Chapter1

The airline industry

1.1 Transport:
Transportation is the motion of people and goods from one place to another. Transport is
important because it allows for trade to be carried out among people which is vital for
development of organizations. Transportation mediums can be air,
rail,road,water,pipeline,cable and space. This field can be divided into
Infrastructure:
Includes static establishments like railroads, roads, waterways, airways and for
terminals like airports ,bus stations, railways stations, warehouses and seaports.
Terminals may be used for cargo and passenger exchanges or for maintenance or for
both
Vehicles:
Vehicles that travel on these system of networks include cars,buses,ships,trains
,aircraft etc
Operations:
Deals with the procedures and practices of operation of vehicles, financing, legal
issues and rules and policies concerning transportation. Operations and infrastructure
ownership, in the transport industry can be either private or public. This depends on
the type of transport medium and the country in which the transport is situated
1.2 Air transport/airline industry:
The fastest medium of transportation is by air. Air transport enables quick transportation of
people and cargo over long distances but in this process has to incur high costs and energy
use .the Airline industry is a service providing industry that provides air transport services for
travelers and freight. To provide these services airlines own or lease their planes and may
form partnerships or alliances with other airlines for mutual benefit. It is mandatory for
airlines to get recognitions through certification or license from governmental aviation body.
The airline must fulfill 2 types of regulatory considerations
1. National
2. International
1.2.1 National:
These are the polticial, safety and economic procedures that the government imposes on the
airlines, since a lot of countries have airlines that are government owned. a government
owned airline is subject to various interventions by the government in its operations, ticket
prices, routes ,maintenances and such. Over time many countries have adopted deregulation
of its airline industry .deregulation allows private airlines to set up and they can dictate their
own operational requirements, ticket prices, routes, flights etc .
1.2.2 International:
This includes the world over standardized set of laws set up by international agencies
concerning air safety and other important aspects related to air transport. A bilateral
agreement is set up between a country, which allows specific airlines to function on specific
air routes. This system is vastly used for international air traffic flow regulation. Bilateral
agreement system is based on the idea of the Bermuda agreement, which was a contract
stating that airports would be used for transatlantic flights (flights over the Atlantic Ocean)
between UK and USA following the world war 2. Bilateral agreements follow the freedoms
of the air concept that includes a set of standardized air traffic rights which allow an airline
of a country to fly over another country and to provide air services in an another
country.1990 saw the commonality of the open skies policy which inhibits the deregulation
of the air line industry
The us department of transportation (dot) categorizes the airline industry into
I nternational these consists of planes that have more than 130 seats and fly world
over. Companies falling under this category typically generate annual revenue in
billions (1 billion or more)
National these airlines have planes with 100 to 150 seats and have annual revenue
more than 100 million but usually less than a billion
Regional companies operating short distance flights and generating annual revenue
less than a 100 million
Cargo airlines providing only goods transport services
A company operating in the airline industry are faced with significant issues comprising of:

Airport capacity: the ability of an airport to cope easily with the flow of passengers,
incoming and outgoing planes and cargo. Small, inadequately equipped airports cause
hindrance in air transport operation
Route structures: designing cost efficient routes for aircrafts that requires minimum
fuel and energy.
Technology: new and improved technology incorporated in the airplanes to ensure air
safety and efficiency
costs to lease or buy the physical aircraft : this forms one of the biggest cost of the
airline .the decision to buy or lease the air crafts is very crucial as it impacts the
airline through out its tenure
Weather Weather can be very inconsistent and unpredictable. Extreme weather like
(snow, fog, rain) can cause airports to shut down and flights to cancel. This is a cost to
the airline
Fuel Cost fuel forms the second largest expense an airline incurs. It is a very
significant part of the airlines total cost but efficiency among airplanes can vary.
small haul air carriers usually get lower fuel efficiency because during take offs and
landing a large amount of fuel is consumed
Labour - According to the American transport association, an airlines labour forms its
number one cost as it has to pay pilots, stewards, baggage handlers, dispatchers,
customer service and others.
1.3 International civil aviation authority:
International civil aviation organization is a special organization of the United Nations (UN)
which was created in 1944 to encourage secure and methodical growth of international civil
aviation through out the world. ICAO provides a global and formal platform for its 191
member states to co operate with each other relating all fields of aviation This agency sets
standards and guidelines essential for
Safety of aviation
Air navigation
Infrastructure
Flight inspection
Aviation security
Facilitation of border crossing systems
Un lawful intervention
Efficiency and regularity in aviation operations
Border crossing
Aviation environmental protection

1.4 National aviation authority:
It is a government statutory authority in each country that oversees the approval and
regulation of civil aviation. NAA checks the major elements of air craft air worthiness
because there is a danger in use of air crafts .below mentioned is a list of elements that NAA
has to take into consideration
Design of aircraft, engines, airborne equipment and ground-based equipment affecting
flight safety
Conditions of manufacture and test of aircraft and equipment
Maintenance of aircraft and equipment
Operation of aircraft and equipment
Licensing of pilots and maintenance engineers
Licensing of airports and navigational aids

1.5 IATA(international air transport association)
IATA is a private organization formed to promote cooperation among the worlds scheduled
airlines to guarantee safe, reliable and economical air services.IATA provides airlines with
the facility of combining their individual ticketing and reservations networks into a
worldwide system that would help them overcome differences in currencies, languages and
laws.IATA codes are 1,2,3,4 character combinations, which are abbreviations made by to
facilitate air travel. These are unique combinations made to identify locations equipment and
times to standardize international flight operations
1.6 Aviation industry in Pakistan
Airports

Airports in Pakistan can be categorized :
the airports only for air force use
air force administered airports but both caa and air force can use them
caa administered airports but both caa and airforce can use them
caa administered airport for caa use only






Figure 1.1: types and locations of airport in pakistan

1.7 Pakistan Civil aviation authority
Established in 1982 through the ministry of defense,Pakistan civil aviation authority is a
public sector independent body which works for the federal government of Pakistan
1.7.1Objectives of CAA
Guarantee safe and well organized domestic civil aviation operations in the country
in compliance with the ICAO standards
Allowance of foreign airlines to continue operations in Pakistan alongside the
Pakistani carriers and a reasonable level of competition to be prevailed
To keep in check predatory pricing and unreasonable competition through a check and
balance of tariffs filling for both international and national airlines
To improve facilities provided at terminal and lessen difficulties faced by passengers
at the airports thus making airports more traveler friendly
Encourage and motivate tourism in Pakistan by integrating tourism and aviation
policies.
Conditions for operations by airlines
Three air carriers is the minimum fleet requirement for passengers and one aircraft for
cargo
Aircrafts will be allowed for Pakistani airlines to be inaugurated on wet or dry lease in
accordance to CAA conditions.
It is mandatory for Pakistani airlines to get their fleet registered. At least one air
carrier should be registered within one years time
Age and origin conditions at time of inauguration by private airlines is as follows :
.eastern origin/Russian: max age 15 years and airworthiness criteria as laid down by CAA
Western/European aircraft: no age limit but compliance with airworthiness criteria
Air worthiness criteria
The Aircraft shall not surpass:
75% of proposed calendar life at the time of orientation- of aircraft, and
75% of final calculated calendar life at the time of orientation of aircraft.


Figure 1.2 growth of Pakistan airline industry over the years
This table shows the growth or decline of the passengers, carriers departures ,freight, airports
,paved airports and unpaved airports .as detailed in the above table passengers carried over all
increased in the last ten years .followed by a general increasing trend in the carries departures
and the number of airports aswell.a decreasing trend in the freight department can be seen.
year passengers carried % increase carrier departures % increase freight %increase airports( number) paved airports(number) unpaved airports(number)
2004
5,097,477.00
100
50,309.00
100
402.04
100 131 92 39
2005
5,364,134.00
105.23
48,905.00
97.21
407.93
101.47 139 92 39
2006
5,714,831.00
112.11
51,296.00
104.89
426.99
104.67 146 91 48
2007
5,439,144.00
106.70
51,029.00
99.48
313.87
73.51 143 92 54
2008
5,605,758.00
109.97
52,165.00
102.23
319.8
101.89 148 95 48
2009
5,303,268.00
104.04
50,939.00
97.65
303.91
95.03 148 95 48
2010
6,588,114.00
129.24
64,932.00
127.47
332.96
109.56 148 101 47
2011
7,940,579.00
155.77
72,695.00
111.96
297.68
89.40 148 101 44
2012
7,746,829.00
151.97
67,208.00
92.45
277.01
93.06 151 107
average 119.45 103.70 96.51 13.02