and now it is well on its way to Asia. Countries of Asia Pacific Rim and Gulf countries have already adopted it. Singapore, Thailand, Malaysia and Hong Kong have five to ten times more air traffic than Pakistan because of liberalisation. Dubai has become a regional hub and there are over 100 airlines operating to Dubai and its revenues in aviation related business is in excess of US $15 billion, more than its revenues from oil.
China and India, the two most populous countries of the world, opened up their skies only recently and both the countries are on fast track to liberalisation. Indian private airlines are now operating to Europe and North America and Indian private airlines have become the largest market for Airbus and Boeing companies. Only in the last six months, Indian private airlines like, Kingfisher, Jet Airways, Air Sahara, Air Deccan, Spice Jet and Indigo, etc have placed orders for new aircraft in excess of 10 billion US dollars. This has created a boom in Indian aviation industry. The average fares on domestic routes have dropped as low as train fares. Airlines were selling few seats in each flight at as low a price as Rs One, Rs 500 and Rs 1000 if you were ready to fly three months from now.
Even in Pakistan domestic fares dropped to as low as train fares (ACC class). Resultantly the traffic grew at the rate of 30% over a period of last six months as against an average of 10% in the past.
Aviation is the key driver of national economy. Removing restrictions on private airlines’ international operations and allowing more number of foreign airlines to Pakistan would boost trade, tourism and people to people contact with other countries, aviation circles said.
Copyright Business Recorder, 2005
it takes a while 
