Aviation sector records impressive growth

[Abbas Ali]

By Masood Anwar

KARACHI: As a result of the market strategy of all the private airlines that operate in Pakistan, the share of the PIA in the domestic market has been reduced by 15 to 50 per cent.

However, in terms of numbers of passengers there was no loss to PIA. In fact, this number increased by 10 per cent.

The cutthroat price war on the domestic aviation sector continues to be a sore point for private carriers. Operators of the private sector say that they did not initiate the war and in fact, Airblue has raised the lowest level of below Rs3,000 for its Karachi-Islamabad sector to Rs3,800.

There is also a mechanism for offering the seat at low rates, they explained. The Airblue is offering 15-20 per cent seats at 50 per cent while we are selling about 20 per cent seats at a premium of Rs300 to Rs500.

The offer of below cost fare by the private airlines in the country stunned aviation experts initially and they are apprehending "air pocket in the local aviation industry’s flight."

At the moment, when the fuel prices are touching an all-time high in the international market, cutthroat war between the private carriers placed the question about the feasibility of these airlines. Can they survive?

To save the national aviation industry, the Ministry of Defence deregulated the international air routes and allowed private airlines to operate on international routes to compete with the national flag carrier, Pakistan International Airlines (PIA).

The CAA and the Ministry of Defence together decided to take a U-turn on the national aviation policy that almost finished the monopoly of PIA on the Pakistani skies. A level-playing field means permission on the international routes that are being operated by PIA in a monopolistic way, as CAA defined the new term.

The opening of the new air routes to the private airlines gave them a beacon of hope. Seeing this as an opportunity to expand, Airblue entered into a deal with European aircraft maker, Airbus for the procurement of ten new aircraft. This was the biggest-ever deal for the procurement of aircraft in the Pakistani aviation industry.

The airline has finalised the deal to buy 320 and 330 versions of Airbus. At present, the airline’s fleet consists of three A-320 type aircraft. These aircraft were hired on dry lease by the airline to run its operations.

It was the biggest foreign investment in one go in the country and a direct result of the new policy of the government for the aviation industry.

Earlier, on the same front, PIA inked a deal with Boeing for the purchase of eight new B-777 planes in 2002.

The PIA Board of Directors approved in March 2002 a 10-year plan to replace and induct new aircraft in the PIA fleet with an outlay of $2 billion.

Although the deal of Airblue comparatively does not match the PIA deal in terms of value, however, in terms of number of aircraft, it is a significant step.

It also gives an edge to Airblue over PIA as the entire deal was struck by Airblue with its own resources. It found a financier without getting the government’s surety.

In contrast, the Export Import Bank of the US was the financier for the PIA deal but the government of Pakistan was the guarantor for the US bank. As a Special Purpose Vehicle (SPV), PIA has shifted its entire fleet to a paper company registered in Cayman Island and pledged for acquiring the new aircraft.

Moreover, foreign exchange of the country has also been pledged for B-777 planes. According to PIA’s approved fleet plan, three aircraft had been inducted in 2003, two will be inducted in 2006, three in 2008 and three in 2011. The PIA has also entered into a deal for the replacement of its Fokker fleet this year.

Source: The News

[raza]

What are these aircrafts due in 2011. Is there any confirmed orders