Taliban Discovers The Limits Of Islamic Airline Economics

My basic takeaway from Timur Kuran’s 2011 The Long Divergence is that Mideast countries that have interpreted Islamic economic stricture the most broadly have performed the best economically, while strict adherence to things like bans on interest hold back prosperity.

The Taliban is getting a harsh lesson in the limits to Islamic economics as it deals with international air service from Kabul, now that they’ve returned from the role of rebel force to that of managing institutions of governance. Price controls lead to scarcity.

  • Pakistan International Airlines has been the only international carrier offering regular air service from Kabul since the Taliban takeover

  • Operating in Kabul is challenging. It’s also risky. They’re facing heavy insurance surcharges.

  • Flight prices have risen in some case more than 10x compared to levels when the previous government was in power and the U.S. military provided stability.

  • The Taliban has ordered the airline to lower its prices by 90% or more, back to earlier levels.

  • In response, the airline is pulling its scheduled Kabul service.

“Our flights frequently faced undue delays because of the unprofessional attitude of the Kabul aviation authorities,” Abdullah Hafeez Khan, the PIA spokesman told the AFP news agency. …A source at the airline told AFP that Taliban officials were often “derogatory” and on one occasion “physically manhandled” a staff member.

…The Afghan transport ministry said in a statement that prices on the route should “be adjusted to correspond with the conditions of a ticket before the victory of the Islamic Emirate” or the flights would be stopped. It urged passengers and others to report any violations.

The early Taliban experience should also be viewed as a sharp rebuke to the politics of populism. They want to deliver wins to their median constituency even as they struggle to maintain regular access to electric power, but their ability to do this is bounded by the reality that scarcity and pricing aren’t mere cabals by powerful interests against the people, but reflect the economic reality imposed by risk and uncertainty created by the Taliban themselves.

Quite simply there’s a risk premium to a foreign airline serving Kabul, and any airline has to be compensated for that. They need to offer air service that fills up a plane at high enough prices to both cost higher costs and deliver above-average returns, or else the airline is better off deploying their planes elsewhere. Raising the cost on airlines, or limiting the revenue they achieve, means less air service.

Put another way, when you’re losing arguably the worst airline in the world that is state-backed by a political regime that’s been largely supportive of your revolution you’re doing something wrong.

(HT: Live and Let’s Fly)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. It’s a bit like ISIS demanding that its territory use only gold and silver coins. Or the old Soviets trying to figure out how come a million people bidding on products was more efficient than one council setting prices and quotas. It’s fun to issue fiats, but nobody can break the laws of economics any more easily than they can those of physics. Eventually somebody in this government will figure that out.

  2. I thought no sensible economist will follow Timur for his basic unprovable claims.
    Mr Gary, wait don’t jump to your guns.
    First why PIA agreed to the price after they suspend their flights?
    Second, in unfair exploitive market conditions, any good system fails.
    Taliban fought the foreign occupation and will fight for a fair and ethical market too.

  3. If the Taliban started it’s own airline it would be the only airline that instead of “no jab, no fly” would enforce “no hi-jab, no fly”

    And I’d imagine their frequent flyer program would offer ‘experience’ awards such as: getting to join a flight and fly into buildings filled with infidels.

    Reality is so sad, I have to make jokes…very unfortunate that these animals now have control of a large territory again, and soon enough the implications of this will be felt in the west.

  4. The comments here are bloody hilarious. The posters should be Late Nite Show writers.

    I can’t top them and I thought I was funny…

  5. It doesn’t take any brains or organization to overthrow a government but it does take experience and discipline to govern it better than it was.
    At their high birthrate it will be like 100 rats going after the last loaf of stale bread. Guess what they eat next?
    Glad we are out of there.

  6. The constituency of the Taliban doesn’t care about access to electricity, and probably would be happy it is being denied to the liberal, city-dwellers of the country. They are making no effort to actually improve or even maintain the lives of their urban population, beyond that of a PR campaign or horse and pony show for international media.

  7. The comment on populism was a cheap shot, uncalled for, and disingenuous. There is a big difference between 120 million in the U.S. or 300 million in Europe who are part of a race that developed every technological innovation and comfort in history/who has expertise in manufacturing, steel, construction, advanced farming, commercial fishing, oil exploration, automotive, weapon manufacturing, crypto, alternative communications and etc. to a group who sometimes lives in a cave and has produced nothing in history.

    It’s foolish to speak ill of populism relating to economics when populists in the western world allow the modern economy to function. If populists started saying no and started using their numbers, your economic system would collapse.

  8. Just for fun I did a google maps search of hotels in Kabul. The only hotel with availability for the night I searched was the Kabul Serena Hotel for $181. At least it was rated 4.4 stars on google, the only problem is the last review was 2 months ago so I’m not sure if it could have dropped since then 🙂

  9. As usual non factual, disgusting and biased blogging, you should be ashamed of your sorry blog.
    Why do you keep forgetting that it was your own US government that created and funded Taliban to fight the Soviets. Stop blaming Pakistan and own your shit

  10. Populism is a device used by opportunistic politicians to attack the “elites” in power, whom they accuse of tilting the system to their own ends. The reality is that, once they gain power, populist leaders make choices that are all too often based on whims, personal priorities and prejudice. They will quickly discard the controls of democracy and bring in a new elite who bow to the populist gods, not least of all their populist leader.

    The choices of populist leaders (think of Afghanistan, Venezuela or North Korea) are all too often only loosely aligned to the promises that won them popular support, but they mostly fail in the execution. A certain wall comes to mind.

  11. Maybe Afghanistan can operate its own national airline, Taliban Sharia Airlines.

    Their own version of TSA.

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