With open skies, airports likely to generate huge revenues

Published: December 14, 2015
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PHOTO: REUTERS

PHOTO: REUTERS

PHOTO: REUTERS To cope with the expected increase in air traffic, there is definitely a need to improve airport infrastructure and run the airports on modern lines. PHOTO: APP

KARACHI: Pakistan’s airports are now set to generate huge revenues as more and more airlines touch there thanks to the new aviation policy.

Keeping in view the spirit of the Aviation Policy 2015, the Civil Aviation Authority (CAA) held talks for liberalising the existing and concluding new air services agreements with 17 countries at the International Civil Aviation Organisation’s (ICAO) Air Services Negotiation Event held between October 19 and 23 in Antalya, Turkey.

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This undoubtedly is the first step to make the operations framework attractive for the airlines of other countries and making aviation activities more lucrative in Pakistan.

These countries included Azerbaijan, Bulgaria, the Czech Republic, European nations represented by the European Commission, Ireland, Malta, Morocco, New Zealand, Oman, Qatar, Rwanda, Serbia, Sri Lanka, South Korea, Turkey, the UAE and Vietnam.

In fact, protectionism and restricted market access were the main hurdles to the growth potential of the country’s aviation sector. The new policy rightly addresses the problem by making air services agreements more liberal, ensuring greater business freedom, higher levels of customer satisfaction and greater micro and macro-economic growth in the aviation domain.

Furthermore, the open skies policy for other countries based on the principle of reciprocity is bound to give a boost to aviation activities in the country.

Apart from the bilateral air services agreements, Pakistan being a member of the D-8 is also negotiating multilateral agreements that will permit liberal air services between member states. Endeavours are being made to enter into similar agreements under the umbrella of the Economic Cooperation Organisation (ECO) and Saarc.

The D-8 Organisation for Economic Cooperation, known as Developing-8, works on development cooperation amongst Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey. Its objectives are to improve the position of member states in the global economy, diversify and create new opportunities in trade relations, enhance participation in decision-making at the international level and improve standards of living.

Rise in air traffic

The execution of these air services agreements will obviously result in a massive increase in the flow of air traffic to Pakistan. To cope with the increase, there is definitely a need to improve airport infrastructure and run the airports on modern lines.

The CAA has decided to take various measures immediately. These include refurbishment of airport buildings, rehabilitation of airside infrastructure and strengthening of air cargo services to promote export of Pakistani products globally. Establishment of two state-of-the-art cargo villages – one in the north and the other in the south – are also on the anvil.

To accelerate the pace of work, the CAA has decided to appoint chief operating officers (COO) at major airports. Operational control of all agencies working at the airports like ANF, Customs and Immigration will be given to the COO for efficient airport operations.

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Moreover, rationalisation of duties and taxes in the aviation sector to help attract more businesses and provide benefits to the end-users is an absolute must. Restructuring and simplification of taxes in line with best international practices is in the process.

The CAA believes that higher taxes and duties negatively impact the transportation activity, which in turn adversely impacts economic growth and employment opportunities. It advocates there should be no taxes and duties on investment in the aviation sector.

Support to economy

According to the new aviation policy, currently, the airline and airport industry supports about 58.1 million jobs (8.7 million are within the sector itself, working for airlines, at airports) and contributes $2.4 trillion to the global gross domestic product (GDP), equivalent of 3.4% of global GDP.

Developing countries in Asia enjoyed steady economic growth at 6.2% in 2014. Asia’s population and income growth is expected to continue through at least the first half of the 21st century.

If the current growth rate continues, by 2050, Asia’s per capita income could rise by 600% matching Europe and other western countries, and this growth will generate major changes in the travel market.

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Aircraft manufacturers estimate the region’s airlines will need an additional 12,820 airplanes valued at $1.9 trillion over the next 20 years. That would represent 36% of the world’s new airplane deliveries.

Air transport is indispensable for business and tourism of Pakistan, which are the principal foundation of economic growth, particularly for developing economies.

It is encouraging to note that the CAA’s financial position is reasonably sound. In fiscal year 2014-15, it paid Rs6,195 million in income tax and is expected to pay Rs9,262 million in 2015-16. The total revenue generated by the CAA in 2014-15 was Rs50,819 million and it is expected to generate Rs56,176 million in 2015-16 thanks to the vibrant aviation policy.

The open skies policy promises much in terms of growth potential. Let’s hope Pakistan is able to utilise it to its advantage.

The writer is a freelance contributor on economic issues

Published in The Express Tribune, December 14th,  2015.

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Reader Comments (26)

  • Baba
    Dec 14, 2015 - 9:05AM

    The writer got too excited and forgot to mention exactly how will the new policy do it. The only reference given was from CAA’s report. C’mon!Recommend

  • nadeem
    Dec 14, 2015 - 9:33AM

    And what is the CAA doing to improve safety in the skies for the anticipated increase in traffic? Recommend

  • Imran
    Dec 14, 2015 - 9:53AM

    surely CAA revenues will increase and Pakistani airlines will go bankrupt (already have)Recommend

  • nouman
    Dec 14, 2015 - 10:12AM

    Awesome. Amazing opportunity for retired, forces dinosaurs to milk the state. We must order top of the range black tinted SUV to ferry their aging wives and kids to school. Dont forget to order gaudy, corner shop owner to have eye teasing neon lighted kiosks.
    We being an agricultural society must never loose a chance to present our airports like they are some small town railway stations. Karachi airport already look like a bastardtized shopping mall with hoarding, bill boards and banners. Recommend

  • Sammy
    Dec 14, 2015 - 10:51AM

    “…massive increase in the flow of air traffic to Pakistan”

    Really??! Who are all these people who would want to come to Pakistan all of a sudden?! Tourists? Business people? Come on…Be realistic!Recommend

  • Nafees
    Dec 14, 2015 - 10:59AM

    To handle expected additional traffic, CAA needs to upgrade its airports. Today Islamabad and Lahore arrivals and departures cannot accommodate more than two wide-body aircraft passengers and finding a parking slot in the Parking lots is a nightmare.Recommend

  • Dec 14, 2015 - 11:32AM

    This is just a stupid news. I just landed yesterday at Karachi airport and it is exactly the same as it was 10 years ago. There are no any measures taken to improve the airport. No facilities. No entertainment. No duty free shops. Arrogant staff. The airports are supposed to be refurnished completely. Our airport taxes are too high, due to this, many international airlines abondond their operations in Pakistan.
    Corruption, corruption and corruption everywhere…Recommend

  • Javed khan
    Dec 14, 2015 - 12:02PM

    CAA needs internal reforms as well. There is no accountability within. No way for the airlines to register their grievances against CAA officials. Recommend

  • Dec 14, 2015 - 1:55PM

    @Dr Jazzy:
    No. YOU did not land at Jinnah International yesterday. That is hogwash.
    Duty free shops are on the DEPARTURE concourse. Not ARRIVALS.
    There ARE duty free shops. Once you pass the immigration and customs
    checkpoints. On way to boarding gates. Everything from leather jackets to
    all kinds of souvenirs and MORE.Recommend

  • Lion King
    Dec 14, 2015 - 4:50PM

    General Zia’s founded CAA headed by corrupt retired Air force officers destroyed

    Karachi’s unique international position of the main air travel hub in

    Asia by imposing neck breaking conditions and rising charges on foreign airlines to

    benefit Dubai in 1980s.Recommend

  • sodu
    Dec 14, 2015 - 6:51PM

    so negativity in the comments. we shoulf appreciate their new caa’s policy, they are source of million of rupees in taxesRecommend

  • Fast
    Dec 14, 2015 - 7:47PM

    Surely inians have a lot of time to waste thats why they come on our site. Just for remembering indians has highest number of unemployed persons.Recommend

  • Bizz
    Dec 14, 2015 - 8:14PM

    Liberalization of air services agreements will not “obviously result in a massive increase in the flow of air traffic to Pakistan”. How is that even plausible?

    CAA is not capable of understanding its duty as a service provider for its customers which are airlines and passengers. As long as there is only aviation behemoth in Pakistan which acts both an aviation regulator and provides the ANS and airport operations services it is meant to regulate, there is no incentive to perform better!! It would be far better to, first separate the regulatory function from the service provision functions so that these are independent actors. Second, open up for competition of service provisions. I’m sure operating major airports and ANS in Pakistan would be very attractive for many global actors. That would generate a better return for the state of Pakistan in terms of taxes and spur competition so that our airports and air services actually perform at a standard which attracts customers and befits an emerging country of 180+ million people. That would be a real benefit to the society and not what you have today: if you know someone who works in CAA, you get to cut the line at the airport. Otherwise, join the cattle run which you can see everyday at major Pakistani international airports.Recommend

  • ShaikhMustafa
    Dec 14, 2015 - 8:15PM

    @sodu, it’s good to be positive, but seeing what the Pakistan caa has done over the last three decades to the airline industry of Pakistan is nothing short of murder. Has anyone ever wondered had everything only been wrong at PIA’s end how is it that the private sector airlines never grew. Take India’s example, air India had never quite been any better than pia, however the Indian government persevered with it(that’s a separate debate altogether), the Indian private airlines kept growing. I’m sure there was something right thief civil aviation which sadly the Pakistan caa could not replicate. Recommend

  • ShaikhMustafa
    Dec 14, 2015 - 8:31PM

    In the 1980s khi was a major hub for airlines of Pakistan, pia surprisingly was growing despite all the competition from the likes of Lufthansa , aur France, Alitalia, pan am, British airways, klm and the list goes on. Now barring the Gulf carriers there are hardly any other carriers coming here, what dxb is now khi was 25-30 years back. What has the caa done now, they have given such exorbitant landing rights to the Gulf carriers that Pakistan has now become a gold mine for them. Their excessive operations have spoiled the market for all other major carriers of the world the ones mentioned above that once graced the Pakistani airports and skies. Recommend

  • Jj
    Dec 15, 2015 - 2:16AM

    @Dr Jazzy:
    Are you stupid? Duty Free is designed for people going out (departures) and not arrivals.Recommend

  • Adeel Naqvi
    Dec 15, 2015 - 2:28PM

    Let’s encourage CAA to attract more and more foreign airlines and praise the efforts as PIA is getting bankrupt with every passing dayRecommend

  • Adeel Naqviprhouse@live.com
    Dec 15, 2015 - 2:30PM

    Let’s encourage CAA to attract more and more foreign airlines and praise the efforts as PIA is getting bankrupt with every passing dayRecommend

  • Adeel Naqvi
    Dec 15, 2015 - 2:32PM

    As PIA is getting bankrupt with every passing day I think its time for CAA to make concerted efforts to attract more and more airlinesRecommend

  • Dawood
    Dec 15, 2015 - 2:44PM

    By Reading this article i can surely say that Pakistan Civil Aviation Authority is playing a vital role in enhanching Pakistan’s Aviation Capabilities and moreover this revenues Generated will surely Boost Pakistan Economy.Recommend

  • Hamdiya
    Dec 15, 2015 - 2:47PM

    Well Done CAA. this is really nice to see the efforts done. i am sure all these efforts will benefit Pakistan.Recommend

  • Dawood
    Dec 15, 2015 - 2:51PM

    Well Done CAA. by reading this article i can surely say that in near future Pakistan will surely be a benefiticiary of all these policies and will play a role in Boosting the economy aswell.Recommend

  • Elishma
    Dec 15, 2015 - 7:56PM

    This article enlightened me with depth of knowlegde about CAA and its activities. these figures are sky high in terms of an Organization that always yields profits. good to know.Recommend

  • Ishbah
    Dec 15, 2015 - 8:11PM

    I was travelling to Dubai recently. this was my 2nd international trip after a spam of 2 years. and i can see the differences at the airports and their facilities in Karachi and Lahore. Way to Go.
    loved reading this article.Recommend

  • Anwar Hasan
    Dec 15, 2015 - 9:39PM

    It would have been great if the major airline was PIA. Unfortunately the major airlines are Emirates, Qatar, Fly Dubai and Etihad. Recommend

  • Nasser
    Dec 15, 2015 - 9:39PM

    @Dr Jazzy:
    You never landed there bro….and the ofcourse the article has discussed the future opportunities and not any magic which can transform anything overnight.Recommend

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