The Competition Commission of Pakistan (CCP) will issue its opinion under Section 29 of the Competition Act, 2010, regarding the competition concerns over a tender floated by the Civil Aviation Authority (CAA) for establishing only one flight kitchen at the new Islamabad International Airport on joint venture basis.
CCP conducted an open hearing after noting concerns that the CAA's decision to establish only one flight kitchen at the new Islamabad International Airport will limit the choices available to domestic and international airlines to procure in-flight catering services. The CCP bench was headed by the Chairperson Vadiyya Khalil, and consisted of members Dr Shahzad Ansar and Mueen Batlay.
The hearing was participated by the CAA's officials, legal counsels and representatives of local and international airlines and catering companies. On the conclusion of the open hearing, Chairperson Vadiyya Khalil said that the CCP will analyse all competition related aspects in the issue of establishing only one flight kitchen at the new airport on joint venture basis. She said that CCP will give its opinion taking into account viewpoint of all stakeholders as well as the competition law.
The CCP bench listened to all the stakeholders one by one and asked questions from them. The chairperson asked CAA for its reasons for not allowing other flight kitchens to operate at the new airport and for opting for the joint venture/revenue sharing model.
She posed questions at the CAA and airlines about the prevalent system of uplifting of meals for flights, the costing details for international and domestic flight meals, and the rationale behind the idea of only one flight kitchen at the New Airport of Islamabad.
She asked participants to assist CCP by providing relevant information and highlighting best practices regarding the flight kitchen business. In flight meal is a very important part of the whole flying experience for passengers. Current practice is that all local airlines have their own flight catering departments/companies at some airports in Pakistan and for airports where they don't have flight kitchens they uplift meals from specialised flight catering companies.
Representative of PIA Inam ul Bari, General Manager (New Islamabad Airport Project) noted that PIA was initially allocated space for a flight kitchen as part of its operational offices at new Islamabad Airport and was at an advance stage of planning however, the tender for single kitchen created ambiguity and confusion.
PIA raised the concern that CAA's participation through a joint venture created a conflict of interest as CAA's core function was regulatory. The counsel for Air Blue, Rahat Kaunain Hassan stated that Airblue too had initially been allotted space for flight kitchen at the new Islamabad Airport however; CAA has failed to inform the airline about the status of the land allotment despite repeated queries.
Airblue cited the National Aviation Policy 2015 which laid emphasis on encouraging competition in the airline industry and envisaged the segregation of CAA's regulatory and service functions. Rahat Kaunain Hassan also referred to the Policy Note issued to the Federal Government recommending it to amend Section 166 of the Insurance Ordinance, 2000, which prevents competition in the non-life insurance market by extending exclusive rights to the National Insurance Company Limited (NICL) with respect to insurance of public property.
Airblue also noted that in the 12 jurisdictions they researched, nowhere could they find an example of the regulator being involved in the catering service industry. Currently there was more than one flight kitchen at all the major airports including Karachi, Lahore and Islamabad. Why was the CAA then deviating from this practice now?, Rahat Kaunain Hassan added.
Azfar Ali from Emirates Airline and representing the Air Operators Committee said that a single flight kitchen would reduce competition in the market. If there is only one flight kitchen and it is closed down due to some reason, what would happen at the airport and how situation would be handled for international flights? The result would ultimately be detrimental to the passengers.
Mueen Batlay, Member CCP asked the airlines about the current practice of flight catering. Sarfraz Ahmed, GM Catering, Shaheen Air replied that currently Shaheen Air operated its own flight kitchen from Karachi and Peshawar and uplifted meals from third party vendors from other stations. He noted that having its own catering company gave autonomy to the airline with respect to menu selection.
Peter Andrist, Chairman Gate Gourmet Pakistan informed the Bench that his company was involved in the provision of flight catering services in over 20 countries. He noted that only a handful of international airlines uplifted meals from Pakistan. Alqera Atiq, Secretary CAA Board informed that the CAA has duly followed the process of transparency and PPRA rules for floating of tender for operating flight kitchen at the new Islamabad International Airport.
He added that no airline has directly approached the CAA with any complaint on the issue of the new flight kitchen. Some of the complainants have not even participated in the tender process.
He noted that CCP can review the issue of pricing at any time. He stressed that if meals are taken from Pakistan using flight kitchen here, it would directly benefit the country, and informed that a board with representation from all airlines would monitor the pricing and other related issues of the flight kitchen. Sadiqur Rehman, Director Commercial of CCA informed that having two flight kitchens at Lahore airport has not increased traffic or volumes. About the cost and pricing, he said we cannot afford to give high price for meal to passengers in a competitive environment.
The complainant Tahir Razzaque Khan, FCA alleged that in the tender the CAA has made an attempt to usurp the basic rights of the consumer for getting food and allied things at competitive price with competitive quality at New Islamabad Airport which likely to start functioning in December 2016. This tender is aimed to assault the consumer by getting food at higher charge due to inclusion of CAA's own heavy profit and monopolising the source of supply to one person. The consumers (ie, the passenger) would be charged at a higher amount by the service provider.
CAA being the regulator cannot be allowed to work against the basic rights of the consumers who are going to pay a very high cost of food and eatables to the recipient of tender (whosoever it may be). CAA is also not mandated to promote the monopolies of source of supply of food and eatables by its charter and bye-laws. Moreover, CAA has no justification by deviating from the existing practice, Tahir opined.
He raised questions is this mandatory for local airlines to buy food from that kitchen when we have a capacity to make their own food and doing this on other locations? Is airline allowed to make a kitchen outside the airport for exclusive use for their airline. Kitchen is a part of the airline industry and most of the airlines have their own kitchens in the world and in Pakistan. There is no example of a regulator be a part of a vendor in Pakistan which is a democratic country. This is against the core of competition.
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