Big relief for local airlines as punitive surcharges slashed to 14%
While the cut is unlikely to immediately lower airfares, they believe improved financial stability will enhance competition and service quality over time, ultimately benefiting passengers
Highlights
- Surcharges cut to 14.25% from staggering 72%
- Airlines to have 30 days to pay bills without penalty
- The move hailed as positive for local airlines' survival
- Industry leaders say local carriers disproportionately penalised
- Industry leaders say local carriers disproportionately penalised
- Surcharges account for 78% of Tk7,351cr outstanding dues
Bangladesh's local airlines have received major relief as the civil aviation ministry significantly reduced airport payment surcharges to 14.25%, ending years of crippling financial pressure on domestic carriers.
Under recently amended rules, the annual surcharge on delayed payments for aeronautical charges has been slashed from the previous effective rate of 72%. The charges apply to a range of services, including landing, air navigation, parking, embarkation, runway use, control room services and terminal facilities at the country's eight airports, collected by the Civil Aviation Authority of Bangladesh (Caab).
Industry insiders say the decision could significantly improve the survival prospects of local airlines at a time when at least three domestic carriers have already been forced to suspend operations, largely due to unsustainable debt driven by accumulated surcharges.
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While the cut is unlikely to immediately lower airfares, they believe improved financial stability will enhance competition and service quality over time, ultimately benefiting passengers.
Mofizur Rahman, managing director of Novoair and general secretary of the Airlines Operators Association of Bangladesh (AOAB), described the move as a major breakthrough. He told TBS that the reduction would remove that extra pressure and help lower operational costs in the future.
Calling the decision a "big relief" for the industry, he said it would strengthen the financial capacity of local airlines, improve service standards and have a positive long-term impact on passengers. However, Mofizur noted that it remains unclear whether the reduced surcharge would be applied retrospectively, adding that discussions with the authorities are still ongoing.
According to a gazette notification issued by the civil aviation ministry in late November, airlines will now have 30 days from the date of bill submission to make payments without any surcharge. If payment is delayed beyond that period, a 1% surcharge will apply for the next 30 days.
For delays between the 61st and 120th day, a 1.25% surcharge will be imposed, while a 6% surcharge will apply for every additional 120 days or part thereof until full payment is made.
Previously, under the Civil Aviation Rules, 1984, airlines were required to pay a 6% surcharge per month on overdue bills. This meant that a one-year delay resulted in a surcharge equivalent to 72% of the principal amount, often making recovery financially impossible.
US-Bangla Airlines spokesperson Md Kamrul Islam said the revised rates would significantly ease payment pressures on airlines. He explained that the surcharge was imposed on pending or overdue bills, and the previously high rates often made it extremely difficult for airlines to clear their dues. Lower rates, he said, would make payments more manageable and reduce excessive financial stress.
Kamrul noted that several airlines had collapsed in the past under the weight of excessive surcharges. Although US-Bangla has consistently tried to remain compliant with regulatory payments, he said the previous surcharge regime posed a serious threat to sustainability.
"If airlines can survive and remain financially stable, the ultimate beneficiaries will be passengers," he added.
Kamrul also highlighted the structural disadvantage faced by local carriers compared to foreign airlines. Bangladeshi airlines must keep aircraft stationed in Dhaka around the clock, resulting in higher ground time, greater operational exposure and more frequent use of airport facilities. Foreign airlines, by contrast, typically operate a single flight and depart within one or two hours, leaving local carriers disproportionately exposed to surcharge penalties.
Caab data illustrate the severity of the problem under the previous regime. Total outstanding dues of local airlines reached Tk7,351.45 crore, of which around 78% – or Tk5,734 crore – consists solely of surcharges. As of FY25, five airlines – Biman Bangladesh Airlines, Novoair, United Airways, Regent Airways and GMG Airlines – account for this amount.
The crisis is most acute for the state-owned flag carrier Biman Bangladesh, which alone owes Tk6,068.54 crore. Of this, Tk4,794.13 crore is surcharge, while the principal bill stands at just Tk745.52 crore.
Private airlines have faced a similar pattern, with surcharges forming the bulk of liabilities. United Airways, Regent Airways and GMG Airlines have already suspended operations, with industry insiders citing excessive surcharges as a major compounding factor alongside weak management, high jet fuel prices and limited access to capital.
Former United Airways Managing Director Wing Commander (retd) ATM Nazrul Islam said abnormal surcharge rates had trapped airlines in a vicious cycle. He noted that during the Covid-19 pandemic and other crises, many airlines failed to make timely payments, and the excessive surcharge structure made recovery nearly impossible.
He also said such punitive rates deterred potential investors from stepping in to revive struggling carriers.
