More than 10 local private airlines entered the aviation industry, which is globally considered a sophisticated and capital-intensive one, during last 18 years. Of them only four are now in operation and others had an ignominious exit.
Despite constant increase in domestic air traffic over the years, the private airlines have never been comfortable due to lack of sufficient aviation industry management knowledge among their sponsors and shortage of skilled manpower and liquid cash.
Private airliners entered the domestic aviation industry one after another during last 18 years. However, the industry also saw the demise of relatively older airlines at regular intervals. The entry of new airlines in the backdrop of poor financial health of the existing ones comes as a puzzle to many aviation industry experts.
Some people suspect foul play involving the procurement or leasing of aircraft for pressing the same into domestic and international routes.
According to aviation experts, air traffic in Bangladesh has been increasing steadily on domestic routes in recent years with the growth in business and domestic tourism. Every year new foreign airlines are coming to Bangladesh to have a slice of this growing market, but the private airlines have concentrated their operations primarily in the domestic market which is not that rewarding.
Lack of proper policy support, hike in aviation fuel prices, wrong selection of aircraft, shortage of qualified professionals including pilots and technical manpower, high tax rates and airport charges are learnt to be the main reasons for many local airlines becoming financially sick.
According to sources, more than ten private airlines have started business over the last 18 years since the government allowed private airlines and most of these airlines had to cease operations, many of them shortly after their take-off.
Only four private airlines-United Airways, Regent Airline, Novoair and US-Bangla-are now in operation. Of them US-Bangladesh has started its operation very recently. Another new private airline-Epic Air - is waiting to spread its wings with a target to go beyond the country's boundary.
The participation of too many airlines in a small niche market intensifies the competition, leading to a price war. This in most cases makes the operations of small airlines very difficult, financially.
The US Bangla Airlines, a joint venture of US and Bangladeshi investors, starts its flight on Dhaka-Chittagong route offering a fare rate of Tk 3500 as against the normal rate of around Tk 4500 while Dhaka-Jessore fares start at Tk 3000 as against Tk 4000 charged by other private airlines.
The arrival of Epic Air, that aims to bring low-cost travel to the country with an initial fleet of two Boeing 737s, will engender the competition among the airlines, said an aviation expert. "Epic Air aims to offer a better travel experience with competitive fares," he said.
"I do not know how much benefit they will get from these fare competition and low-cost offers," said Kazi Wahidul Alam, an aviation analyst, adding that the new airlines would create some unhealthy competition in the market. "Most airlines are operating flights on the domestic routes below the profit margin. The new airlines will obviously trigger a price war," he said. Customers may be benefited for the time being, Alam said, adding that some operators may not survive in the long run like their predecessors who had to wind up business for their managerial inefficiency."
"There is a lot of competition in the private aviation sector," also said United Airways Managing Director Tasbirul Islam, urging the government to waive the non-aeronautical fees for the private domestic airlines.
To control an unhealthy competition, some of the experts also urged the Civil Aviation Authority of Bangladesh (CAAB), the regulatory body, to exercise utmost caution while issuing licences for the private airline operators.
Each of the airlines is required to submit report of feasibility studies to the CAAB as a prerequisite for getting licences, but hardly anyone of them has ever done it. "We cannot deny anyone if they abide by the rules and regulations and fulfill all official requirements," said a CAAB official on condition of anonymity.
The airlines that closed their operations in the last 18 years after incurring huge losses included Best Air (2007-2009), Royal Bengal Airways (2006-2009), Aero Bengal (1995-2000), Air Bangladesh (2000-2005), Air Parabat (1998-2001) and the GMG Airlines (1997-2012).
In 1993, the government decided to allow private airlines to operate in selected domestic routes with 'short take-off and landing (STOL)' aircraft. Local entrepreneurs showed interest in aviation business and GMG Airlines launched its flights forming the country's first ever airline venture in April 1998.
In 2003, the government opened regional and international routes to private airlines. The last decade saw the launching of some private airlines: Best Air, United Airways and Royal Bengal Airways in 2007, and Regent Airways in 2010.
Aero Bengal and Air Parabat which started operation in mid-nineties and Royal Bengal Airways in 2007 are now history. Air Bangladesh that operated only one old jet aircraft in 2004 was banned from entering the EU airspace because of safety deficiencies. The airline closed its operation in 2005.
The Royal Bengal Airlines was owned and run by some members of Bangladeshi community in Britain. It launched commercial operations on 31 January 2008 but could not continue due to multifarious problems.
The private airlines also owe huge amounts of money to CAAB as aeronautical and non-aeronautical charges. The GMG Airlines, which stopped flying on March 30 last year, owes the CAAB Tk 1.34 billion in fees and charges like landing fees, gate fees, navigation, cargo handling, refuelling and security fees. The CAAB has also filed a money suit against Aero Bengal Airlines to realise arrear of about Tk 600,000.
Among the airlines in operation, United Airways and Regent Airways owe about Tk 1.0 billion to the CAAB. Besides, the GMG owes Tk. 180 million to the National Board of Revenue (NBR) in taxes.
Most of the airlines, aviation sources said, were forced to close down their operations because of some internal problems as well as lack of managerial skills, experience and expertise, poor planning skill, lack of operational efficiencies and most importantly inadequate liquid fund to keep their operations going. When airlines face a mounting loss, it becomes really very hard for them to recover, experts said.
According to sources, airlines business is very dynamic, fast moving and requires a huge amount of liquidity. Smart and fast decisions have to be made at all times. "The problem is that almost all of the private airlines in Bangladesh started operations rather prematurely", said an aviation expert.
"Without having adequate financial capital, or knowledge about aircraft or aviation business in particular some people had floated airlines," said Epic Air chief executive officer (CEO) Imran Asif, who was also a former chief of Regent Airways.
Things are changing constantly in this business and to keep up with these changes a substantial amount of liquidity is required to back up the business. "However, most of the private airlines in Bangladesh did not have the required liquidity to back up the business when needed badly and hence they were in unsustainable debts and had to cease operations at one stage," said Imran.
The mindset of most of the private airlines in Bangladesh is that, they will first start domestic operation with a Dash 8 Q-100 or Q-300 and after a few years they will start their international operation with cheap and old but gas guzzling, inefficient aircraft such as the MD-80's.
According to experts, the problem arises when they spread their wings in the international sky. They try to acquire as many aircraft as possible so that they can expand their network within a very short time and make profit within a very short time.
The operation of old aircraft not only involves a high operational and maintenance cost but also carries possibility of frequent breakdown.
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