Takeoff into the free skies: Breathing life back to the airline industry of Bangladesh

Infographic: TBS

Bangladesh 2.0!

Even to those like me in the aviation industry who never imagined anything else other than the sound of airplanes could be sweeter, that line above indeed sounds the sweetest! 

Pensive souls will find the freedom in the air to be much akin to flying through clear skies after making it through long, rough and stormy weather.

As much as I would love to drift away in emotional deliberations, the very purpose of writing this article obligates me to come back to its purpose—to make a point yet once again on commercial aviation in Bangladesh, 8 long years since the last time I did so in 2016.

Fifty-three years on since 'first' liberation and more than 30 years since the first private entrant into the commercial airline industry of Bangladesh, the story of this sector has been dismal, to say the least. 

National airline Biman Bangladesh Airlines continues to lose money and lose grip of the otherwise expanding market, while the private airlines have been going nowhere fast (and often nowhere at all) while suffering from continued losses owing to national policies and regulations that have been thwarting any and all attempts by local airlines to compete against their international counterparts. 

While the incumbent interim government led by Nobel Laureate Dr Muhammad Yunus has a lot on his plate already that should be prioritised, like restoring law and order, reviving the economy and the financial sector from the shambles, to name a couple, I shall endeavour to point out three major steps the interim government should take to improve the aviation industry. 

Based on my experience of having been the chief executive at three different airlines over the past 15 years, I believe these three steps could be the stepping stones which the airline industry of Bangladesh needs to finally get a chance to thrive sustainably.

Adjust policy for fuel pricing

Fuel (Jet A-1) is the single-largest cost component of any airline's expenses and has a significant impact on the viability of being in business. Unfortunately, jet fuel costs in Bangladesh have been unnecessarily high at prices that have not been based on free market dynamics or accepted best practices. 

The industry best practice on fuel pricing is to rely on independent price reporting agencies (PRAs) to extract assessments of jet fuel prices based on demand and supply fundamentals. PRA price assessments offer a level playing field to market participants by preventing arbitrary pricing of jet fuel. 

However, in Bangladesh, the jet fuel continues to be set at prices with no reference to price assessments from PRAs, thereby creating economic and operational distortions—more so for the local airlines based in Bangladesh.

The resulting high jet fuel prices have proven to be counterproductive to the economic development of Bangladesh by hindering aviation growth and the very feasibility of the industry, ultimately driving down revenues for all stakeholders of the supply chain, including government-owned Bangladesh Petroleum Corporation (BPC) and Padma Oil Company Limited (the sole supplier of jet fuel in the country). 

As a matter of fact, if jet fuel prices were rationally set, both BPC and Padma Oil could have generated more revenue and profits from sales in higher volumes than they have done from sales at unreasonably high prices.

Major airlines operating to and from Bangladesh, like Emirates and Singapore Airlines, who operate long-range widebody aircraft like B777, B787, A350, etc., uplift little to no jet fuel from Bangladesh because of high prices, while local airlines trying to compete with these airlines, like Biman Bangladesh Airlines and US-Bangla Airlines, are forced to uplift fuel from Dhaka at prices that are between 20% and 30% higher.

It makes their entire commercial operations uncompetitive from the onset and thwarts long-term sustainability in business.
 

Amend policies for surcharges and fees

No country on the face of this planet with the potential to develop their commercial aviation industry has done so with as exorbitant surcharges and fees as prevalent in Bangladesh—surcharges that can accrue at up to 72% per year on due payments of aeronautical and non-aeronautical fees! 

By comparison, countries such as Singapore, Malaysia, and India have between 8% and 18% surcharges on these fees, along with a host of other benefits for their native airlines—specific waivers on landing and parking fees, commercial subsidies for connecting remote or underserved regions, to name a few.

Commercial airline business is inherently cyclic in nature, with upturns and downturns over a given period of time, and this holds true for every airline operating in any part of the world. 

As Mr Aengus Kelly, CEO of an Ireland-based aircraft leasing company with more than 1,700 aircrafts in its portfolio, opined, "Airlines make most of their money in 3 months and then spend the rest of the year trying not to lose so much." 

Indeed, that is the truth! Even allowing for some variance, airlines make their money from up to four months in a year and try to sustain and survive for the rest of the eight using the money in hand, hoping to see through to the end of the downturn. 

The reality is that the business is not that straightforward to predict. Challenges on a global scale, like the Covid-19 pandemic, or even on a national scale, as recently seen during the July Uprising in Bangladesh, disrupt the airline industry without foreseeable prediction for recovery. 

During such phases, airlines would incur losses it did not expect and would not be able to manage the cash flow as originally planned. This will inevitably lead to non-payments of certain due fees regardless of how good the airlines' intentions were. And they would end up having to face the non-sensibly high surcharge rates, which has already caused several airlines to go out of business and never find their way back again. 

As a result, more of the market share of air travellers between Bangladesh and the rest of the world went to the foreign carriers.

Development of skilled manpower for the industry

What is any organisation, or for that matter, any industry, without its people? Nothing! More than 5 decades since the country became independent, Bangladesh still lacks any infrastructure that has trained and produced skilled personnel for the airline industry. 

While Biman Bangladesh Airlines had to invest taxpayers' money to train and develop their own human resource through their own hardships, private airlines have, thus far, had to rely on personnel retiring from Biman Bangladesh Airlines and Bangladesh Air Force to recruit the predominant part of its skilled manpower requirement, including pilots, aircraft technicians and engineers, customer service executives, reservation staff, etc.

In the ever-increasing competitive and dynamic world of business around us, this situation is simply not sustainable for the industry. Just as we cannot hope to build our cricket team by picking players off the streets, without training academies, we cannot hope to build a strong, competitive airline industry without the development of training infrastructure supported by the state through practical policies. 

The government should put its efforts into developing a comprehensive national aviation policy for the long term, which should give its utmost emphasis on planning the development of well-accredited training resources that will produce the skilled manpower the industry needs.

Developing any industry to reach its potential requires mid-to-long-term adaptive policies based on industry intelligence and foresight. The readymade garment industry is the prime example of how pragmatic policies can yield a prosperous industry over a period of time. 

There are probably a hundred different things to do to take our airline industry to a place of lasting glory, but these three ideas penned here could be, in my opinion, the firmest first steps that can pave the way for steady progress.

It is on us to take to the unlimited skies, but our wings must first be freed from the cage of derelict policies. It is now or never.  

Sketch: TBS

Dr Imran Asif is the current CEO of Air Astra. Previously, he was the CEO of Regent Airways and US-Bangla Airlines.
 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.