As travellers return, local airlines go for expansion
Local airlines see profit on the horizon as aviation forecasts outshine economic downturn gloom
For airlines, it is looking more like 2019 again.
A travel bonanza is exceeding expectations helping airlines earn profits again and brightening the outlook for the rest of the year. It is also a welcome relief for the local airlines to dust off the expansion plan they had to shelve for two years during the Covid induced gloom.
Local private airlines US-Bangla, Novoair and Air-Astra are in talks to bring in 13 aircraft – such as Airbus 330, Dash 300 and Airbus 900 – to their fleet late-2022, which now has 22 planes.
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The move for expansion is encouraged by the third terminal opening of the Hazrat Shahjalal International Airport next year and better aviation infrastructure across Bangladesh, said officials.
Currently, the private airlines carry 5,000 passengers per day, according to Captain Lutfor Rahman, CEO of the US Bangla Airlines, and the number of per day air travellers will be at least 7,000 next year.
"A major chunk of the air traffic will be outbound. Therefore, we are going to operate more flights to Sharjah and Singapore," he told The Business Standard.
Alongside the current 11 international routes, the US-Bangla CEO said they will introduce the Dhaka-Delhi route next winter as the new aircraft will ramp up the capacity to the gulf countries – a key manpower exporting hub for Bangladesh.
With the expansion plan in place, aviation sources said that US-Bangla, Novoair and Air-Astra altogether will have 30 planes in the first quarter of 2023 and 33 in the second quarter next year.
Novoair, which now operates on domestic routes and only the Dhaka-Kolkata international route, approached Airbus recently for the Airbus 320, a narrowbody jet airliner. Novoair, according to the sources, also is in expansion mode.
The third local aviation company Air-Astra says it will add four aircraft to its fleet by November this year to begin initial operations on domestic routes.
"We will operate flights on all domestic routes except Barishal if we get all four planes this year," Air-Astra CEO Imran Asif told The Business Standard.
He said they would try to manage a hangar at Dhaka airport. If they fail, they would use Sylhet airport for aircraft parking.
A turbulent time
As airlines emerge from the pandemic, they have been facing critical labour shortages, elevated fuel prices, a chaotic global economic situation and a looming recession on top. But the aviation prospects are bright as they defy all the economic challenges.
Against a backdrop of slowing economic growth, the recovery in global air travel continues to support forecasts of a return to 2019 levels of traffic in 2024 at the aggregate level, the International Air Transport Association (IATA) forecasted in September.
The Airports Council International (ACI) World also says full recovery of the aviation sector will take 2024.
Earlier in June, the International Air Transport Association noted that air cargo volumes are expected to set a record high of 68.4 million tonnes in 2022.
The association said airlines have emerged "leaner, tougher and nimble," having defied predictions for widespread bankruptcies and failures.
The IATA bottom line was, "Efficiency gains and improving yields amid ongoing strong recovery in international traffic will help airlines to reduce losses."
"The price of jet fuel was Tk64.50 per litre last year as it is now Tk101.75," Mofizur Rahman, managing director of Novoair, told The Business Standard.
He said the fuel shock forced them to raise airfares on all domestic routes.
Usually, fuel accounts for around 33% of the total expenditure of airlines. But for the last one year, fuel spending stands for 50% of costs in the local aviation sector, say insiders.
Mofizur Rahman, who is also the secretary general of the Aviation Operators Association of Bangladesh, also pointed to the current tax structure weighing on them.
"The government imposed 15% VAT in the current fiscal year for import of aircraft spare parts. Besides, we have to pay 5% custom duty for aircraft import, 5% advance tax and 5% advance income taxes for parts, and 5% advance tax for engines. But there are no such duties and taxes in India, Singapore or Malaysia," he added.
Wait for third terminal opening
When the third terminal of the Hazrat Shahjalal International Airport will be completed in October next year, it will triple the airport's annual passenger and cargo handling capacity, according to the Civil Aviation Authority of Bangladesh (CAAB).
Currently, Dhaka airport handles 70-80 lakh passengers each year. After the opening of the third terminal, the airport will be able to provide services to around 2.20 crore passengers every year.
It will be able to handle 5 lakh tonnes of cargo, more than double the current capacity of 2 lakh tonnes.
At present, 28 foreign airlines are operating international flights to Bangladesh. Of them, Qatar Airways, Emirates, Saudi Airlines, FlyDubai and Air Arabia dominate the market.
Apart from the local companies, aviation sources said foreign airlines also want to ramp up their flight frequency. But the aviation authorities are not approving them for accommodation issues.
Kazi Wahidul Alam, an aviation expert and also the editor of travel magazine Bangladesh Monitor, said, "Qatar Airways used to operate three flights daily, it's now up to four per day. As far as I know, many airlines including Emirates and IndiGo want to increase their flight frequency and expand routes. They will do so as soon as they get the permission."
National flag carrier Biman Bangladesh Airlines also looks to expand the business, as Biman Managing Director Zahid Hossain told The Business Standard that they will hold a press conference within a week on the details of the plan.
At a press briefing in August after assuming office, Zahid Hossain said they will make the optimum use of Biman's existing fleet of 21 aircraft.
"Biman will expand its routes in different new destinations including the USA. We will also increase the number of flights on different lucrative routes," he told the press.
Biman now posts a $700 million annual turnover, which the new MD wants to expand to $1 billion.
A fast-spinning chopper market
The demand for hiring helicopters has increased significantly in recent years thanks to the growing and rapidly changing economic and business environment. More and more people are making trips by helicopter for business, recreation, and medical emergencies.
Responding to the growing market, nine firms are now offering helicopter services with 32 choppers, according to the Civil Aviation Authority. Besides, one company is in the pipeline, said insiders.
Currently, the helicopter operating companies are Square Air, South Asian Aviation, Meghna Aviation, BRB Air, ATL Aviation, Partex Aviation, R&R Aviation, Bangla International Airlines, Bashundhara Airways and BCL Aviation.
"There were only three choppers for hire even in 2005," Captain Md Gulzar, managing director of chartered airline South Asian Airlines said. He added the sector had five helicopters on average per year.
In 2030, there will be more than 600 flights per month where the flight number is now 350, he predicted.
