United Airways takes the biggest gamble in its nearly two years operation as it plans to fly to lucrative Dubai despite intense fare war that almost sent its older rival GMG into the mortuary.
Company chief Tasbirul Ahmed Choudhury said that the airliner, owned by Bangladeshi diaspora, will operate three weekly flights between Dhaka and the Gulf aviation hub in a move to fortify its international footprint.
"We will launch the flights in May. Already we have bought a 170 seater MD-83 on lease-cum-purchase option to ensure smooth operation," Choudhury, the managing director of the company, said.
The move comes amid a global economic meltdown that has sharply squeezed growth in aviation industry while a slide in oil price means there are fewer Bangladeshis travelling to the Gulf countries with jobs.
Global passenger traffic is expected to shrink at 3.0 per cent in 2009, worst since 2001 when traffic fell 2.7 per cent, according to International Association for Travel Agents (IATA), the trade group.
Choudhury however, brushed aside the gloomy prognosis, saying air traffic to Dubai has remained robust with all the Gulf carriers planning expansion.
"We don't bother about the global crisis. The demand for air travel on Dhaka-Dubai is growing despite all the negative projections," Mr Chowdhury told the FE in an interview.
"Although economy of Dubai is feeling the pain of the downturn right now, I think it's a transitory phenomenon. Things will be back to normal and workers' recruitment will gain steam," he said.
"Competition will always be there. There will be ups and downs. It's all parts of business."
United boss unveiled the ambitious plan as the country's oldest private carrier GMG resumed its Dubai flights in January this year after more than eight months of suspension.
Last February 10-year-old GMG launched its Dubai flight --- the first by a Bangladeshi private carrier --- amid much fanfare in an effort to cement its position as the country's main rival to state-owned Biman.
But the experience brought the airlines down to its knees as it lost an estimated Tk1.00 billion in just four months, forcing it to halt international flights in all but one route to survive the Dubai mauling.
Over 1.0 million air-borne passengers travel between Dhaka and Dubai a year, making it the most lucrative destination for any airliner operating in Bangladesh.
Currently, state-owned airline Biman and Emirates dominate the route with nonstop passengers flights to the main business and tourism hub of the UAE.
Last month, Emirates, the biggest Arab carrier, increased flights to Dhaka by three to 17 a week, apparently to match demand of passengers headed for Europe and North America.
An aviation analyst said United's entry to the 'tough' route dominated by state airline Biman and Dubai-based Emirates would unleash new round of "fares war," leaving others to face the margin pressure.
"United is entering a fiercely competitive market. It has made substantial investment on aircraft purchase. But it's not going to be an easy job to secure the best possible return," said independent aviation consultant Imran Asif.
"United must cut fares to lure passengers, particularly the labour traffic. But if it reduces fares further, per passenger yield will take a sharp dive, making its survival even more difficult, " he added:
Mr Asif said that all the airlines except Emirates would be locked into the battle to survive.
United chief did not make comment on the fare war, but marketing director Jilani F.R Chowdhury said the company would not repeat the mistakes committed by GMG and Best.
"Unlike these two, we spent all our energy building assets. We are shielded from any caprice of the market like sudden fuel price hike or extremely high lease payments, which cost GMG millions of dollars in losses," Chowdhury said.
United started its operation in July 2007 after purchasing a Dash-8 from its Canadian manufacturer Bombardier. It has already added another Dash-8 to its fleet in last March and plans to purchase more aircraft over the next five years.
The airline, 95 per cent owned by non-resident Bangladeshis, has already snatched 45 per cent share in the domestic market.
United racked up a loss of Tk 39 million in the first year of its operation ended June 2008, less than half of the original estimates, Choudhury, a career pilot, said .
United chief said his airline has established its reputation for maintaining 98 per cent "dispatch reliability"--timely takeoff and departure of planes--for more than 10,000 flights so far.
Bangladesh's private aviation sector has been booming since Biman cut domestic and international flights in the fiscal year of 2007 after incurring a record $120 million in losses in fiscal 2006.
