One of the sectors that has
benefited from Pakistans improving economics is
transport. The aviation industry grew by about 20 percent in
2005 and, while growth has been more subdued in 2006, its
still proving a good place to be.
Tariq Kirmani took over as chairman of Pakistan International
Airlines in 2005 after having been managing director of
Pakistan State Oil since 2001. He took on a carrier with a
mixed reputation internationally, an aging fleet, in a country
low on the world tourism agenda and with a rising fuel
The five year outlook is
pretty good, he says. We have a fleet renewal
program in place and an upgrade of the entire organization.
What were trying to do is work with our customers, our
passengers, which was missing in the past to some extent.
PIA now hedges up to 25 percent of its fuel costs but has only
recently developed this capacity, so was badly hit by the rise
in the oil price to $78 a barrel. It represents almost half of
the airlines operating costs.
The fleet renewal program is
timely; days before Institutional Investors interview,
the European Union banned four of the airlines Boeing
747s from flying there.
Basically its the
age, Kirmani says: some of them are more than 25 years
old. PIA will get nine new planes in the next six months, three
of them Boeing 777s, and within five years he wants the average
age of the fleet to be less than 10 years rather than 21
PIA faces much more competition
than it used to. Kirmani speaks of four competitors on the
western border (Emirates, Qatar Airways, Etihad and Gulf Air)
and four on its eastern side (Singapore Airlines, Cathay
Pacific, Malaysian Airlines and Thai Airways), and in addition
there are private sector competitors within Pakistan. In
any industry I enjoy competition, Kirmani says.
When you are competing you improve your operations and
start giving better service. He says PIAs market
share domestically has actually grown, from 66 to 69.3 percent
in the last year, and that its share of international flights
in and out of Pakistan has climbed from 48.5 to 50 percent.
But its a tough business.
A lot of people who are interested in the airline
business think there is a lot of glamour. When they open up the
airline there is less glamour and lots of losing