Air fare war may extend to international routes

The fare war virus, injected by the national carrier Pakistan International Airlines (PIA) in the domestic market by suddenly reducing fares on domestic routes recently, may spread on international routes as well, according to indications available here.
Never before in the history of Pakistan, aviation fare-war had taken place amongst airlines prior to the PIA's move, which had a major impact on all operating airlines on the domestic routes, severely affecting their revenues. This sudden reduction brought panic in the market.
The Ministry of Defence and the Civil Aviation Authority (CAA) considered such practice as a predatory tactic and lost no time in taking serious notice of the issue. They were convinced that all the airlines were operating below their operating cost, which was unhealthy trend for the growth of aviation in Pakistan.
The glib talking among the private carriers, the PIA and the ministry officials, however, did result in the dust to settle down.
According to aviation circles, all the blame cannot be shoved to the PIA because when the Air Blue commenced its operations, it substantially reduced its fares upto 50 percent on the domestic routes to establish itself in the market. This was followed by raising agents' commission to 15 percent and above.
Since the airline had limited operations, it did not have a major impact on the market. But the other airlines quickly picked up on this trend and started reducing fares to safeguard their share in the market.
It is feared that after liberalisation of the government policy to award additional international routes to Pakistan's private airlines, fare-war may extend to international routes as well.
An indication of this trend was given by Air Blue's Chief Operating Officer Shahid Khaqan Abbasi, in an interview in a Dubai daily, saying: "Some of out-fares will be lower than what is currently available in the market."
If that trend was allowed, it would invariably invite the foreign airlines, which were carrying the sixth freedom traffic to and from Pakistan to retaliate with still lower prices, which would be detrimental to the aviation industry of Pakistan, experts in aviation said.
In the 2000 National Aviation Policy (NAP), the Ministry of Defence said it was committed "to contain predatory pricing and unfair competition, both internationally and domestically, through a system of filing of tariffs and compliance thereof."
Aviation circles hoped the CAA would take notice of such detrimental trends and enforce fare integrity in the market. Experts in the field of aviation, however, considered this thinking as paradoxical, because fares internationally stood deregulated.
The government and the CAA have no control on fixation of fares. Even the International Air Transport Association (IATA), which once monitored closely the undercutting resorted to by the airlines, has no role left now and the airlines are free to fix the fares on the basis of their own calculations.