Pakistan and Turkey in air link

Citing competition from Gulf airlines, Pakistan International Airlines enters into alliance with Turkish Airline.

Pakistan International Airlines has signed a code-share agreement with Turkish Airlines to gain access to more than 100 European destinations. Arif Ali / AFP

Pakistan International Airlines (PIA) is tying up with Turkish Airlines to win back precious market share from Gulf carriers such as Etihad Airways and Emirates Airline.

The ailing Pakistani state carrier signed a code-share agreement last week to gain access to more than 100 European destinations by feeding traffic into Turkish Airlines' hub in Istanbul.

The alliance will also help PIA, which is facing reported debts of US$1.7 billion (Dh6.46bn), rationalising its network to cut costs.

The move underscores the competitive tensions between Gulf airlines and their rivals, as carriers such as Emirates, Etihad and Qatar Airways use so-called "sixth freedom rights" to pick up passengers in one country, such as Pakistan, and deliver them to a third country via their Gulf hubs.

Splitting a journey into two legs via a home hub allows the Gulf carriers to serve many more markets.

"We were losing passengers to Emirates, Etihad and Qatar Airways," Aijaz Haroon, the managing director of PIA, told The News, a newspaper based in Karachi.

He added that PIA was hindered in competing with Gulf airlines by a "lack of aircraft and limited flights to many countries in the West".

A recent PIA survey revealed that 81 per cent of the total international traffic from Pakistan was being routed through Gulf carriers, the report added.

Saj Ahmad, an aviation analyst in London, said Gulf airlines have used their business and political links to gain greater access to key markets such as Europe and the US. "By the same token, PIA and the Pakistani government must use these same methods in order to further the airline's future progress.

It needs to expand on fifth and sixth-freedom rights and engage more robustly in creating more open-skies deals so that it too can better compete against its Arab rivals and claw back some of the traffic that it has lost to them in recent years."

The tie-up with Turkish Airlines will have an immediate impact on PIA's bottom line, company executives said. "Even in the worst-case scenario, we will be able to earn 12 billion rupees [Dh513.3 million] additional revenue from this agreement," Mr Haroon said.

He told Pakistani media that PIA had also held discussions with Gulf airlines for the code-share deal, but ultimately selected the Turkish carrier. One factor in that decision was likely to have been the Turkish airline's membership in the Star Alliance, which includes Lufthansa, United Airlines, and 25 other carriers, Mr Ahmad said.

"Turkish Airlines is a key member of the wider Star Alliance, too, already the biggest alliance on earth. It is clear that PIA wants to tap into this market and alleviate the pressure it faces from GCC airlines."

PIA recently submitted a five-year plan to the Pakistani government that called for debt forgiveness as well as expanding the fleet by 42 aircraft, in addition to the 40 aircraft currently in service. With the new alliance, the airline will instead shrink its operations in a bid to stave off losses.

Under the plans, PIA will reportedly cut its existing routes to Europe and the US except for London, Oslo, Copenhagen, Paris and Toronto. PIA passengers flying to New York and Chicago will be transferred in Istanbul on to Turkish Airline's network, for example.

While the strategic tie-up with Turkish will ultimately benefit PIA, much work still needs to be done on the company's business operations, Mr Ahmad said.

"The airline needs to match the route overhaul with a business overhaul," he said.

"PIA is still overstaffed and sunk with high operational costs. Unless these are addressed, whatever perceived financial gains they make through their revised network with Turkish Airlines will be lost on cost of implementation," the analyst added.