Air travel usually costs more than either train or bus for domestic commute around the world. It, however, does not legitimize what travellers in Pakistan are charged for inter-city journeys in the wake of feeble local competition.
An economical one-way trip from Karachi to Islamabad would cost roughly $45, translating into $0.064 per mile for a domestic air trip in Pakistan. On the flip side, an inexpensive Delhi-Mumbai flight is priced at $55 and around $0.049 per mile. This per-mile price differential elucidates the industrial mess.
Pakistan’s oligopolistic airline industry
Pakistan has an oligopolistic airline industry where only two private airlines- Serene Air and Airblue- were competing against each other, and the national flag carrier, Pakistan International Airlines (PIA), before the entry of AirSial at the tail end of the outgoing calendar year.
On the flip side, Air Indus, Bhoja Air, and Shaheen Air are the ones with Regular Public Transit (RPT) licenses, but they are not Civil Aviation Authority (CAA)’s certified operators as of now. An RPT license is a prerequisite to set up on-ground operations of the company, but it does permit the airlines to operate flights until the CAA grants an Air Operator Certificate (AOC) under stringent conditionality.
The CAA requires the company to procure state-of-the-art equipment, recruit a qualified workforce capable of using it, and develop a satisfactory supervisory methodology for operational flights.
Besides, it is mandatory to satisfy the use of acceptable aircraft, prepare manuals to identify Standard Operating Procedures (SOPs), and deploy experienced personnel positioned at managerial positions along with ensuring regular maintenance of aircraft.
Why does the industry remain unattractive for new entrants?
Despite austere examinations, Pakistan has been unfortunate to witness plane crashes that raise eyebrows on CAA’s capability to scrutinize air operators for all the right reasons.
The last decade (2010-20) alone saw seven ill-fated plane incidents, including the crash of Airblue’s Airbus in July 2010, JS Air’s Beechcraft in November 2010, Sun Way’s Ilyushin II-76 in November 2010, Bhoja Air’s Boeing in April 2012, Mil- Mi 17 helicopter in May 2015, PIA ATR in December 2016, and PIA Airbus in May 2020.
According to the International Air Transport Association (IATA), Pakistan has one of the fastest-growing airline industries with a rapid spike in domestic routes and passengers each year. So, why does the industry remain unattractive for new entrants?
The airlines in Pakistan are not sanctioned international routes until they fly for at least three years domestically. This limits the potential market size and, for the investors, the business idea becomes unviable.
A perpetual rise in energy prices also hit the airline industry which is already under the weather owing to an exorbitant debt obligation. Moreover, the fleet size of Pakistan’s airlines is 49, while Qatar Airways alone has a fleet size of 208 with 124 Airbuses and 84 Boeings. Being the oldest flight operator, PIA has a fleet size of 30, while Airblue, Serene Air, and AirSial have 10, 5, and 4 aircraft, respectively.
This, together with a lack of government incentives, has stagnated the industry’s growth and the customers consequently suffered.
However, three more domestic airlines’ anticipated ingress is a sigh of relief for frequent airline users. Jet Green Airlines, Fly Jinnah, and Q-Airlines are the players eager to tap a sizable yet neglected segment of the society.
Jet Green Airlines is still undergoing perusal while the other two are reported to get Civil Aviation Authority (CAA)’s consenting nod soon. After the CAA’s approval, the Aviation Division and Federal Cabinet will formally ratify these airlines’ case.
The competition will best serve the users of this transportation mode as it will lead to ameliorated in-flight services. In addition, it will seed contention among the companies for market share which will have trickle-down price benefits for the public.
The writer is a former Research Enumerator at the State Bank of Pakistan’s Research Department. He has a keen interest in political economy and financial markets, and he tweets at @zohaib_jawaid. The views expressed in the article are the writer’s own and do not necessarily reflect the editorial policy of Global Village Space.