Aviation association calls for adjusting jet fuel price

The Aviation Operators Association of Bangladesh (AOAB) has called on the authorities to adjust the jet fuel price in line with the global market as they are currently purchasing jet fuel at a 30-40% higher price than the international market price.

The association, in a letter sent to the Minister of State for Power, Energy and Mineral Resources Nasrul Hamid yesterday, also expressed fear that the aviation sector is inching towards an existential crisis due to the overpriced jet fuel.

"This has pushed airline ticket prices beyond passengers' affordability, resulting in a steep decline in ticket demand, which is currently one third less than usual. As a result, the government's tax collection will drop by Tk7.2 crore per month," the association said.

Promising airlines including GMG, United and Regent have already gone bankrupt, it said, adding that the remaining airlines are deprived of their right to purchase fuel at a competitive price as Padma Oil has the sole authority to sell jet fuel.

The association said the same fuel for domestic flights costs 15-25% more than the fuel for international flights.

The letter pointed out that recently the fuel price of domestic flights has been increased by Tk5 to Tk130. On the other hand, the fuel price for international flights has been reduced by 9 cents (about Tk10) to 1 dollar, which it termed as unprecedented.

Domestic flights consume 44.5 lakh litres of jet fuel every month, while international flights require 5.03 crore litres. Domestic demand is only 8% of the overall jet fuel demand. As a result of the recent price adjustment, the Bangladesh Petroleum Corporation's revenue on domestic fuel will only increase by Tk2.225 crore, while for international flights it will incur a loss of Tk50.3 crore, which will lead to a cumulative loss of Tk600 crore at the end of the year.

AOAB Secretary General M Mofizur Rahman told The Business Standard, "Two years ago the price of jet fuel used in aircraft was only Tk46 per litre. Now the price of the same fuel set by the government is Tk130 per litre, which is a 127% increase."

He added that fuel cost accounts for 40-46% of an airline's operating costs.

The association floated three proposals to solve this problem – Permitting direct purchase of fuel from Pertex Petroleum for domestic private sector airlines and helicopter operators, allowing import of jet fuel from abroad at competitive prices if required and domestic fuel prices are adjusted in line with international flight fuel prices.