LAHORE - Grant of excessive traffic rights to foreign carriers, heavy comparative landing charges and taxes on air fare have ruined local aviation industry, a report of Pakistani Operators on National Aviation Policy revealed.
The report says, “During ten years of 2008-2017 increase in capacity granted to foreign airlines was 400 percent as compared to market growth of only 54 percent. This created a capacity glut in the market leading to intense price war by Gulf Carriers which are subsidized by their governments. Operating margins of Pakistanis were eroded. Rise in fuel cost and rupee devaluation further deteriorated the airline industry of Pakistan”.
Pakistan Civil Aviation Authority (PCAA) is also receiving highest landing charges in the region. Landing charges of PCAA are one of highest in the region, report says.
PCAA is also receiving highest percentage of taxes and charges on base domestic fare in the region. In Pakistan it is 22 percent, in India 5 percent, Malaysia 5, China 9, Iran 8, Bangladesh 7, Saudi Arabia 5, and in Afghanistan it is 2 percent only.
Authorities in Pakistan have been granting traffic rights to foreign airlines, especially from the Gulf, UAE and Turkey well in excess of actual point to point 3 freedom market. As per Pakistan CAA data presented in the preamble of National Aviation Policy 2015, from 2009-13, domestic market in Pakistan grew at less than 1.8% per annum, while the international grew at a rate of 3.6% per annum.
However, during the same period of 2009-2013, traffic rights granted by Pakistan grew by more than 100%, or more than 25% increase per annum.
Traffic rights granted to airlines of UAE/GULF, Sri Lanka, Turkey and China in 2009 202 weekly rights were granted while in 2013 these weekly rights were 435. Despite grant of excessive traffic rights, Pakistan market remained stagnant.
Average annual international market growth during 2008-2017 remained 6 percent per year and in nine years it was 54 percent total growth. During ten years of 2008-2017 increase in capacity granted to foreign airlines was 400 percent with 516 weekly flights as compared to market growth of only 54 percent.
Taxes and duties on domestic air travel in Pakistan is 22% (average) which is significantly higher than India (approximately 4%) and Malaysia (approximately 3%), which needs to be rationalized.
Dropping of yields due to capacity glut, highly volatile fuel price, currency depreciation and high taxation all resulting in negative margins for airlines of Pakistan.
To achieve sustained growth for aviation industry self reliance in the field of aircraft design and manufacturing in private sector in Pakistan through maintenance of high standards of safety, security and provision of state of the art infrastructure is needed, while ensuring level playing field for all market players.
The report further recommended that PCAA should provide a level playing field for airlines of Pakistan to grow and compete successfully in an international market based on organic point to point market growth based upon spirit of commercial reciprocity. The report proposed rationalization of existing exorbitant taxes/duties/levies/CAA charges for a conducive environment for the aviation industry to prosper by making air travel affordable for the masses.