Aviation Analysis: Pakistan – The Large Sleeping Giant in Aviation

With over 220 million people and an ever-growing middle class, Pakistan is South Asia's second largest economy. Over the last few decades, the economic structure has undergone dramatic changes. Contrary to other sectors, service has seen a strong increase. Despite many challenges in the past two decades, the economy continues to move forward on a path of higher and more sustainable growth.
The Pakistani aviation sector is the big sleeping giant due to many challenges. It needs to get out of the pandemic and seize the opportunity to make a better future.

I was part of a high-ranking business delegation from Germany and the UAE that visited the Government of Pakistan in September. The purpose of the visit was to advise the country about future-proofing its aviation sector. It was an eye-opener to see the delegation visit to Karachi, Islamabad.

Before the pandemic, Pakistan's air transport sector was expected to grow by more than 180 percent over the next 20 years.

The aviation sector created over 500,000 jobs in Pakistan in 2019 and more than 500,000 indirect jobs. Today, the aviation sector contributes 1.3 percent to Pakistan's GDP. This includes foreign tourists who travel by plane. In 2019, 85 percent of international departures from Pakistan went to the Middle East, especially Dubai (2.3 million departures).

For the post-pandemic period, the fate of Pakistan's airline industry will change. The Pakistani aviation industry has faced many challenges to date: political instability, security, poor infrastructure, poor safety culture and inconsistent tax laws. It also faces inconsistency in government policy and inconsistent tax laws. There is weak economic growth and access to funds.

A Snapshot of the Current Aviation Environment in Pakistan

Travelling by plane is more expensive than a bus or train ride to get you home. It does not justify the charges that passengers pay for domestic flights in Pakistan, due to low competition.

A one-way ticket from Karachi to Islamabad costs approximately $45. This is $0.064 per mile for domestic flights in Pakistan. A Delhi-Mumbai flight costs $55 and is around $0.049/mile if you look over to India. This clearly demonstrates the economic mess that Pakistan has been in for over a decade.

The market is still small, despite recent market entrants such as Fly Jinnah. Since the departure of Shaheen Air, a privately owned carrier, in 2018, Pakistan International Airlines has been the main beneficiary of the domestic market. Pakistan is an oligopolistic country with Serene Air, Air Blue and the national carrier PIA competing in an oligopolistic industry. AirSial, a new airline company, entered Pakistan's domestic market last year.

Despite Pakistan being fifth in the world in population, its domestic market is not performing well. Pakistan has 0.03 seats per capita, compared to India (0.16), Nepal (0.11), and Bangladesh (0.04).

The market share of low-cost carriers is still very large in Pakistan. Their share is smaller than that of Pakistan's neighbor countries, like India. Pre-Covid-19 (2019), there were less than 1.3million low-cost seats leaving from Pakistan. This is 12.6 percent of total capacity in Pakistan. Contrary to Pakistan's low-cost market, India's low-cost carriers account for around 34 percent of all international flights.

There are many opportunities for services from the Gulf, such as the UAE, Bahrain, Saudi Arabia and Qatar, Oman, Oman, Kuwait, because of the low penetration of low-cost airlines into Pakistan's market. Prior to the pandemic, only three out of Pakistan's top ten international routes by capacity had at least one low cost carrier.

DubaiKarachi, which has 21 percent of the lowest low-cost capacity between Pakistan and the Gulf is the route with the highest share. Surprisingly, the low-cost share of most routes between Pakistan cities and the Gulf is below six percent.

PIAs are struggling

Because of PIA's poor safety record, the airline must ensure its safety standards are met by its staff and fleet. This will satisfy international regulators like the EASA, ICAO, and the FAA.

A lack of profitability has caused a decline in national carrier's financial performance. The loss-making carrier must increase its revenue, reduce costs, and restructure its financial position to be financially viable in the post-pandemic era. These initiatives will restore customer confidence, allow for flight operations to resume on previously closed routes or banned routes, and improve code-sharing agreements with other airlines in order to increase overall revenue.


Factors such as the high percentage of young people (15-33 year olds: 63%), the growing middle class and real GDP growth of 3.9% in 2020-21, and governments increasing awareness of the importance of the airline industry for a country are all factors that lay the foundations of a better future.

Despite the many bottlenecks, there has been a significant improvement in the investment climate over the past few years. To wake up this large sleeping giant, structural reforms will be required and economic policy adjustments will be necessary. To make air travel more affordable, the Pakistani government must reduce the high taxes that are imposed on tickets. The country's aviation sector is now in a better and more sustainable future thanks to Air Arabia's JV with Lakson Group.