News Analysis |
United States of America Airline industry may have announced the victory in its campaign against the United Arab Emirates (UAE) national carrier to not to add further [so-called] fifth-freedom flights. The UAE ambassador to the United States gave a totally contradictory statement that Dubai based Airline will continue to add fifth-freedom flights.
America Airlines claim victory for putting an end to their long-standing dispute regarding unfair subsidies provided by the Gulf state to its two major airlines. National carriers very often enjoy these subsidies. Over the years, even in America, airlines have also enjoyed billions of dollars in various government subsidies but remained critical of Gulf airlines for the same reasons.
Similar concerns of unfair treatment were shown by Pakistan’s national carrier Pakistan International Airlines (PIA) when it allowed the Gulf-based airlines to operate to and from the small airports of the country.PIA had questioned the policy of the government as it allowed some Gulf-based airlines to operate to and from the Multan, Faisalabad and Sialkot airports.
The ruling PML-N government was expecting to sell its stake to revamp PIA by eliminating the corruption and significantly overcoming its poor service quality.
The government was criticized for not ensuring the ‘fifth freedom’ rights from the Gulf countries to benefit the PIA. It is believed that if the policy is changed, it could rake in millions of dollars if agreements with the airlines are reviewed.
Fifth freedom rights enable the Gulf airlines operating in US and Pakistan to carry traffic from its own country to another country [Either Pakistan or the US] and at the same, time, it operates in routes to the United States and Pakistan that do not originate in the UAE. In simpler words, it means that the Gulf airlines pick up and drops traffic from the intermediate country to a third country.
The US and Pakistan may make the case against the Gulf airline. But, in fact, they try to move the focus from their bad-performance to external factors.PIA often blames international carriers which include Turkish Airlines, Qatar Airways, Thai Airways, China Airlines, Kuwait Airways, Oman Air, Etihad Airways, Saudi Airways, Gulf Air, and Emirates Airlines, for offering cheap fares.
These airlines carry Pakistani passengers through airports like Dubai, Doha and Abu Dhabi to various destinations, especially to Europe and the USA. Similarly, American airlines wanted to put an end to those fifth-freedom flights, which affected their businesses dearly.
The UAE ambassador to the United States gave a totally contradictory statement that Dubai based Airline will continue to add fifth-freedom flights.
When Emirates and Abu Dhabi’s national carrier, Etihad, fly from their home bases to the United States via Europe, it creates a big loss to the American airlines. The Pakistani airlines have been losing its market share, akin to what America airlines experienced in the US.
Last year, PIA had been contemplating to cease its operations in certain lucrative markets to curb the losses, which were denied by the airline. Gulf airlines are not to be blamed if they provide good services. The government has bailed out PIA number of times in recent years. Last week, the Economic Coordination Committee (ECC) approved another Rs20-billion bailout package to keep the national carrier afloat.
The losses in operations which even fails to cover the direct variable cost have put the airline in jeopardy. The poor management and failed policies senior management in the past also proved a disaster and opened the route for foreign airlines to cash on PIA’s failure.
Some of the fundamental reason for under-performance included nepotism, poor service quality, widespread corruption and failure to build long-term strategic initiatives. The ruling PML-N government was expecting to sell its stake to revamp PIA by eliminating the corruption and significantly overcoming its poor service quality.
Over the years, even in America, airlines have also enjoyed billions of dollars in various government subsidies but remained critical of Gulf airlines for the same reasons.
International Monetary Fund (IMF) had also advised Pakistan to retire its debt on public entities, it must privatize. The government was unable to privatize PIA as Supreme Court halted the move. Apex court ordered to put the PIA managing directors (MD’s) who served from 2008 to 2018 on the Exit Control List (ECL). Opposition political parties also cried foul play over the controversial move.
The incumbent government expected that by selling its stake, it will be able to revamp PIA by eliminating the corruption and significantly overcoming its poor service quality.PIA’s financial position deteriorated under the PML-N regime. In 2013, PIA’s borrowing capacity was Rs137.4 billion which witnessed a steep increase to 42% in its tenure. Moreover, losses of the airline have doubled to RS340 billion from Rs170.3 billion, when PML-N took over the government.
Poor governance and poor service remain a problem for the national air carrier. Rather than blaming the other airlines for taking their market share, PIA must look into its own operational capabilities and failure as a service provider which allowed the best airlines in the business to take over the market share.
If American and Pakistani airlines are to beat the tough competition from Gulf airlines, they must look into their service which remains so poor despite government subsidies and bailouts.