Outsourcing Airports

The move to outsource airport services in Pakistan is aimed at helping loss-making international airports to be on a par with the rapidly-evolving and highly competitive aviation sector.

By Syed Khalid Hassan | September 2023

To attract more Foreign Direct Investment (FDI) in Pakistan, the Economic Coordination Committee, with the advisory support of the International Finance Corporation (IFC) - a member of the World Bank, has initiated a process to outsource the services of three major airports through the Private-Public Partnership Act 2017. The airports are namely Jinnah International Airport in Karachi, Allama Iqbal International Airport in Lahore, and Benazir Bhutto International Airport in Islamabad.

Qatar has expressed interest in investing in the improvement of airport services and utilizing airport lands for commercial activities in Pakistan. Prime Minister Shehbaz Sharif has stated that this is a normal practice to seek profits and has guaranteed complete transparency in dealing with such significant government assets. This trend of outsourcing airport services is increasing globally, and about 44 countries including the UK, the USA, and India have already adopted this approach. This trend has led to modernization of airports and significant improvement in passenger comfort.

The move to outsource airport services in Pakistan is aimed at helping loss-making international airports to be on a par with the rapidly evolving and highly competitive aviation sector. The current airport infrastructure in Pakistan is in dire need of increased capital investments, as well as improved productivity to keep up with the pace of global development. With the Pakistani economy already suffering from low foreign and central bank reserves, the government needs to take measures to rise to the occasion by flooding in FDI and boosting investor confidence. The Pakistan Civil Aviation Authority is currently the operator of the airports, and to ease the government’s budget strain, a profit-driven entity must be implemented. Since Pakistan does not have the capacity to keep up with the globally evolving aviation sector, this move is crucial for the country’s economic growth.

There has been an increase in activity in the aviation sector in Pakistan recently, with Skardu Airport receiving international status, the forthcoming inauguration of Gawadar Airport, and the addition of AirSial and FlyJinnah as new domestic airlines. Talks are also underway to add more airlines to compete with the Pakistan International Airlines (PIA). With more airlines projected to enter the market, there is potential for an increase in demand for airfares, which makes it imperative to improve the quality of airports in the country.

However, Pakistan International Airlines is currently suffering losses of about USD 1.41 billion due to having more staff than aircraft, as well as being banned from flying to Europe, as well as making other strategic and political mishaps in a high-risk industry. The current state of aviation policymaking in the country is terrible and requires significant improvement. For the government, one possible strategy would be to focus on security, policy-making and PIA, while the private sector continues to be productive and competitive.

At present, the only airport capable of hosting the A380 is the new Islamabad airport named Benazir Bhutto International, which reflects the state of the other airports in the country. Once these airports are able to accommodate a vast range of wide-body aircraft, PIA would be encouraged to invest in them, improving their capital and airworthiness, and increasing the number of destinations they can serve worldwide.

In addition to that, PIA can also reduce costs by outsourcing their ground handling services to a third-party company, which would enable them to fully focus on improving their core competencies, such as aircraft maintenance, route expansion, and in-flight services. This would also allow PIA to streamline their operations and potentially increase their profitability, which is critical given their current financial challenges. By leveraging the expertise of specialized ground-handling companies, PIA can improve efficiency, reduce turnaround times, and enhance the overall passenger experience, ultimately helping them to remain competitive in the ever-evolving aviation industry.

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