Air accord with S Arabia violates anti-trust law

ISLAMABAD: The Competition Commission of Pakistan has found the air service agreement between Pakistan and Saudi Arabia to be in violation of the anti-trust law and asked the federal government to review the agreement signed in 1972.

The Commission, during the course of hearing a case pertaining to PIA Hajj fares, found that the agreement between Pakistan and Saudi Arabia restricted competition on direct routes by allowing only two designated airlines, PIA and Saudi Airlines, to operate on these routes.

The CCP wrote to the government that the agreement allowed air fares to be fixed by mutual consultation between the two airlines rather than letting market forces establish competitive levels of air fares. If the government acted upon the CCP advice, it will pave the way for other international airlines to operate Hajj flights, which will help ease pilgrims’ problems. The PIA enjoys monopoly in Hajj flights.

The CCP said that concerns over air fares were most prominent during the Hajj season, as pilgrims did not have choice other than PIA and Saudi Airlines to travel to and from Saudi Arabia. Moreover, the Commission took note of market division. The PIA and the Saudi Airlines have divided pilgrims into half under the fixed quota clause of the agreement. The PIA pays royalty to the Saudi Airlines for carrying pilgrims in excess of its allocated quota. “Market division is an offence under the Competition Ordinance 2010,” the Commission said and found that the PIA was passing on royalty cost to its consumers resulting in higher ticket prices.

The policy note, issued by Dr Joseph Wilson, Member Policy Planning, Research and International Affairs, recommended to the government that the agreement should be amended to allow multiple airlines of both countries to operate direct scheduled services. Moreover, the market division should be abolished as early as possible.

Published in the Express Tribune, May 19th, 2010.