New airline prompts open skies debate

The arrival of a new Dubai-based airline in Pakistan has many asking whether the sky is big enough for competition. Established airlines once used to block competitors to protect their market share, but those days are long gone.

After low-cost airline flydubai’s first flight took off from Karachi last month, PIA employees held a protest at Jinnah International Airport to demonstrate against the government’s decision to approve the new entrant. One reason is that flydubai’s one-way fare from Karachi to Dubai is only Rs8,600 which is 25 per cent lower than the rate offered by airlines for the same route.

Despite this initial antipathy, Shahid Khaqan Abbasi, CEO of private airline Airblue, said that new airlines will actually benefit the market as there is huge demand. “You cannot stop anyone,” he said, “Times have changed now and you cannot block anyone, if you do someone will block you from going in their market.”

While Abbasi said he supported the open skies policy, PIA’s managing director said it would be detrimental for the market.

Managing Director of Pakistan International Airlines, Aijaz Haroon has expressed concern that its share of the local market would be threatened by international low-cost airlines. “Unlike Dubai, we cannot afford this policy,” he said “We disapprove open skies policy because Pakistan operates in different circumstance.”

Haroon said flydubai would serve as competition for private airlines in Pakistan rather than PIA that but did accept that the new carrier would hurt PIA to a certain extent.

Another PIA official said that the arrival of flydubai in country meant that the market share of PIA would also be hurt significantly.

As a public sector airline, PIA can not officially oppose the government’s policy of allowing new airlines into the country. “When private airlines are allowed to operate freely, your flag carrier will obviously feel the brunt of it,” the official said. He claimed that governments support their flag carriers but PIA has to compete.

But director general of the Civil Aviation Authority (CAA), Air Commodore (retd) Junaid Amin has supported the government’s move to allow more foreign airlines in Pakistan.

“More airlines mean more competition which is helpful for passengers who get good service at affordable rates. Competition will help all airlines in long run,” he said.

Amin said that in the summer passengers, especially those to Dubai would have to wait for 15-20 days as demand surpassed supply. He said the CAA has facilities to cater more airlines and welcomes more airlines to the country’s airports.

The Competition Commission of Pakistan (CCP) has also supported the government’s move to allow more airlines to start operations in Pakistan. CCP chairman Khalid Mirza said “We supported the idea of coming more airlines into Pakistan. It was not intended to support only flydubai, the support was intended for all airlines.”

He said that the whole idea is to increase competition among local airlines in Pakistan as more airlines foster competition leading to better services.

When airline officials launched flydubai in Karachi last week they said that there was no friction between them and the government as they have been allowed to start operations. The carrier also announced intentions to expand to other cities in Pakistan in the future.

Some aviation industry experts predict that airlines will be facing tougher times in the future as government intends to further liberalise the aviation industry.

Published in The Express Tribune, July 6^th, 2010.