Pakistan International Airlines (PIA), once a bluechip company, is now not only one of the three major entities bleeding the national exchequer requiring large annual bailout packages but is also continuing to suffer from a decline in customers due to its inability to match the lower ticket prices that are on offer by other airlines.
There are several factors that account for the present state of affairs but perhaps the most critical is the 1992 decision of Mian Nawaz Sharif as the country’s then prime minister to announce an open sky policy – a year when PIA had registered record earnings of 41 million dollars and revenue of 880 million dollars. This policy reflects an international concept calling for liberalisation of rules and regulations pertaining to commercial aviation with the objective of creating a free market environment for the airline industry.
This policy exists till today and accounts for mainly Gulf-based airlines operating from all major Pakistani international airports. The problem with this policy, put succinctly by former Managing Director PIA Captain Aijaz Haroon in 2008, was: “what they do is that the 25, 26 percent of seats they, or any other airline, are unable to fill, instead of sending those seats empty, they come to this country and offer those seats at throwaway prices. They come and ruin my market. When an airline offers a Pakistani a fare for New York at $800, I can’t do that. If I sell at a higher price I lose that passenger. This is what has to be restricted.” The question of course is why PIA cannot follow suit both domestically and internationally? The reason is the very high price of fuel in this country due to high taxes on jet fuel as well as overstaffing that raises PIA’s cost of doing business.
Captain Haroon has further stated that “when you say open skies, the aviation division of the ministry of defence (MoD) and the Civil Aviation Authority (CAA) don’t agree that there is an open skies’ (policy) in Pakistan. There is a deregulation policy that they have adopted. It has hurt PIA a lot. And it is still hurting. There are ways to correct that.” Deregulation in the airline industry implies no longer regulating to limit routes or set fares and limit competition with other airlines to food, cabin crew quality, and frequency. Captain Haroon had further contended that CAA is focused on earning more revenue which is possible with more airlines’ presence at our airports; however, he pointed out that just one PIA flight to say Manchester once a week has the capacity to generate 3.5 billion rupees – much more than what the CAA earns.
Captain Haroon also expressed his deep concerns over flawed bilateral arrangements and disturbingly revealed “there is a restriction on the number of passengers between Pakistan and Saudi Arabia. We can only carry a certain amount of passengers to Saudi Arabia per week. The Saudis are firm on that. If they give me an open hand, I can have six flights to Saudi Arabia today and they will all go full. They have put the restriction to protect their airline. Pakistan is not doing that”.
And finally, one must fault the successive governments that administer PIA for their inability to improve service by improving cabin crew quality or indeed its pilot performance, or keep its aircraft well maintained. Frequent delays in departures and arrivals have become the norm and PIA has emerged as one of the most badly-run national airlines in the world. In addition, overstaffing, due to political considerations, as well as resistance to any major overhaul of the airline continues unabated.
The National Aviation Policy 2015 unfortunately decided to continue the open skies policy even though PIA’s number of international destinations has been reduced from 60 to 30 since this policy was adopted. One would hope that the Sharif administration would take appropriate decisions to mitigate the effects of a policy that has clearly sounded the financial death knell of PIA with a resulting massive loss to the exchequer. -Business Recorder