Saturday, April 7, 2018

Why is PIA Losing Money Amid Air Travel Boom in Pakistan?

What is behind the domestic and international aviation boom in India and Pakistan? Why is Pakistan doing better than India in terms of international passenger growth while badly lagging in domestic air travel?

Passenger Aircraft at Karachi International Airport
What has happened to the global airline industry since the passage of the US Deregulation Act of 1978? Why did many big airlines of yesteryears die in spite of huge growth of air travel? How did so many upstart low-cost carriers succeed while state-owned airlines failed?

Why are the domestic air fares in Pakistan three times higher than those in India for similar distances? Why does state-owned PIA control two-thirds of Pakistan's domestic market? Why isn't there more competition on domestic routes in Pakistan?

Why are state-owned airlines, including PIA and Air India, losing a lot of money, requiring massive taxpayer subsidies and still performing poorly? Why aren't these airlines run more efficiently? Are PIA jobs used for political patronage? Why does PIA fly so many empty seats rather than cut fares to expand market?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/hh99nMnueBA




Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Air Travel Market

Pakistan $20 Billion Tourism Industry Booming

Saving PIA, Railways and Education in Pakistan

Pakistan: Political Patronage Trumps Public Policy

Riaz Haq's Youtube Channel

2 comments:

Riaz Haq said...

India tried to sell its national airline. It got zero bids

http://money.cnn.com/2018/05/31/investing/air-india-privatization-fails/index.html

India has failed to find a buyer for its ailing national airline.
Selling Air India was one of the government's economic priorities for this year, and the failure of the auction will dampen hopes that it could privatize other state-owned companies.

Bidding for the national carrier closed Thursday without a single prospective buyer coming forward.

"As informed by the transaction adviser, no response has been received for the expression of interest floated for the strategic disinvestment of Air India," the Indian Ministry of Civil Aviation said on its official Twitter account.

The government put Air India on the auction block last year, and was offering bidders the chance to buy 76%. It wants to scale back taxpayer support for an airline that has lost money for years.

The auction deadline had already been extended in the hope that a buyer may come forward. The future of the indebted carrier is now very uncertain.

"Further course of action will be decided appropriately," the ministry said in its tweet.

Air India declined to comment, referring the matter to the ministry. Aviation ministry officials did not respond to requests for comment.

Despite its losses, and growing competition from budget carriers such as SpiceJet and IndiGo, Air India is still a major player in an aviation market that is projected to be the world's third biggest by 2026.

Riaz Haq said...

With a population of 216 million, Pakistan is the world’s fifth-largest country, sandwiched in size between Indonesia and Brazil. It is also large geographically, with an area bigger than Turkey.

Since 2014, Pakistan’s GDP growth has averaged 4.7%, dragged down by less than 2% last year. The country’s average was the second-lowest in South Asia, with only Sri Lanka achieving lower growth. Bangladesh (7.2%) and India (7.0%) performed strongly.

In 2019, total seats to, from, and within Pakistan amounted to 24.1 million, up by 53% – or 7.4 million – over 2010, data from OAG indicates.



https://www.anna.aero/2020/07/31/pakistans-international-seats-68-since-2010-domestic-seats-population-lower-than-bangladesh/


Despite 7.4 million seats added since 2010, Pakistan’s capacity was down nearly 8% YOY in 2019, with a loss of two million seats.

This decline was the result of a myriad of things, including the country’s struggling economic performance, PIA’s ongoing major problems, and the end of Shaheen Air in late 2018.

Shaheen Air was Pakistan’s third-largest operator in 2018, down from number-two in 2017, mainly as it ceased operating before the end of the year.

The rise of SereneAir, which launched in 2017, has not been sufficient, with this carrier operating nine domestic routes with a fleet of just four B737-800s.

Last year was in many ways extraordinary, so perhaps not too much attention should be paid to it.

Pakistan’s international market increased by 68% between 2010 and 2019, with over eight million seats added.

Pakistan’s own airlines were flat in 2019 versus 2010, with their share falling from 52% to 31% – the lowest in many years.

This decline, eliminating the growth from 2014-2017, was partly from Shaheen Air’s cessation. In 2018, over seven in ten of Shaheen Air’s seats were deployed internationally, mainly to the core Pakistan markets of the UAE and Saudi Arabia.

Nor was it assisted by PIA’s international seats falling by over 800,000 – hopefully partly from it attempting to focus on profitable and marginal routes that could be improved.

PIA’s ban from the EU this year will obviously not help, with one-quarter of the operator’s international capacity to/from Europe. It has just been announced that its UK services will resume in August.

Meanwhile, foreign airlines have inevitably strengthened their offerings, with their seats growing by 137% since 2010 – up over eight million. Foreign airlines were solely responsible for the country’s international growth in this period, with Saudia, Emirates, Qatar Airways, flydubai, and Air Arabia growing the most.

Saudia, which was already Pakistan’s leading airline at the start of the decade, added the most seats of all foreign airlines, cementing its position. Saudia had 14 routes to five Pakistani airports last year; with 555,000 seats, Jeddah – Lahore was its top route.

Like South Asia generally, Pakistan is the bread-and-butter of the MEB3: Emirates, Qatar Airways, and Etihad.

Collectively, the MEB3 had 4.8 million seats to/from Pakistan last year, up by nearly three million since 2010.

Perhaps surprisingly, the MEB3 had ‘only’ 24% of total international seats last year, while their share of capacity by foreign airlines was unchanged at 35%. This was from reducing capacity in more recent years.