The Competition Commission of Pakistan (CCP) has issued a policy note to the federal government recommending that the bilateral Air Services Agreement of 1972 between Pakistan and Saudi Arabia be amended to address competition concerns. The Commission, during the course of PIA Haj Fares Case in 2009, found that the agreement restricted competition on direct routes between the two countries by allowing only two designated airlines, i.e. PIA and Saudi Airlines, to operate on these routes. Also, the agreement allowed air fares to be fixed by mutual consultation between the two airlines rather than letting market forces establish competitive levels of air fares. Concerns with air fares are most prominent during the Haj Season as pilgrims have no choice other than PIA and Saudi Airlines to travel to and from Saudi Arabia. Moreover, the Commission has taken note of the market division, i.e. the 50/50 quota fixed between PIA and Saudi Airlines, and the payment of royalty by PIA to Saudi Airlines, for carrying Hajjis in excess of its allocated quota. Market division is an offence under the Competition Ordinance, 2010. The Commission also found that PIA was passing on the royalty cost to its consumers resulting in higher ticket prices. The policy note, issued by Dr. Joseph Wilson, Member Policy Planning, Research and International Affairs, has recommended to the Government of Pakistan that the agreement be amended to allow multiple airlines of both countries to operate direct scheduled services and hajj services between the two countries; abolish any market division, quotas and payment of royalties; and allow market forces to determine ticket prices without interference from either country’s aviation authority or airlines. The Policy Note is available on the CCP’s website, www.cc.gov.pk
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