Airblue to add four Airbus 321s to fleet

Published: November 6, 2015
Email
Encouraged by tax waiver, company decides to expand. PHOTO: FILE

Encouraged by tax waiver, company decides to expand. PHOTO: FILE

KARACHI: Encouraged by a tax waiver, private carrier Airblue has decided to add four Airbus 321s to its fleet over the next few months, according to officials.

The announcement was communicated to Prime Minister’s Special Assistant on Aviation Shujaat Azeem in a recent meeting held to review the progress on the new aviation policy.

China completes production of own passenger plane

“We are pushing airlines to invest and expand operations,” said Azeem, adding that it was the best time to make the most out of the new aviation policy while the fuel price was down.

The National Aviation Policy 2015 introduced earlier this year has further liberalised air space by encouraging investment in the airline industry and its auxiliary operations.

The reduction in taxes and duties on the import of aircraft and their spare parts has been the highlight of the recent aviation policy that earlier used to blot up the cost by as much as 35%.

Despite the incentives offered, except Pakistan International Airlines (PIA), which leased 15 aircraft in the last two years on the back of government support, other airlines have been reluctant to invest aggressively.

New Airbus design stacks passengers on top of each other

“The aviation policy is a step in the right direction, especially with its focus on taxing revenue instead of investment,” said Airblue Managing Director Junaid Khan.

It is time for the Ministry of Finance to realise that taxing domestic airfare heavily will result in a retarded growth for the industry.

“Taxes make up around 30% to 35% of domestic airfare,” noted Khan. “This shouldn’t be more than 4% to 5%.”

Pakistan’s passenger traffic has been stagnant for the past couple of years, making some of the officials at the Civil Aviation Authority (CAA) sceptical about the incentive-led growth model.

PIA to lease seven new jets, expand fleet

“Change won’t come overnight,” added Khan. “For argument’s sake, I would relate our situation to that of the telecom industry. Who would have conceived 20 years ago that even a milkman would be carrying a mobile phone?”

“Similarly, people need to travel; our job is to only make it affordable.”

However, domestic airline history is replete with failures.

Pakistan adopted an ‘Open Skies’ policy in the 1990s, allowing competition on domestic routes and giving broader access to foreign airlines.

Chinese firms sign deal to buy 300 Boeing planes: Xinhua

More than 20 licences were issued to airliners but none except Shaheen Air survived. Aero Asia, Bhoja Air and others succumbed to financial troubles.

Air Indus, the youngest of the four domestic airlines, is also struggling to revive its operation after running into problems with the CAA over its inability to lease jets.

A capital-intensive business, airlines are often run and sponsored by people who do it more for the charm and prestige of it than its return on capital, which takes years to come.

The risk-averse nature of Pakistani banks has not helped the airlines either. A narrow-body jet is leased for around $50 million.

Aviation advisor Shujaat Azeem says he has decided to take on this challenge and has called up a meeting with top bankers to have their opinion on the matter.

Published in The Express Tribune, November 6th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (9)

  • Blue Eyed
    Nov 6, 2015 - 9:34AM

    Addendum: “Shahid Khaqan Abbasi, Federal Minister of Petroleum and Natural Resources, long held the position of CEO Air Blue before his current incumbency”Recommend

  • Curious
    Nov 6, 2015 - 11:27AM

    @Blue Eyed:
    Shahid Khaqan Abbassi owns AirBlue. While SNGC and SSGC are going bankrupt his business is on the rise. He is the minister in charge.Recommend

  • Adnan Siddiqi
    Nov 6, 2015 - 1:47PM

    @Curious:

    He is the minister in-charge of Petroleum and Natural Resources. What does it have to do with aviation or if SNGC and SSGC are going bankrupt? Besides, a level playing field has been given to whoever wants to startup an airline and no one is stopping PIA and Shaheen to jack up their business. He is an entrepreneur and a fully qualified pilot. If he cannot run a business in Pakistan he knows best to run, what else is he suppose to do?Recommend

  • pak47
    Nov 6, 2015 - 1:55PM

    @Blue Eyed Shahid Abbasi is not the owner. Just digest the fact that he was an ex worker just like he was in PIA in the 90s. He left his job with Airblue when he became elected as an MNA. Moreover just so you know, Airblue in the past 2 years had terminated many destinations and returned many aircrafts to lease companies. Its still in no competition with Shaheen Air or as a matter of fact with PIA.Recommend

  • Blue Eyed
    Nov 6, 2015 - 2:18PM

    @Curious @Adnan Siddiqi @pak: Thanks for the responses. Only wanted to highlight a relevant fact which should have been part of this story, imo.
    @pak47: FYI, Abbasi, has got “options” in Air Blue which makes him an indirect owner. I know this firsthand. The owner of Air Blue is a close friend of Abbasi, actually a colleague. They both formed the airline as a startup which is no less than a success story. Personally, I am an admirer of Abbasi and consider him among the better of the lot, however, it does not overshadow the “Conflict of Interest” aspect. Further, you may also like to know that his father worked as MD PIA in the past as well!Recommend

  • Adnan Siddiqi
    Nov 6, 2015 - 3:26PM

    @Blue Eyed:

    Dear Sir, Shahid Khaqan’s father was a retired PAF officer who after retirement from the service joined politics and was a minister in Zia ul Haq cabinet. Furthermore, it was Shahid Khaqan Abbasi himself and not his father who was MD PIA during Nawaz Sharif’s second government between 1997-1999. Your point about “Conflict of Interest” aspect is still debatable since he is does not look after aviation sector of the country.Recommend

  • Blue Eyed
    Nov 6, 2015 - 4:27PM

    @Adnan Siddiqi: Thanks for the correction. It was indeed him and not his father – my faulty memory! Recommend

  • Shakil Ahmed Khan
    Nov 6, 2015 - 7:19PM

    Last time he created own airline out of PIA kickbacks and at its cost! now LNG and all the mega petroleum ministry kickbacks going all well for Mr Khaqan Abbasi!

    This is the reason they come to power! While PIA dwindling down, Air Blue is taking off! Recommend

  • SNKN
    Nov 6, 2015 - 7:48PM

    Gents, Abbassi or whoever else! Pakistan domestic demand remains strong despite higher ticket prices… We need a lot more capacity to handle demand… I hope all the four Pakistani owned airlines take advantage of the liberalized policy window to ramp up with new planes.

    On top of this, GCC airlines are experiencing high demand to And fro Pakistan – Emirates, Qatar Airways, Etihad, Saudia, Gulf Air, Oman Air, Fly Dubai and Air Arabia… even to their newly added destinations like Sialkot, Faisalabad, Multan and Quetta.

    Our airlines need both domestic and int’l routes to truly become viable.Recommend

More in Business