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Thursday July 18, 2024

PCAA defends Air Arabia’s entering local market but experts dissent

There is little clarity on what role Air Arabia would play in Fly Jinnah operations in Pakistan

By Bilal Hussain
February 15, 2022
PIA CEO Arshad Malik has written two letters to Prime Minister Imran Khan apprising him of concerns of domestic airlines.
PIA CEO Arshad Malik has written two letters to Prime Minister Imran Khan apprising him of concerns of domestic airlines.

KARACHI: Pakistan Civil Aviation Authority (PCCA) has championed allowing Air Arabia to set up Fly Jinnah, an airline, in collaboration with Pakistan’s Lakson Group, while local stakeholders disputed the move as being against the core interests of domestic aviation industry on top of being controversial, The News has learnt.

This decision will allow a foreign airline to unfairly increase international frequency and slots, infringing on the market share of domestic peers, something no other country would ever allow, according to industry officials.

They alleged local aviation authorities were always willing to bend rules to entertain foreign airlines, especially the ones from Middle East, for reasons better known to them only. Nehal Akbar, a commercial aviation expert with a 40 years’ experience, said Air Arabia’s stakes in Fly Jinnah would be an interference in domestic market.

“This normally doesn’t happen elsewhere. Pakistan goes out of the way to accommodate foreign airlines especially from the Middle East.” He said it wasn’t the first time Pakistan had given access to Middle East airlines to more Pakistani destinations as compared to local airlines.

“For instance Qatar only has one city to offer to Pakistan but we have allowed them five. Despite earning from Pakistan, those airlines don’t pay any taxes here. Giving them more access (frequencies and slots) than local players is certainly not in Pakistan’ favour,” Akbar added.

A source in the aviation industry said foreign airlines had remitted $5.7 billion from Pakistan last year. He said there was little clarity on what role Air Arabia would play in Fly Jinnah operations in Pakistan, but it was suspected it would definitely meddle into Fly Jinnah’s affairs for its own benefit, hurting local airlines interests.

Another source said Air Arabia was using the local partner to unduly increase its frequency and slots and also access domestic market. 

Arshad Malik, CEO Pakistan International Airline (PIA), has written two letters to the prime minister – one in December 2021 on the behest of all the domestic airlines, which share similar concerns, and second in January of 2022.

In the letters, the PIA has sought a meeting with Prime Minister Imran Khan and concerned quarters, on behalf of all the domestic airlines, to block the upcoming operations of Fly Jinnah, a joint-venture by the UAE’s Air Arabia Group and a Pakistani business conglomerates.

“The request for the foreign carrier to get more frequencies to Pakistan, is contrary to the devised spirit of the National Aviation Policy (NAP) 2019, which requires reciprocity and organic market growth to warrant increase in capacity,” Abdullah Hafeez Khan, a spokesperson of the PIA, said.

“The reciprocity for Pakistani carriers is often blocked by either not providing slots or they are allotted for really unfavourable timings. By acquiring a domestic airline to get these capacities, is circumventing the prevalent policies, which may be termed as smart play, but technically against the NAP 2019.”

He said the respective carrier put these requests with immense diplomatic pressure but they were blocked with the support of the Government of Pakistan, as they did not make any logical sense in wake of negative market growth consequent to Covid-19 pandemic and subsequent travel restrictions.

“As per IATA reports, the 2019 traffic levels won’t be achieved till the end of 2023, hence any increase in frequencies more than 2019 level at this juncture cannot be justified," Khan explained.

He said foreign carriers’ domestic operations are termed as 'Cabotage' in technical aviation terms and are not allowed even in the most liberal countries being against their national interests.

However, a PCCA official said allowing Air Arabia to invest in Pakistan would help bring foreign direct investment, increase competition, bring ticket fares down, and improve service.

“We are not against creating competition, as competition brings improvements in products and develops the industry; however, the competition has to be fair, in a level playing field,” PIA’s spokesperson said.

Khan said the prevalent conditions were strangulating the growth of domestic aviation industry, which had not seen any significant new truly domestic players to come and operate to serve a large country of 220 million people.

“In the upcoming airline operator Fly Jinnah, Lakson Group is a majority stakeholder and thus the airline is a local player in country's aviation sector and will be a Pakistani national air carrier,” the CAA spokesperson said. “The impression that local routes are being doled out to a foreign airline is not accurate,” he said adding, “The country's civil aviation policy and applicable regulations allow it and it is in line with the national foreign direct investment policy as well”. He said the local group had majority shareholding in the joint venture (Fly Jinnah); however, he declined to share accurate shareholding of the two groups.