PIA to operate New Islamabad International Airport? Is a new trend materialising

The Pakistan Civil Aviation Authority has established a committee to examine the feasibility of privatising the New Islamabad International Airport, Karachi Jinnah International Airport and Lahore Allama Iqbal International Airport. At the same time the Government is said to be considering a proposal to shift the headquarters of Pakistan International Airport (PIA) from Karachi to Islamabad, together with another to appoint PIA to operate New Islamabad International Airport (NIIA), replacing the Pakistan Civil Aviation Authority.


Summary:

  • Pakistan International Airlines (PIA) could operate the recently-opened New Islamabad International Airport as the airline’s HQ moves from Karachi;
  • Privatisation of the new airport has been discussed before, but safety concerns are paramount;
  • It could become one of several instances of airlines taking on airport operational roles, worldwide – there are 50 known cases of airlines doing, or aspiring to do this.

NIIA commenced operations on 03-May-2018 and is the new primary international gateway to Pakistan’s capital, Islamabad and the Islamabad-Rawalpindi metropolitan area. The airport replaced the Benazir Bhutto International Airport which is now an air force base. It is Pakistan’s second green field airport, after Sialkot International Airport and is located 20 km outside the twin cities near the Kashmir Highway and on a highway interchange.

It is the largest airport in Pakistan in terms of passenger capacity, capable of serving 15 million passengers per annum in its first phase. Initially, it will handle nine million passengers annually. According to the CAPA – Centre for Aviation airport profiles, the Benazir Bhutto Airport had a system capacity of just over seven million seats in 2017.

Further planned expansions will allow NIIA to serve up to 25 million ppa. A third runway is planned. It is also the first and so far only airport in Pakistan capable of handling the Airbus A380.

CHART – The New Islamabad International has replaced Benazir Bhutto airport, which saw three years of double-digit annual growth between 2015 to 2017 before a benign performance last yearSource: CAPA – Centre for Aviation and OAG (NOTE: * The values for this year are at least partly predictive up to six months ahead and are subject to change)

NIIA is one of three airports that could have been privatised previously, but security risks predominated. The country’s Federal Cabinet considered plans to privatise three major airports at a meeting held in Apr-2017. The CAA published an RFP to outsource the operation, management and development of NIIA, also the Lahore and Jinnah airports mentioned previously.

Presumably the government perceives less risk in the national airline taking operational control then a foreign airport operator or investor. Intriguingly, as this article was published, British Airways (BA) announced it was inspecting NIIA to review security facilities and procedures in preparation for the launch of a three times weekly London Heathrow – Islamabad service in Jun-2019. BA suspended services to Pakistan as long ago as Sep-2008 owing to security concerns.

Pakistan is not the only country potentially to see its main airport being operated by the state airline. In Jun-2018 the Kenyan cabinet approved Kenya Airways to operate Nairobi Jomo Kenyatta International Airport on a 30-year concession, having received a privately initiated proposal from the airline. However, progress has been slow since then. It would not be unreasonable to expect similar delays in Pakistan. NIIA took 13 years to build the new airport, although at least the Civil Aviation Authority financed it themselves.

There is a (slowly) developing trend towards airlines operating airports, where they can. International regulations are a little vague on airline ownership of airports and consequential competition issues and deals typically fall to national laws for jurisdiction. According to the CAPA – Centre for Aviation Global Airport Investment Database there are no less than 50 airlines, large, medium and small, dotted around the world which hold equity in airports, manage them in whole or part, or have done, or aspire to, out of a total of over 900 profiles in late Jan-2019.

Some of the more interesting ones include Lufthansa, which holds 5% of Fraport; Bangkok Airways, which owns and operates three small airports in Thailand and which was an early mover in this business segment; and Qatar Airways, which is poised to sign a concession agreement to operate Vnukovo Airport in Moscow.

It isn’t quite clear yet how the Islamabad scenario has evolved. It may simply be that PIA is considered to be better at security than the CAA. Or it may be a precursor to a more complex concession, one that is shared with a foreign operator and/or investor and which is then used as a model for other airports. A strategically placed capital city airport with upwards of 10 mppa would attract them.

What Pakistan must avoid is the sort of fiasco that occurred in Bangladesh in 2006 when Thai Airways International signed a contract to manage the Shah Amanat International Airport in Chittagong from 01-Sep-2006 in a USD10 million deal. It was later rejected by the Bangladeshi government – on security grounds!

The opening of the new airport was previously detailed in the following The Blue Swan Daily article: