What needs to be done to help local private airlines survive and thrive?

Local private airlines in Bangladesh are seeking more business-friendly policies and regulatory frameworks due to their struggles with high business capital and jet fuel costs. Complications related to machinery imports, inadequate maintenance facilities, high duties, limited human resource development capacity, and challenges with air service agreements with other countries have further exacerbated their difficulties.

"These challenges have hindered our ability to compete with foreign airlines and the national carrier, Biman Bangladesh Airlines," says Md Kamrul Islam, general manager of US-Bangla Airlines.

Industry insiders say that the disparity between Biman Bangladesh Airlines and private airlines through undue patronisation by the state carrier is a significant barrier to their expansion.

Over the past 26-27 years, several private operators, including GMG Airlines, United Airways, and Regent Airways, had to ground their fleets as they struggled to survive. Currently, the three privately operating airlines — US-Bangla, NovoAir, and Air Astra — are expressing concerns about their ability to capture the growing aviation market from foreign competitors due to inadequate policy support.

"For the last two and a half decades, we have witnessed a troubling trend of private airlines closing down, causing significant instability in the industry," said Kamrul Islam. 

"The government has granted opportunities for the three existing private airlines to operate, and it is the government's responsibility to ensure their survival. Currently, local airlines, including Biman, represent only 20% of the market, so they require comprehensive support to regain market share from foreign carriers," he added.

"Expanding our capacity and fleet availability is essential to compete effectively with foreign airlines. Additionally, if we reduce operational costs, we can make air travel more affordable for passengers, giving us a competitive edge," Kamrul further said. 

According to industry insiders, about 40% of an airline's operating costs consist of jet fuel, and all airlines in Bangladesh face higher jet fuel prices compared to their global competitors.

"Fluctuations in jet fuel prices significantly affect our ability to forecast operational costs," expressed Mofizur Rahman, secretary-general of the Aviation Operators Association of Bangladesh (AOAB) and managing director of NovoAir. 

"In our region, we consistently contend with oil prices that are 30-40% higher than global market rates. Sustaining any aviation service under these high-cost conditions becomes an enormous challenge."

He further pointed out that when global crude oil prices decrease, local airlines cannot reap the benefits as the prices charged to them remain unchanged. 

"High jet fuel prices, in addition to high business capital costs, pose significant challenges for the existence of local carriers. If an airline seeks local financing, the cost can be more than ten to thirteen percent, whereas foreign carriers based in the Middle East or Southeast Asia enjoy lower capital costs of 3% to 5%," Mofizur said.

Imran Asif, CEO of Air Astra, emphasised, "If the cost of capital is reduced, foreign carriers gain a significant advantage in overall expenditure, making it challenging for Bangladeshi carriers to compete with international carriers."

He also highlighted issues with air service agreements, stating, "The air service agreement outlines the permissible frequencies or routes that can be operated between our country and another nation on a weekly basis."

However, there are instances where Bangladeshi airlines aspire to expand their operations, only to find that the required frequencies are unavailable within the existing agreement. 

"Unfortunately, the process to amend the agreement tends to be protracted due to bureaucratic complexities in Bangladesh. By the time this revision is completed, foreign airlines often seize the opportunity to enhance their capacity by deploying larger aircraft," he added.

Call for a level playing field

Private carriers are calling for a level playing field similar to Biman's. 

Mofizur Rahman expressed his concerns, saying, "The government's efforts to safeguard state-owned airlines at all costs are significantly detrimental to the viability of private airlines. While Biman can delay fuel payments for years, private airlines are required to pay for fuel in advance."

He continued that private airlines also bear the burden of funding civil aviation infrastructure, a responsibility that state-owned carriers are exempt from. 

"In fact, the fares charged for domestic flights do not even cover the fuel costs for private airlines. However, this disparity exists due to a lack of oversight," he added.

While a syndicated loan of Tk100 crores would be sufficient, such resources are beyond the reach of airlines as they have not earned the credibility that banks demand. In contrast, Biman faces no such problem as the government acts as its bank guarantor.

Furthermore, there are regulatory roadblocks, including high rates of surcharges, aeronautical fees, landing fees, and parking fees. Meanwhile, the lack of a sufficient number of trained human resources, including pilots and engineers, poses a significant challenge for meeting industry demand.

"There is a substantial shortage of skilled personnel essential for the advancement of the aviation industry. It is crucial for the government to provide policy support for the establishment of the necessary educational institutions. With such support from the government, the private sector can also step up to bridge this gap," noted Squadron Leader Lutfor Rahman, CEO of US-Bangla Airlines.