The Pakistan International Airlines (PIA) will suspend its flights to New York, Chicago, Spain, Netherlands, Germany and Italy on the implementation of joint venture commercial agreement (JVCA), signed with Turk Hava Yollari, Turkish Airlines (TK), at PIA head office here on December 29, 2010.
The agreement was signed by Captain Muhammad Aijaz Haroon, Managing Director of PIA, and Dr Temel Kotil, President and Chief Executive Officer of TK. According to details of the discussions between the two delegations and JVCA available here, TK President on the request of PIA Managing Director to first present Turkish Airlines proposal for enhancement of commercial co-operation between the two airlines, proposed that there should be seven weekly frequencies each from Karachi, Lahore and Islamabad to Istanbul and back.
TK suggested that this arrangement would be under a joint venture agreement on trunk routes that will allocate seat capacity and revenues of both parties under one pool arrangement where the earnings would be shared on the basis of seat capacity floated and prorated revenue on each airline's documents.
PIA was also offered by TK 20 percent commission on PIA sales beyond Istanbul sectors that overlap on the prorated fare on that sector, excluding fuel surcharge. PIA Managing Director appreciated TK efforts to increase frequencies to once daily from three gateways of Pakistan. PIA, however, made a counter-proposal to achieve the same objective. In the larger mutual interest of two airlines and to make efficient utilisation of each other's resources, following was proposed by PIA.
PIA suggested that it would stop operation to USA (New York and Chicago) and to Germany, Spain, Italy, France and the Netherlands. PIA would operate 21 frequencies (seven ex-Islamabad, seven Lahore and seven Karachi) between Turkey and Pakistan and deliver its passengers to TK at Istanbul for onward carriage to destinations beyond Istanbul.
The arrangements would be under pool/prorated revenue sharing and/or Code share where the bilateral arrangements so permit in terms of Third-party co-share clause. PIA proposed to have the code share under free said arrangements on 15 percent commission to marketing carrier on prorated price (net fare plus fuel surcharge) which shall be inclusive of fuel surcharge.
Regulatory authorities of the two countries will be approached for permission to operate these frequencies on aforementioned routes on Temporary Operating Permit (TOP), subject to implementation and continuation of the commercial agreement. However, after discussing various possibilities, it was agreed that the two airlines will work to achieve the following, under JVCA:
-- Operation of 21 frequencies between Pakistan and Turkey, with TK operating four weekly flights between Istanbul and Karachi and three weekly flights between Istanbul and Islamabad on TOP, and PIA operating the remaining frequencies. This arrangement could be re-evaluated and changed, if so desired and agreed between the two airlines.
-- On the implementation of JVCA, PIA will suspend its flights to New York, Chicago, Barcelona (Spain), Amsterdam, (Netherlands), Frankfurt, (Germany), and Italy.
-- PIA will retain its sales personnel at these stations and promote sales on beyond routes and joint venture flights on trunk routes.
-- PIA will operate three weekly flights, originating from Karachi to Houston via Istanbul. These flights will be supported by PIA sales. TK will advise affirmatively to the corresponding authorities for PIA replacement of the beyond point New York specified in Air Service Agreement for USA, to allow freedom carriage on Istanbul-Houston and return sector on these flights.
-- PIA will operate seven weekly frequencies between Istanbul and mutually agreed points in Europe under joint venture code share/pool/commercial arrangements with TK, as additional or as replacement of TK's already operated frequencies.
-- In case joint venture flights are extended to the beyond destinations out of home carrier's any hub, the principles of the seat capacity allocation will be agreed and reflect on the final text of JVCA and will be applicable on reciprocal basis.
-- The above arrangement will be on free sale, code-share basis, where possible, and on pool/SPAs/other commercial arrangements, as required on case to case basis, considering the Air Service Agreement 3rd party code share restrictions. Both airlines will conclude Special Prorate Agreement on all sectors that the airlines may request from the partner.
-- The joint venture operation will be under a joint Revenue Management (RM) control on mutually acceptable fares. Terms and conditions of proposed joint venture will be negotiated and concluded by working groups of both airlines.
-- Turkish Airlines will be joint venture partner on PIA flights from Pakistan to Nepal, Bangladesh, Bombay, (India), Sri Lanka and Male (Maldives), and other points east of Pakistan under similar arrangements.
-- PIA will be General Sales Agent (GSA) for TK in Pakistan, and TK shall be the GSA for PIA in Turkey.
-- PIA will provide ground handling and technical coverage to all TK flights operated to Pakistan, and TK will provide technical coverage and ground handling of PIA aircraft at Istanbul. If required, training of engineers will be mutually arranged.
-- Both airlines will exclusively use catering facilities of the partner airline, when applicable, on flights between Pakistan and Turkey.
-- To give the customers confidence in joint venture operation and homely atmosphere, the airlines will have the right to position their cabin crew on the operating airlines aircraft.
-- The operating carrier will arrange special food, reading material to the taste of marketing carrier's passengers.
-- The two airlines will cooperate in maximum utilisation of each other's engineering, maintenance and training facilities.
-- The two airlines will also integrate their frequent flyer programs for mutual benefit of the airlines and passengers travelling on two airlines.
-- The two airlines will immediately test/integrate interline e-ticketing.
-- Both airlines will provide all assistance/transit/business class lounge facilities to passengers at their home stations.
-- The two parties will also have code-share/block space/commercial co-operation arrangements for carriage of cargo under prorate basis. PIA will support TK to grant the required permission for its cargo flights which are scheduled at two weekly frequency between Turkey and Pakistan.
-- The JVCA is not binding for both parties unless and until both airlines get corresponding approvals from their boards and final documentation is signed by both parties.
Also, the implementation of these arrangements and final JVCA will be subject to the approval of the relevant Anti-Trust Immunity (ATI) and other regulatory authorities of both countries and will be to the extent permitted by any applicable law or regulation, and/or any existing agreement which binds either party. In case of any change to the agreed minutes due, to any such binding clause, the arrangements would be open for re-negotiation.