There’s not a day that goes by where I don’t learn something new about the airline industry — it’s one of the reasons I never get bored. I figured I’d share the “lesson” I learned today (thanks to Noa for pointing this out), since it’s one that caught me off guard.
I’ve always been under the impression that the UK has the world’s highest tax on airline passengers, in the form of the Air Passenger Duty (APD). As it turns out, Pakistan absolutely puts the UK to shame, with taxes on premium cabin airline tickets that make the APD look like a bargain, by comparison.
In this post:
Federal excise duty on airline tickets from Pakistan
Virtually all countries charge taxes of some sort on airline tickets, though Pakistan really takes it to the next level. The country charges a federal excise duty on itineraries originating in Pakistan. So you don’t pay these taxes if you’re simply connecting in Pakistan, or if you’re traveling to Pakistan, but instead you pay them for any portion of a trip that originates in Pakistan.
How bad are the taxes? Well, in economy and premium economy, they’re not so bad, at least relatively speaking. The federal excise tax is 12,500 PKR (~45 USD), regardless of where you’re traveling to. That’s kind of steep for a short haul international flight, though not unreasonable for a long haul international flight.
However, it gets much more costly if you’re traveling in a premium cabin. There the cost varies based on where you’re traveling to. For tickets in first and business class:
- Pakistan charges 350,000 PKR (~1,263 USD) for tickets to North and South America
- Pakistan charges 210,000 PKR (~758 USD) for tickets to Europe, much of Asia, Australia, New Zealand, etc.
- Pakistan charges 105,000 PKR (~379 USD) for tickets to the Middle East and Africa
Keep in mind that the above amounts are just one aspect of the taxes you pay, as there are other taxes and fees, both for the origin and destination country. This is also separate from any carrier imposed surcharges an airline may add to the cost of a ticket. The tax also applies when redeeming miles for a ticket.
For example, if you’re redeeming American AAdvantage miles from Islamabad to Abu Dhabi in Etihad business class, you’d pay $400.40 in taxes and fees.
If redeeming miles from Islamabad to Frankfurt via Abu Dhabi in Etihad business class, you’d pay $789.50 in taxes and fees.
If redeeming miles from Islamabad to New York via Abu Dhabi and Amman in Etihad and Royal Jordanian business class, you’d pay $1,323.61 in taxes and fees.
Ouch!!
That tax can’t be easy for airlines
Pakistan is a challenging aviation market. The country’s national carrier, Pakistan International Airlines, has struggled endlessly with both operating reliably and staying in business. The country has also struggled with consistently maintaining long haul service from other carriers.
I can of course understand the balance that governments have to try to find between getting the funding they need to operate, while not making things unaffordable. I see the logic of heavily taxing premium cabin tickets, since those are generally going to be the least price sensitive customers, and there’s also a huge wealth gap in Pakistan.
At the same time, taxing passengers $750+ for any flight that’s more than several hours makes matters really difficult for airlines. I would imagine that in many cases, Pakistan’s federal excise duty on airline tickets is significantly greater than the typical profit margin for a flight (especially for an airline with a big premium cabin).
I suppose if the government views demand for air travel (especially in premium cabins) as being highly inelastic, then maybe the country is onto something. However, I think the math isn’t quite that straightforward, and that these kinds of taxes probably impact the extent to which some airlines offer service to the country.
What’s funny is that Pakistan International Airlines has actually found a loophole to avoid having to charge these kinds of taxes. Nowadays the airline markets its business class as “executive economy,” so since that’s considered premium economy, the higher fees aren’t due.
Now, I suppose the government is probably happy with that loophole, since passengers on foreign air carriers are on the hook for this, while those flying with the national carrier aren’t. At the same time, it’s pretty dumb to not set parameters around what constitutes first and business class, and what doesn’t.
Bottom line
It’s news to me, but Pakistan seems to have the world’s highest taxes on premium cabin passengers. For a short flight within the Middle East, a business class passenger is on the hook for a fee of nearly $400, while for a flight to the Americas, that tax increases to over $1,200. I always enjoy learning something new, so hopefully I’m not the only one who finds this interesting.
What do you make of Pakistan’s incredibly high airline taxes?
Now you've published this, just watch the grubby UK Labour gov't play 'monkey see, monkey do'.
Other than folks with family ties, there is no reason to go to Pakistan. What is appealing about that country at all?
Yes this departure tax is new and makes any redemption out of Pakistan expensive.
One can arrive into Pakistan in the premium cabins, however if one is willing to fly in Economy to the closest city, Dubai, Abu Dhabi or Bahrain and then fly Business out of there the taxes are low.
Darn, no Pakistan, guess I’ll. Go to Italy
The workaround is took Turkish via Lifemiles ;)
It seems to me that the examples shown for EY mile redemptions are misleading as the amounts shown would include carrier imposed surcharges as well, not just government taxes.
@ CapitalMike — AA doesn’t have fuel surcharges on Etihad redemptions.
When people avoid paying income taxes, thr govt needs to generate revenue other ways.
The Dominican Republic charges 18% sales tax on airline tickets originating there. For a first class roundtrip ticket, that can easily add up to several thousand dollars.
Yes this tax is relatively new. Part of the new government policies. I had to basically redeem to separate Mikes tickets. One in Economy to Doha. And a separate one from Doha on business. The worst part is you can’t avoid the tax if you do a multi segment economy to business either.
For that amount, do they make sure I can’t smell the other passengers?
How do other passengers make sure they don't smell *you?*
Thanks for your stupid and racist comment. Now go back to your room or the hole in the wall you came from.
hahahahaha... you wish!
There are a few things I wanted to say about this. I am an American born Pakistani citizen, and a lot of my family lives there and I've been going there 1-3 times a year for the past 15 years.
1). These taxes must be new, because I know for sure they did not exist before. I have redeemed the 70K J award through AA for travel on QR and EY many times. I...
There are a few things I wanted to say about this. I am an American born Pakistani citizen, and a lot of my family lives there and I've been going there 1-3 times a year for the past 15 years.
1). These taxes must be new, because I know for sure they did not exist before. I have redeemed the 70K J award through AA for travel on QR and EY many times. I believe this is recent, because it would make sense as the government has been looking for ways to make money due to the (recently more) dire financial situation in the country. This would also explain why I haven't been able to find decently priced premium cabin cash tickets originating in Pakistan, which previously used to be very cheap (I frequently booked $2K USD r/t rickets from Islamabad to New York on Etihad/Virgin Atlantic, and once booked $1,200 r/t on Etihad to the US).
2). This tax seems to be aimed at the wealthy in the country. And I have to say, it is actually quite smart. The wealth gap in Pakistan is huge between the wealthy and the normal citizens, and has grown even more these past few years. The wealthy live extremely differently then the common citizens. This is especially true for wealthy Pakistani's living in Pakistan. If you can afford to book a First of Business Class ticket out of the country, you are very well off, disproportionately to the rest of the country. Everytime I fly to Pakistan, Business Class only has a few seats booked with cash, while everyone else are op-ups and Economy Class is often full on EY, QR, and EK's 77Ws. I frequently get operational upgrades to J on Qatar as an AA Gold status holder (the lowest status tier with AA that gets you Oneworld Ruby status). It is interesting to me though that this tax was implemented with the current Prime Minister, who is a billionaire and his family is known to have policies which favor them and their friends of the same socioeconomic level.
3). PIA actually markets their premium cabin as Premium Economy on all of their international flights (and has done so for a while now). So, I assume they don't have to pay these high taxes assuming these tax figures you wrote about apply to First and Business Class, and not Premium Economy.
I can say with certainly that these taxes did not exist in this form 2 years ago, but I haven't redeemed miles on a ticket from PK since then so I can't give a better estimate unfortunately. But I don't think airlines are being harmed much by this because there isn't really much premium cabin demand originating in Pakistan. Most of the people flying in F and J on flights to/from the country are wealthy Pakistanis living abroad, so they book their tickets r/t from their country of residence. I actually think this tax is quite smart in my opinion. It taxes the ultra wealthy. I'm of course negatively impacted by it though since I can't use that 70K AA award anymore.
@ JB -- Fascinating how PIA markets business class as executive economy. Thanks for the heads up, as I added that detail to the post.
I am in Pakistan right now and this was the big topic of conversation today as some people I'm with were looking at changing their departure flight due to the protests. Apparently the taxes started in August, and it's a big FU to the wealthy who have left the country over recent years.
@Ben - Thank you! I wanted to clarify though that PIA started marketing their premium cabin as "Premium Economy" years ago, prior to this tax having been implemented. The reason PIA changed their marketing of the product was because they knew how subpar it was compared to other airlines (especially their competitors in the Middle East for long-haul traffic). As a result, they rebranded it in order to help set the proper expectations for passengers....
@Ben - Thank you! I wanted to clarify though that PIA started marketing their premium cabin as "Premium Economy" years ago, prior to this tax having been implemented. The reason PIA changed their marketing of the product was because they knew how subpar it was compared to other airlines (especially their competitors in the Middle East for long-haul traffic). As a result, they rebranded it in order to help set the proper expectations for passengers. This was not done as a response to this tax in order to find a loophole. In fact, I think it's likely that the government knew this and intentionally set a separate bracket for Premium Economy ticket taxes, so that the governemnt-owned PIA would have an advantage.
@JB - this is relatively new. I'm a Canadian Pakistani and go back 1-2 time every year. The first significant hike happened around 1.5-2 years ago and this most recent one occurred this year following the new budget. It's quite unfortunate. As far as points redemptions go, I've been booking either cash or Y points fares now from Pak to one of the ME countries and then separates points booking onwards to NA.
I wonder...
@JB - this is relatively new. I'm a Canadian Pakistani and go back 1-2 time every year. The first significant hike happened around 1.5-2 years ago and this most recent one occurred this year following the new budget. It's quite unfortunate. As far as points redemptions go, I've been booking either cash or Y points fares now from Pak to one of the ME countries and then separates points booking onwards to NA.
I wonder if this is also the reason you're not seeing cheap premium cabins deals ex-Pak anymore either...
Yet another reason why foreigners aren't going to Pakistan.
...and why capital won't flow into Pakistan
@Tim Dunn
Last I checked, there were a lot of bigger reasons other than airline taxes for why foreign companies aren't investing in Pakistan.
Samsung, Toyota, BYD and especially other Chinese companies invest in Pakistan. That being said, it needs to sort out its vast corruption problem - from the top.
not saying that there aren't... but this kind of tax is reflective of why some countries stay economically separated from the rest of the world.
of course there are multi-national companies that operate in PK. There is a market and some companies figure out how to navigate the issues
Pakistan is not LHR with huge amounts of premium demand - and these taxes aren't even as high as the UK APD, but don't let them know or they might increase those too.