PIA Umra flights: Exploiting passengers to the travel agents’ benefit

Long before seats become available for booking, they are sold to agents.

LAHORE:

Pakistan International Airlines (PIA) might lose potential revenue of over Rs1.5 billion from Umra flights this year if it continues selling seats at discounted rates to selected tour operators before opening bookings for the public, The Express Tribune has learnt.

This practice, which has continued for several years, results in inflated prices for passengers and bumper profits for tour operators. But for the PIA, it means potential loss of approximately Rs18,000 per seat this year. With 84,000 Umra passengers expected this year, that translates to Rs1.54 billion potential loss of revenue.

As the Umra season commenced at the beginning of the Islamic month of Rabius Sani (early March 2011), PIA carried 2,598 Umra pilgrims on six Boeing 747 extra-section flights. These flights do not follow the regular schedule and are operated to provide extra service.

But long before these seats became available for booking, they were sold to four travel agents – Eidgah in Islamabad and Moon Travels, Raja Travels and Quality Aviation in Karachi. Even though the PIA had raised the Umra return fare to Rs55,000 from Karachi and Rs60,000 from Lahore, Islamabad and Peshawar, these travel agents paid only Rs42,000 to Rs46,000 per seat.

Meanwhile, no seats were offered to travel agents in Lahore, Multan, Peshawar, Faisalabad, Mardan, Nowshera or anywhere else in the country. This creates an artificial shortage in these areas, allowing selected tour operators to sell tickets at Rs70,000 to Rs80,000.

According to sources within the PIA, the new managing director of the airline is unaware of this arrangement – he was captaining a PIA flight to New York when this deal was being worked out with travel agents. “If we’re going to exploit the customer, shouldn’t it benefit the airline instead of travel agents?” a PIA official remarked.

Price-fixing cartel

Umra and Hajj seats are already the most expensive in terms of price per kilometre and represent a significant chunk of PIA’s revenue. Last year, PIA carried over 80,000 Umra passengers on its regular and extra section flights, which accounted for almost six per cent of its total revenue of Rs98 billion. This year, the airline expects to fly over 84,000 passengers.

PIA and Saudi Airlines enjoy a monopoly over direct flights to Jeddah and Madina from Karachi, Lahore, Islamabad and Peshawar. The Umra visa is valid for 15 to 20 days, ensuring airlines get steady traffic for five months of the season, which ends after Eidul Fitr and restart immediately after the Hajj operation ends.

In 2009, the Competition Commission of Pakistan (CCP) had fined PIA for what it called an unreasonable increase in Hajj and Umra fares in 2008. The commission also found that an agreement between PIA and Saudi Arabian Airlines, reached in 1972, allows only these two airlines to operate direct flights between the two countries, which is a violation of anti-trust laws. Essentially, the two airlines operate a cartel and indulge in price-fixing on these routes.

Fair industry practice would be that these seats are offered to all travel agents and at airline sales counters so that intending pilgrims get the best bargain and airlines reap the maximum yield. Instead, Umra season is a bonanza for a few tour operators.

This irregularity comes in the wake of the Hajj scam and the Supreme Court’s suo motu notice, and will reflect very poorly on the relevant ministry. It will also reflect badly on those involved in PIA, where there is a separate division headed by a GM who looks after the Hajj and Umra operation, a regular annual event.

Published in The Express Tribune, March 27^th, 2011.