The Civil Aviation Authority (CAA) plans to introduce a new aviation policy by the end of September which will require start-up airlines to have a higher paid-up capital and more aircraft, officials told The Express Tribune.
The policy will also focus on lowering taxes on domestic airlines and offer unilateral rights to Asian carriers, they stated, after a high level meeting chaired by Shujaat Azeem, adviser to the prime minister on aviation, was held on Tuesday at the CAA headquarters to review progress on the national aviation policy.
It has been seven years since the former director general of CAA, Farooq Rehmatullah oversaw preparation of a liberal aviation policy, which was never properly implemented.
“The basic idea is to encourage the aviation sector by offering tax breaks to domestic carriers,” said an official who is involved in the consultations. “For instance, the 17% sales tax on airlines is a major setback.”
But the rationalisation of taxes depends on the government, he said.
“We will try to push the idea forward as multiple taxes on everything from fuel to the import of spare parts have eroded the profits of our airlines. We need to come up with some sort of a cushion,” he said.
As per the proposals in the policy it is apparent that the CAA has decided to discourage weak players from entering the airline business. The new policy will require start-up airlines to have a paid-up capital of Rs500 million against the current limit of Rs100 million.
Similarly, new airlines will need to acquire at least five aircraft against the present requirement of three. “We are doing this to encourage genuine investors.”
When Pakistan adopted the open sky policy in 1990s, more than 20 airline licences were issued to different business groups, however, none of them except Shaheen survived.
Last airline to declare bankruptcy was Aero Asia. This was primarily because the investors who had bought the licences were not financially strong.
The new aviation policy also envisages encouraging private shuttle services to secondary stations like Benazirabad and Bahawalpur. “It is being proposed that they should be exempted from CAA taxes and the paid-up capital requirements for these ventures are set at minimum,” the official said.
The CAA wants to go a step ahead and put up abandoned airports for auction. “We would really like to see private investors take control of airports in cities like Hyderabad and Panjgur.”
The previous policy prepared during the tenure of Rehmatullah also envisaged such an approach but it was never materialised.
The official said that the CAA is also conscious about the exit of Asian airlines from Pakistan. “That is why we intend to offer unilateral open skies to airlines of the Saarc members. This means they wouldn’t necessarily have to reciprocate by offering us flights,” he said.
Airlines including Cathay Pacific, Singapore Airlines, and Malaysian Airlines have scaled back their operations since 2008, partly due to concerns related to the security of their employees.
Only 19 foreign carriers started their operations in Pakistan. Other than the airlines originating from Gulf countries, the only notable carrier making stops in the country was Cathay Pacific.
“When it comes to attracting more airlines, a lot depends on the security situation,” the official said.
Published in The Express Tribune, September 24th, 2014.
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