Report calls for major overhaul in Pakistan’s aviation industry
Pakistan’s civil
aviation industry is facing growing economic challenges, structural weaknesses,
and an uneven competitive landscape that threaten the long-term sustainability
of domestic airlines, according to feedback gathered in a new market assessment
by the Competition Commission of Pakistan
(CCP).
The report, based on consultations with
airlines, travel agents, and other industry stakeholders, indicates that local
carriers are struggling with high taxes, currency fluctuations, and costly
financing while competing with foreign airlines that benefit from strong
financial backing and subsidies.
Domestic airlines informed the CCP that
roughly 60–70% of their operating expenses are linked to the US dollar,
including fuel, aircraft leasing, maintenance, and pilot salaries. As a result,
any depreciation of the Pakistani rupee significantly increases operational
costs.
Read More Risks
and challenges to modern aviation: A perspective from Pakistan
Industry representatives also highlighted a heavy domestic tax burden. Airlines pay approximately 18% sales tax on aviation fuel and related services, and taxes can account for as much as 70% of the cost of certain international tickets. Stakeholders argue that foreign carriers operating in Pakistan do not face comparable domestic taxes, creating what they describe as an uneven competitive environment.
Another major concern is limited and expensive
access to financing. Airlines report borrowing costs in Pakistan of 13–14%,
compared with 2–3% in many global markets. Considering that airline profit
margins worldwide typically average only 3–4%, industry players say such high
interest rates make fleet expansion and long-term investments extremely
difficult.
Local carriers also pointed to intense
competition from major Middle Eastern airlines, including Emirates and Qatar
Airways, which benefit from subsidies, lower taxes, and extensive international
hub networks. Domestic airlines claim these carriers can operate flights to
Pakistan at minimal profit margins in order to channel passengers through their
global hubs.
Read More Collective
action urged for sustainable aviation in Pakistan
Travel agents participating in the study
raised concerns about discriminatory pricing practices, saying airlines often
offer lower fares and special deals through their own websites or corporate
agreements. This approach bypasses traditional travel agencies and reduces
their commission margins.
The report also notes that Pakistan’s aviation demand is largely driven by labour migration
and religious travel, rather than tourism. This results in
lower-yield passenger traffic, which further constrains airline profitability.
Operational issues at airports were also cited as barriers to efficiency. Stakeholders pointed to outdated baggage handling systems, insufficient check-in counters, and bottlenecks in ground-handling services that affect both service quality and operational performance.
Read More Reforms
urged to modernize Pakistan’s aviation industry
To address these challenges, industry participants recommended reducing aviation-related taxes, improving financing access, upgrading airport infrastructure, and formulating a unified national aviation strategy that integrates airlines, airports, and tourism development to enhance the sector’s competitiveness.
Source: Business Recorder