Pandemic-hit airlines struggle to stay afloat

The pandemic-hit aviation sector of the country is still struggling to find its wings back as meeting stringent safety conditions makes it very hard for the Bangladeshi operators to enter the gradually reopening airspace. Making sure that passengers are certified Covid-19 free to be eligible to fly is an additional burden on them.

The pandemic devastated the Bangladeshi aviation sector just when the national flag carrier invested Tk10,000 crore and the other local aviators another Tk1,250 crore to expand their operations.

But with paltry income and a bleak international aviation forecast for the next three years, the industry is now facing tremendous pressures of loan repayment and paying their staff.

The airlines now seek policy support and whole-hearted support from aviation-related authorities, including the customs department, to minimise their operational losses, speakers said at a webinar organised by The Business Standard.

They also suggested that the government put all-out efforts for credible Covid-19 testing and certification for all outbound passengers to ensure that foreign airports feel confident with passengers coming from Bangladesh.

Even though inbound and outbound travels restarted in June, international flights are being operated at 40% capacity loss due to various restrictions imposed on air travels by different countries, said Md Mokabbir Hossain, managing director of Biman Bangladesh Airlines.

Air operators have to run flights keeping two rows of seats empty in compliance with the instructions of the Civil Aviation Authority of Bangladesh (Caab). Moreover, different countries have taken quarantine measures and set many other conditions that include having a Covid-19 test certificate.

A lack of passenger demand is another challenge, he said.

"Biman has been operating flights in spite of losses because keeping its fleet grounded would be even more lossmaking," he said.

The other two local private airlines, US-Bangla and Novoair, are in serious difficulty as well as they continue operating flights despite losses since the reopening of the airspace in June.

The aviation industry started to suffer from the pandemic fallout from February this year and it is still running at 50% capacity loss, said Mofizur Rahman, managing director of Novoair.

Citing the case of increased transport fares in other sectors while airfare remained unchanged even during the present crisis situation, he said, "As a result, air operators are still grappling with losses."

Large airline companies around the world got financial support from the government to pay salaries, but the local airlines in Bangladesh did not get such support, he said.

The Novoair managing director said the aviation industry now needs policy supports like reduction of fuel price, revising down of aviation charges and tax to continue the business.

He said airline operators will have to come up with proper planning to expand the domestic market and develop internal tourism for the sake of the survival of the aviation business.

US-Bangla, the largest private carrier in the country that was planning to make more investment to increase inter-connectivity, backtracked on its business expansion plan in the wake of the coronavirus outbreak.

The pandemic has setback the airline industry for at least two years, said Sikder Mezbahuddin Ahmed, chief executive officer of US-Bangla.

"Now we are making a survival plan," he said.

The main challenge for the air operators is to boost the confidence of travelers by ensuring safety measures as there is a fear of a second wave of the infection, he observed.

In the domestic routes, US-Bangla has already seen improvement in passenger load factor by up to 90% by working on recovering passenger confidence, he said.

In the case of international flights, the government needs to ensure proper Covid-19 certification as required by the destination countries, he said.

"If the government can ensure proper testing of air passengers, it will help air operators get entry permission to more countries. This will boost the aviation business," he asserted.

Meanwhile, the International Air Transport Association (IATA), recently downgraded its traffic forecast for 2020. The association now expects full-year 2020 traffic to be down 66% compared to 2019. The previous estimate was for a 63% decline.

In August, international passenger demand plummeted 88.3% compared to August 2019, witnessing a mild improvement from a 91.8% decline recorded in July, according to the IATA.

Domestic markets continued to outperform international markets in terms of recovery, although most remained substantially down than a year ago.

Domestic traffic fell 50.9% in August. This was a mild improvement compared to a 56.9% decline in July. Domestic capacity fell 34.5% and load factor dropped 21.5 percentage points to 64.2%, according to IATA.

Recovery challenge for Biman

The brand new wide-body aircraft that was supposed to turn Biman's fate around before has now become a curse for the national carrier.

As the international market is uncertain amid fears of a second wave of the novel coronavirus, the IATA is suggesting air operators to focus on the domestic market for recovering the financial losses caused by the pandemic.

As suggested, air operators around the world are grounding their wide-body fleet and focusing on narrow-body operations.

However, Biman could not take the advantage as most of its aircraft are wide-body ones and suitable for long-haul flights.

The national flag carrier currently has 18 aircraft, of which 16 are wide-body aircraft and two are smaller Dash-8 aircraft.

Three new planes will join Biman by next year according to the previous plan.

Operating wide-body aircraft on domestic routes is not financially viable. On the other hand, those aircraft cannot run at full passenger capacity on international routes due to various travel restrictions amid the current crisis situation.

As a result, Biman could not recover its business yet even after taking a financial support of Tk1,000 crore from the government stimulus package.

The company used the bulk of the stimulus loan for paying installment against a Tk10,000 crore loan taken out for purchasing new aircraft.

"We had a plan to start direct flights from Dhaka to Toronto, increase flight frequency to middle-eastern countries and Singapore by April. But the coronavirus has knocked the bottom out of all the plans," said Hossain.

In the aviation sector, 50% of international passenger movement is tourism-related. And tourism is related to two things – disposable income and safety– both of which are now in jeopardy, he said, adding that it is, therefore, uncertain as to when tourism will recover to its old normal.

Of the rest 50% international passengers, most are related to employment, visa and business. But now, overseas employment is also in crisis, he pointed out.

In this situation, there is a possibility of a mere 30% recovery in international passenger volume, he said.

Sharing his recent experience, Mokabbir Hossain said when the Abu Dhabi route was reopened, Biman operated seven flights per week. But, soon the passenger load factor came down after the stranded passengers had flown to their destinations.

Therefore, Biman gradually reduced its flight frequency due to a lack of passengers, he said.

Only stranded people are travelling on international routes, as no new employment scopes are being created on a large scale amid the present crisis.

About flights to Saudi Arabia, he said Biman was supposed to carry around 800 passengers in two flights soon after the country reopened its airspace. But, the number of passengers came down to 260 later, as many employers refused to take back their employees.

Moreover, fears of a probable second wave of the coronavirus in Europe have caused  further lockdowns. If the second wave becomes severe then the aviation sector will go back to the situation of March.

With so many risk factors at work, air operators are finding it difficult to make any business plan, Mokabbir concluded.