Linus Benjamin Bauer joins a leading German delegation in Pakistan

A German trade delegation made up of senior leaders from the public and private sectors of the MENA region visited Pakistan last week to advise the country on the sustainability and restructuring of some of its key sectors, including aviation. .

Organized by the UAE Joint Council for Industry and Commerce, the Embassy of the Federal Republic of Germany in Islamabad and the Consulate General of Germany in Karachi, the delegation included senior officials and business leaders based in the MENA region, including Oliver Oehms (CEO of the UAE Joint Council for Industry & Commerce), Serkan Guerguen (Senior Director MENA & Turkey at Lufthansa), Nadia Petri (General Manager GCC & Pakistan at Lufthansa) and Heena Nazir ( Director at Germany Trade & Invest).

The delegation also included Pakistani executives from large German companies, such as Saquib Ahmad (Managing Director of SAP in Pakistan), Haris Ali (Managing Director of Rohde & Schwarz in Pakistan) and Markus Strohmaier (Managing Director of Siemens in Pakistan).

Also on the delegation was Linus Benjamin Bauer, Founder and Managing Director of Bauer Aviation Advisory, an award-winning UAE-based strategy and management consultancy specializing in the aviation industry.

Linus, to begin with, why was Bauer Aviation Advisory chosen to participate in the delegation?

Less than a year after its launch, Bauer Aviation Advisory has grown into a serious and successful player in the aviation consulting landscape in the MENA region. Various companies and organizations have followed our journey closely to this day.

Our growing profile has opened up opportunities for our company, such as becoming a corporate member of the Emirati German Joint Council for Industry and Commerce and being invited to join the visiting business delegation to Pakistan focused on representing the aviation sector. – with Lufthansa from Germany.

What are some of the specific challenges facing Pakistan’s aviation industry?

Pakistan’s aviation sector has faced a number of specific challenges to date: political instability, security situation, inadequate infrastructure, poor safety culture and records, inconsistency in state policy, inconsistent tax laws ( for example, heavy taxes on airline tickets), chronic lack of profitability due to operational inefficiencies, weak economic growth, limited access to investments and funds, lack of structural reforms and unfavorable economic policies.

In addition, the process of establishing an airline operating in Pakistan differs from that of other parts of the world. For example, the Pakistan Civil Aviation Authority issues two different licenses: the RPT license and the air operator certificate. The first is only an authorization to develop an organization in the field. It is not considered an authorization to operate an aircraft for which an airline must obtain an Air Operator’s Certificate from the Pakistan Civil Aviation Authority.

The PCAA has certain conditions in place that an airline must meet before it can start flying nationally. A fleet of at least three aircraft is the first such requirement for initiating passenger flights, while one aircraft is required for cargo operations. In order to receive an Air Operator Certificate, a company must also register its fleet in Pakistan.

Coupled with a lack of financial transparency, the administrative complexity and therefore the operational rigidity of the country deters potential (foreign) investors from creating local airlines and investing in the Pakistani aviation sector at large.

Who did the delegation (and yourself) meet during the visit?

During the visit to Karachi and Islamabad, we spoke to the Government of Pakistan (e.g .: Minister of Finance Shaukat Tareen), Pakistan Board of Investment (Secretary General Fareena Mazhar), State Bank of Pakistan (Vice Governor Murtaza Syed), the Pakistan Business Council (chairman Ehsan Malik), as well as with executives from Habib Bank (Pakistan’s largest investment bank) and several chambers of commerce and industry.

In one of your discussions, you described the Pakistani aviation industry as a “great sleeping giant”. What do you mean by that?

Pakistan is South Asia’s second-largest economy with over 220 million people and a steadily growing middle class. The economic structure has changed dramatically over the past decades. Despite being the 5th most populous country in the world, the country’s domestic air transport market, for example, performs poorly in terms of available indoor seats divided by population. Pakistan has around 0.03 seats per person – compared to India (0.16), Nepal (0.11) and Bangladesh (0.04).

Before the pandemic, Pakistan’s air transport sector was expected to grow by more than 180% over the next 20 years. Despite many challenges over the past two decades, Pakistan’s economy has gradually embarked on a path of higher and sustainable growth. Today, only 1.3% of Pakistan’s GDP is supported by aviation sector inputs and foreign tourists arriving by air.

When it comes to the total market share of low cost airlines in Pakistan, the airlines still have a lot of room for improvement. Their share is much lower than that of some neighboring countries of Pakistan such as India. In the pre-Covid-19 era, there were less than 1.3 million low-cost seats departing from Pakistan (12.6% of the total capacity offered in the Pakistani market). In comparison, in India, low cost carriers account for around 34% of all international seats.

Before the pandemic, only three of Pakistan’s top 10 international routes by capacity offered had the presence of at least one low cost carrier. The route between Pakistan and the Gulf with the greatest share of low-cost by capacity offered is Dubai – Karachi with 21%. The share of low-cost on the majority of routes between Pakistan and the cities of the Gulf is slightly less than 6%.

Around the world, traveling by plane is generally more expensive than a bus or train ride for domestic journeys. However, this does not legitimize what Pakistani passengers are charged for domestic flights as a result of weak local competition. A one-way ticket from Karachi to Islamabad, for example, costs around $ 45, or $ 0.064 per mile for a domestic flight within Pakistan. Looking to India, a cheap Delhi-Mumbai ticket costs US $ 55 and around US $ 0.049 per mile.

Much of this big difference in fare per mile comes from the hefty taxes on airline tickets.

Therefore, Pakistan’s aviation industry can be described as a “great sleeping giant” that must wake up, come out of the pandemic and take advantage of opportunities. Air Arabia’s recent joint venture with the Lakson Group (the creation of low-cost carrier Fly Jinnah) paves the way for a better and sustainable future for Pakistan’s aviation industry.

Despite the bottlenecks, the investment climate in Pakistan has improved in recent years. Factors such as the high proportion of young people in the population (15-33 year olds represent 63% of the population), the growing middle class, real GDP growth of around 4% in 2020 and 2021 and the awareness The government’s growing importance of the aviation industry to a country lays the foundation for a better future for Pakistan’s aviation industry.

Finally, what kind of contribution could Bauer Aviation Advisory make to advance the Pakistani aviation industry?

Together with our team of internationally renowned experts, our experience in organizational restructuring and strategic turnaround management brings a great deal of added value to the Pakistani aviation sector, serving airlines and airports. In addition, our unparalleled and award-winning strategic management expertise can guide and support the recovery and sustainable growth of the industry.

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