CAA seeks to derive 40pc income from commercial activities
Friday, August 08, 2008
KARACHI: Development of seven airports is under way while work on mega airport city projects, which will make Karachi and Lahore hubs for transit flights, will start shortly, said Farooq Rehmatullah, Director General of Civil Aviation Authority (CAA).
Besides this expansion to cater to more passengers and aircraft, the aim is also to commercialise the airports to shift CAAs revenue stream in favour of non-aeronautical earning, he added.
Civil aviation authorities around the world derive 40 to 60 per cent of their income from commercial activities, he said in an interview with The News.
This income, which is earned from duty-free shops and shopping malls at airports, was only 20 per cent in case of Pakistan when Rehmatullah took over the helm of affairs as the aviation regulator and airport manager two years back. Now it has increased to 30 per cent. Our ultimate objective is to take it to at least 40 per cent, he said.
Increase in commercial revenues help authorities reduce aeronautical income, which comprises mostly of charges airlines pay for using a countrys airspace. Subsequently, such destinations become more lucrative for airlines to land.
Among the airports, which are being developed, the New Islamabad International Airport is the flagship project of CAA. Being built at a total cost of Rs50 billion, it will address the problem of air traffic congestion in the capital.
Similarly work on other neglected airports has been initiated as well, he said, referring to construction of new terminal building at Skardu airport, provision of snow moving equipment at Chitral airport, inclusion of Khyber Road on the premises of Peshawar airport to provide for more aircraft parking space and extension of Lahore airport.
Besides the development of airports, CAA has also embarked upon changing the decades old radars installed at major airports. The induction of new calibration aircraft will help CAA maintain the accuracy of aircraft guidance system at home and sale calibration services to other countries.
But for Farooq Rehmatullah, whose tenure comes to an end later this month, the triumphing achievement was changing the working environment in the lethargic organization.
One thing which was lacking (in CAA) was that there was traditional government way of working where a file moves through 10 people and yet decision was not taken, he said. We are now implementing ERP (enterprise resource planning) system, which will be in place within next 18 months.
This, he said, will assist the management in taking sound decisions and provide required information at push of a button.
The tedious file culture and lengthy clearance procedures had also long barred cash resourceful CAA from investing in development projects.
Our capacity to invest was only Rs500 million to Rs800 million a year, a budget of more than this always lapsed, he said, recalling that in his first year he fixed capital expenditure of Rs4 billion but hardly Rs1 billion could be spent.
The problem was that there were 27 steps that a proposal had to go through. By the time the steps were completed, the year had passed. So, now we have brought those down to 7 and as result of that this financial year we have spent Rs6 billion.
CAA has also prepared a five-year business plan, which seeks to increase its revenues to Rs30 billion from current Rs13bn.
For Rehmatullah, ex-Chairman of Shell Pakistan, restructuring of CAA was a task he thinks he has achieved. Under the restructured model, the three core areas of regulatory, airport services and navigation have been separated. This, he says, is now helping each department to achieve their targets and has improved the decision making process.
However, growth in domestic traffic has not resulted in much needed increase in number of flights. While CAA might have succeeded in signing and renewing air services agreements with many countries, not much has happened on this part either.
It is a commercial proposition, he said, adding, If you make money you jump into the business. But this year airlines are losing money and that has dampened growth.
During last year growth in domestic air traffic has been negative 2-3 percent due to lack of capacity, he said. Air blue pulled two of its aircraft, Aero Asia was grounded and PIA grounded its 747 aircraft. So the overall capacity was reduced.
A new and liberal aviation policy introduced last year will address some of these by liberalising countrys airspace and increasing competition. The draft (of the aviation policy) will be presented to the cabinet for approval anytime now.
Asked if he was not worried that most of the projects launched under his command were in their infancy and could be affected by his departure, he said: Leaderships primary responsibility is to prepare a successor and I have done that.
CAA seeks to derive 40pc income from commercial activities
