In 2018, Aviation industry experiences highs and lows

British Airways announces return after 10 years; SAI shuts down; PIA losses mount

Usman Hanif January 02, 2019
Towards the end of the year, AirSial, which had applied for a flying licence, won assurances from PM Imran Khan and it is expected to begin operations shortly. PHOTO: FILE

KARACHI: The outgoing calendar year proved to be a game changer in the area of aviation. During the past 12 months, the sector saw some highs and lows.

A welcome surprise was the return of British Airways to Pakistan after a hiatus of 10 years. The major international airline is set to recommence operations from June 2, 2019 and will fly thrice a week on the London-Islamabad route.

Earlier, the air carrier halted flights to Pakistan following the 2008 Marriot hotel bombing - one of the deadliest attacks in the capital.

Britain is home to more than a million expatriate Pakistanis and their sheer number suggests that British Airways has taken a business-friendly decision by resuming flights to Pakistan.

However, it will lead to more challenges for the loss-making Pakistan International Airlines (PIA). Islamabad-London is one of the most important routes for the national flag carrier. Separately, the aviation industry received a setback when domestic air carrier Shaheen Air International (SAI) caved in to the tough competitive environment and stopped flying due to mounting dues.

SAI, ranked the second largest national carrier due to its fleet of 16 aircraft, shut down completely and laid off hundreds of employees.

SAI had defaulted on payment of Rs1.4 billion to the Civil Aviation Authority (CAA) and Rs1.6 billion to the Federal Board of Revenue (FBR). “The CAA has filed a recovery suit in the Sindh High Court in accordance with the law,” stated a CAA spokesperson. Initially, SAI appealed to the authorities to give the airline sufficient time to clear its outstanding bills and sought permission to restart operations, but things went from bad to worse.

Later, rumours started doing rounds in the industry that a Saudi Prince had expressed interest in taking over the troubled private airline by injecting equity and SAI would soon become operational.

After SAI’s founder Khalid M Sehbai passed away in 2013, his sons took charge of the airline. Kashif Sehbai, then 34, was appointed chairman and his younger brother Ehsan Khalid Sehbai, then 31, was appointed CEO.

Although the brothers announced that they would continue to work on their father’s vision of expanding the airline, the younger generation soon became locked in a dispute with the old management and ended up accumulating debts of over Rs5 billion.

Meanwhile, the CAA decided to transform its open sky policy into an open and fair sky policy - a longstanding demand of the domestic airlines that has been facing stiff competition from foreign carriers.

In late November, the CAA announced that it would amend the 2015 open sky policy after acknowledging various flaws. The regulator agreed to constitute a committee for coming up with recommendations, but no further progress could be made by the close of the year.

Pakistan’s aviation market is limited but still it is growing at a swift pace, hence, airlines find it attractive but at the same time they also face challenges.

CAA revenues

The CAA collected around Rs60 billion in revenues in 2018 but corruption-related news continued to emerge about the newly built Islamabad International Airport. On one occasion, a boarding bridge collapsed at the new airport, prompting the CAA to constitute a board for investigation. Members of the board recommended that outsourcing of various airport services should be halted and suggested direct regular hiring in core areas.

During the year, the International Air Transport Association (IATA) forecast that Pakistan’s air traffic would grow in double digits but domestic traffic rose merely 3%. However, the international traffic widened 6% to 14.6 million passengers.

Four new players - Askari Air, Go Green, Liberty Air and Afeef Zara Airways - had applied for airline licences long ago but by the close of the calendar year no news emerged about their entry into the market. Experts are of the view that the upcoming airlines are wary of the market situation which is worsening day by day.

Towards the end of the year, AirSial, which had also applied for a flying licence, won assurances from Prime Minister Imran Khan and it was expected to begin operations shortly. Askari Air, on the other hand, is also expected to enter the aviation market in not too distant a future.

In the outgoing year, state-owned PIA, as usual, put more burden on the government. In mid-May, then prime minister Shahid Khaqan Abbasi, while heading an Economic Coordination Committee (ECC) meeting, approved a Rs20-billion bailout to aid the airline in the overhaul of aircraft engines. PIA has so far accumulated losses of about Rs400 billion. Moreover, in first meeting under the current PTI-led government, the Privatisation Commission board decided to strike PIA off the list of enterprises planned to be privatised.

Published in The Express Tribune, January 2nd, 2019.

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BrainBro | 2 years ago | Reply Privatize or shut down PIA. That's the only way forward.
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