Aviation industry is one of the most distinctive industry which is termed as “Global”, connecting people, facilitating businesses and pursuing/encouraging cultural diversity. People linked with this industry are devoted employees who speak high of their departments and inform people about the economic and social benefits of this industry. All stakeholders can enjoy the maximum benefits of air transport by working together for the single cause of supporting the sustainable growth of the aviation industry by expanding its reach to more people, more routes and more number of flights.
Aviation industry has become an indispensable means of transport after experiencing weathered crisis and demonstrated long term resilience. The Pakistan Aviation Industry started with Orient Airways which was founded on 23 October 1946. Its first operations was commenced on June 4, 1947 and it stopped its operations on March 11, 1955 and merged into Pakistan International Airline Corporation to become the national flag carrier of Pakistan called Pakistan International Airline (PIA). PIA is the 16th largest Airline in Asia operating scheduled services to 73 destinations throughout Asia, the Middle East, Europe & North America, as well as an extensive domestic network linking 24 destinations. There are approximately 151 airfields in Pakistan. Aviation Industry is comprised of 13 International, 36 Domestic and 19 Military Airports whereas 2 airports have been closed one in Sahiwal and other in Islamabad.
| Categories Of Bases | Names Of International Bases |
|---|---|
| Primary Bases | Islamabad International Airport- Islamabad |
| Jinnah International Airport- Karachi | |
| Allama Iqbal International Airport- Lahore | |
| Secondary Bases | Peshawar International Airport |
| Faisalabad | |
| Quetta | |
| Multan | |
| Sialkot | |
| Gwadar | |
| Rahimyar Khan | |
| Turbat | |
| D.G. Khan | |
| Skardu |
Most of the airports are public, few are public/private and some are Military/Public partnership. Most of the Civil Airports are operated and looked after by the Civil Aviation Authority. Sialkot is the first Airport which is privately owned airport in Pakistan & South Asia. This airport is used for domestic and international flights. Sialkot Airport is owned and operated by Sialkot Chambers of Commerce & Industry. Military Airbases are under the command of Pakistan Airforce, only two Military Airports of Dhamial and Tarbela are managed by the Army.
Transport has an indispensable role in economic activity as reported in Economic Survey of Pakistan. Without physical access to resources and markets, economic growth and development would not be possible. An effective transport system is, therefore, a fundamental element in enabling sustainable economic development as it helps in promoting the use of natural resources, mobility of labor force and increasing agricultural and industrial production. Transport is also essential for providing access to supply chains and basic public services such as health and education. Removal of physical and non-physical barriers to effective transportation, therefore, has a direct impact on economic and social development of a country. Besides its role in economic development, modern and effective transport infrastructure and services, enabling smooth flow of goods and services within and across international borders, is key for strengthening regional economic cooperation and integration.
In Pakistan there are total 151 airports with 0.68 per 1 mio inhabitants and 0.19 per km2 whereas in Asia there are 4,349 airports with 0.94 per 1 mio inhabitants and 0.000 per km2. For the 21 biggest airports in Pakistan, Alone at Jinnah International Airport operate 20 airlines to and from 36 destinations.
There are three ways to look at the impact of Aviation Industry on Pakistan’s Economy: the Employment Opportunities and Revenue generated by Airlines and their Supply Chains, Trade Flow and Investment from all Airlines users who are serving the country and the connections which make this flow possible in various geographical regions of the country.
Almost 56,000 people in Pakistan are employed by Airlines, airport operators, airport onside enterprise, restaurants and retail, aircraft manufacturers and air navigation service providers. Another 121,000 people who are buying goods and services from local suppliers get jobs through this Air Sector. People who are getting wages from Airlines spend their money on purchase of consumer goods and generate employment of 70,000 from whom they are buying their products. Similarly foreign tourists coming to Pakistan and spending money to buy different goods also spend 253,000 jobs. In aggregate 500 thousand jobs are created by the Air Industry. Air Industry supports US$2 billion of GDP in Pakistan. Foreign Tourists add US $1.3 billion of the country’s GDP, total US $ 3.3 billion are added to GDP of Pakistan.
The spending of foreign tourists and exports value together enhance the value of passengers, shippers and the economy. Air transport connections stimulate an important economic key between Foreign Direct Investment, create productive asset to generate long-term flow of GDP.
Air transport connects cities and this interlinkages and virtual bridging in the air shows the economic flow of goods, investment, people and ideas that are the fundamental drivers of economic growth.
The map shows Pakistan’s connectivity with different regions of the world and its evolution. Pakistan’s passenger facilitation (1.6/10) scores below the average of Asia Pacific (4.4/10) score. Pakistan‘s facilitation of air cargo as per regulation is marked as 67th/124 countries in terms of the Air Trade Facilitation Index (ATFI).
PIAC has opted strategy to revamp its operation during the current FY 2021 as reported in Economic Survey of Pakistan. Due to COVID-19 most of the scheduled flights in the country were suspended declining revenue by PKR 82.6 billion. However, special flights were scheduled during Pandemic to facilitate stranded Pakistanis abroad. It resulted into enhancement of ancillary revenues throughout advance booking for bulkhead seats, pre-allocation of seats, advance excess baggage. Network optimization e.g. code share alliance to expand network. Focus on enhancement of Cargo & Charter Operations; capacity rationalization; Improvement in Customer Services(punctuality and regulating of flights, air craft cleanliness and food quality); Improvement in air crew flight rosters; Enhancing brand perception; Reconciling and rescheduling loans; Better governance and focus on discipline through Time Management system; Increasing maximum limit of take-off weight; Restructuring through Voluntary Separation Scheme (VSS); Reducing Salaries for 6 months with a resultant saving of Rupees 770 million.
Major players are Pakistan International Airline (PIA), Air Blue and Shaheen International Airline. Other companions are Air Indus, Askari Air Pakistan, ASSL (Aircraft Sales and Services (Pvt) Limited, Serene Air and Star Air Aviation.
IATA (International Air Transport Association) has forecasted that Pakistan’s Domestic Aviation Industry will grow at least 9.5 per cent per year whereas the world annual growth rate will be 4 percent over the next 20 years.
The Gwadar Port Project (CPEC) is expected to have deep effects on the growth of Air Transport and Cival Aviation sector of the country would show increase in number of passengers, cargo activities and flights. Government had also planned for a development project to improve infrastructure of Civil Aviation Authority.
| SWOT Analysis of Aviation Industry of Pakistan – 2021 | |||
|---|---|---|---|
| Strengths | Weaknesses | ||
| 1 | Highest share in domestic network. Leading market position. | 1 | Lack of integrated brand promotion as compare to competition. |
| 2 | Strong Brand Image. | 2 | Old aging fleet causing higher operating cost |
| 3 | Subsidized fares | 3 | Loyalty programs not being used to the fullest. |
| 4 | Network presence | 4 | Gaps in the marketing Department. |
| 5 | Superior operating structure | 5 | Concerns with an aircraft. |
| 6 | Strategic location of main hub of Karachi | 6 | Attrition rate of work force. |
| 7 | Wide ranging routes. | 7 | Financial Status / Debt. |
| 8 | Reward Program | 8 | Worse Government Rules. |
| 9 | Air Passenger Rights | 9 | Reliance on Oil prices. |
| 10 | Conditions of carriages. | ||
| 11 | Effective use of Technology | ||
| 12 | Traveler’s information. Track your cargo. | ||
| Opportunities | Threats | ||
| 1 | PIA has largest Domestic network through which it can generate huge amount of revenue and profit. | 1 | High interest rates announced by State Bank of Pakistan causing inflation. |
| 2 | Subsidized fares of main Airlines give competitive edge over others. | 2 | Negative Perception about the country regarding Terrorism. |
| 3 | Introduction of proper Loyalty programs can lead to increased customer Loyalty. | 3 | Political instability and rapid change in rules and regulation does not allow the industry to expand its reach. |
| 4 | Expanding its social media marketing. | 4 | The competitors adopt varying branding strategies which dilute the image of the main Airline Globally. |
| 5 | Maintenance | 5 | Competition in the market. |
| 6 | Millennials. | 6 | Fluctuation in the exchange rates. |
| 7 | Shifting Customer needs. | ||
| 8 | Industry Recovery | ||
| 9 | Growing demands for low cost industries. | ||
| 10 | Having the maximum routes and fleets. | ||
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| PEST Analysis of Air Industry-2021 | |||
|---|---|---|---|
| Political Analysis | Economic Analysis | ||
| 1 | Airline Industry operates in a highly government regulated system and has strong political influence, where passengers are favored over Airlines. | 1 | The 9/11 attack left the major impact on the Air Industry and it is yet to be recovered. |
| 2 | If there is more competition in the Industry and regulations in demand, passengers can push the prices down. | 2 | The prolonged recession, fluctuations in oil prices, an imminent global slowdown, COVID-19 pandemic are the other debilitating factors that are affecting the growth of the airline industry. |
| 3 | Passenger safety is paramount & political Establishment have been made weary of the airlines and airlines have to follow strict regulations for their operations. | 3 | Low cost Airlines, declining passengers, Labor demands, high fuel prices and soaring operating and maintenance costs are also big hurdles in the growth path of Airline industry. |
| 4 | Airline Industries work under Monopoly – Oligopoly. | 4 | Airline Accidents and aircraft disappearance in Malaysia are also affecting the global Airline Industry. |
| 5 | Political stability of the government gives positive signal to the investors and investment is initiated in the form of purchase of new aircrafts and latest technology. | 5 | |
| Social Analysis | Technological Analysis | ||
| 1 | The Millennial generation emerging into consumer class has changed the social norms of the societies and now people are more demanding. | 1 | Latest technology should be used in the gadgets to decrease cost and increase efficiency of flights. |
| 2 | Hajj attracts more people. | 2 | Since the demands of the passengers are changing so there is a need to focus on inflight entertainment. |
| 3 | To meet this increasing demand Airlines have to stabilize this cost. | 3 | Aircrafts Safety and Security system also demands improvement in technology to avoid air crashes and loss of human life. |
| 4 | Customers are more aware of market conditions and want to get best value of their money. They spend time and money for the inflight entertainment system. | 4 | Airports have provided mobile charging facilities for all brands of cell phones. |
| 5 | Passenger’s profile has become more economically minded passengers. | 5 | Vending machine for snacks and drinks has been installed at airports for the convenience of people. |
| 6 | Due to improved technological access and high speed internet, business class passengers have switched to online meetings and it has decreased demand for flights | ||
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| Conclusion of PEST Analysis:These four factors are affecting external macro environment of this industry. We conclude from the above detail of factors that increased cost of doing business, strict government regulations imposed by the regulators, competition from low cost Airlines, Changes in passenger’s profiles and recent air line’s related death have affected the viability and profitability of the Global Airline Industry. A lot of patience and hard work is required to bring the Air Industry on its right track. |
Aviation provides the only speedy transportation network which makes the global businesses more connected and accessible. In this way Aviation industry is helping businesses by generating Economic Growth, creates employment opportunities and facilitates trade and tourism. The total economic impact (direct, indirect, induced and tourism connected) is significant. There are many direct jobs which are created by Aviation Industry like air Navigation services providers and airport staff. The civil aerospace sector (the manufacture of aircraft, systems and engines) also employ many people, the intrinsic value that the speed and connectivity of air travel periods or domestic tourism and trade, including this would increase the employment and global economic impact numbers several folds.
One of the emerging industry which relies on Aviation is Tourism Industry. By facilitating tourism industry Air transport is helping in generating economic growth and alleviates poverty. Half of the tourists entering in the borders of any country travel through Air transport and generate millions of jobs in tourism sector and contribute to Global GDP.
Air transport has become the driver of global trade and e-commerce, allowing globalization of production. The small volumes of air cargo amount to big values in world trade. Aviation’s advantage over other modes of transport in terms of speed and reliability has contributed to the market for “same day” and “next day” delivery services and transportation of urgent or time-sensitive goods. Some 87 percent of business to consumer (B2C) e-commerce parcels are carried by air. The e-commerce share of scheduled international mail tonne kilometers (MTKs) grew from 16 percent to 83 percent between 2010 and 2016 and is estimated to grow to 91 percent by 2025.
Aviation Industry is the best global transportation network to strengthen global business and tourism. It is playing the important role of catalyst in economic growth of developing countries. Almost 2 billion passengers annually travel through Air transport and 40 percent of inter – regional exports of goods (by value) takes place. It has been observed that almost 40 percent of tourists travel by air. Air transport is generating 29 million jobs globally through direct, indirect, induced and catalytic impact. It is estimated at US $ 2,960 billion equivalent to 8 percent of world Gross Domestic Product (GDP).
In comparison to rail and road transportation, Aviation Industry is using resources and infrastructure very efficiently. Air transport has high occupancy rate of 65 to 70 percent. Unlike rail or road, Air transport covers its infrastructure costs and is a net contributor in the treasury of government and brings handsome amount as taxation. Modern Aircrafts have fuel efficiency of 3.5 litres per 100 passengers- kilometer or 65 passenger miles per US gallon. The next generation Air transport are targeting less than 3 litres per 100 passengers or 78 passenger miles per US gallon.
Air Industry is a major employer and is generating 29 million jobs globally, 5.0 million direct jobs, 5.8 million indirect jobs, 2.7 million induced jobs and 15.5 million direct and indirect jobs.
As Air Industry’s capital intensive business so productivity per worker is very high. It is 3 and a half times more than average of other industries.
Aviation Industry is changing the quality of life and broadening people’s vision of leisure, entertainment and culture. Aviation Industry is providing a wide choice of holiday destinations and an affordable means to visit distant places to meet friends and relatives.
Tourism is promoted through Air Transport as it improves living standard and alleviates poverty. It is the only means of transportation in remote areas. Air transport adds revenue through taxation. Air transport helps in delivering emergency medical facilities and humanitarian aid relief payments anywhere on the earth.
The COVID-19 pandemic has divided the industry into three realities. Cargo markets have gained ground on pre-crisis volumes. This attests to the vital role of air cargo in transporting lifesaving medical equipment, PPE, and vaccines along with delivery of e-commerce during the lockdown periods. Domestic passenger markets have recovered to within 20% of pre-crisis levels. This shows that the appetite to fly has not been lost. When restrictions are removed, people want and need to connect. And they do it by plane. International travel, however, stands at just about a quarter of 2019 levels. Demand will not come back until borders reopen and government-imposed travel restrictions are removed.
The pandemic has made the value of aviation clear. Face-to-face meetings, vacations, reunions, and the basic freedom of movement are just some of the things that we have all missed.
Although global activities of manufacturing have increased but due to travel restrictions, passenger’s traffic is recovering slowly especially for international flights. Industry wide revenue passenger kilometers (RPKs) remained down to 64.5% during January 2021 to July 2021. The same when compared with the same period in pre-crisis during year 2019.
Cargo demand has rebounded because even during COVID-19 it was used to deliver medicines, vaccines and trade of goods and services. The strong upward trend in air cargo traffic observed in the second half of 2020 has continued into 2021. Cargo tonne kilometers (CTKs) from January 2021 to July 2021 were 7.9% above the same period in 2019.
Airline Financials are improving with the increase in revenue from domestic flights and cargo but are still in negative. Overall operating revenues for the air transport industry have declined more than 60% in the second quarter of 2021 compared with second quarter of 2019.
Air transport in Pakistan is expected to rise by 184% as per forecast of IATA in the next 20 years under the “current trends”. By 2038, a load of an additional 22.8 million passengers is estimated to increase. If these forecasted targets are met successfully then the resultant share of Air Industry in GDP will be $9.3 billion and around 786,300 people will get employment.