Foreign airlines' $214m stuck in Bangladesh, now flyers paying the price

In a surprising revelation, travellers flying from Bangladesh to various foreign destinations are experiencing significantly higher ticket prices compared to those flying from India. 

Emirates Airlines, for instance, offers tickets from Kolkata to Dubai for as low as just above Rs24,000 (around Tk31,000). The same airline will charge Tk65,000 for a Dubai ticket from Dhaka.

The price difference applies to other airlines as well that operate international flights to and from both India and Bangladesh.

Aviation insiders have said foreign airlines restricted lower-priced ticket sales from Dhaka as global carriers cannot repatriate sales proceeds from Bangladesh due to the persisting dollar crisis. This is among the reasons travellers from Bangladesh are paying much higher for the same global destinations than those flying from India.

Nearly 30,000 international passengers fly from Dhaka airport every day, according to airport sources.

Highlighting the severity of the issue, the International Air Transport Association (IATA) stated in a recent press release that Bangladesh has withheld approximately $214 million in airline funds, making it the second worst-performing nation globally in terms of fund repatriation.

In December 2022, the amount blocked was $208 million, ranking Bangladesh third in fund repatriation.

When contacted, Air Vice Marshal M Mofidur Rahman, chairman of the Civil Aviation Authority of Bangladesh (CAAB), acknowledged that the fund blockage amid the dollar crisis had placed foreign airlines in a challenging situation. Nevertheless, they continue to operate due to the immense aviation market in Bangladesh, he added.

He, however, clarified that fund blockage is not the sole reason for the high airfares, saying the rise in operational and fuel costs has also contributed to the overall increase.

Additionally, Mofidur noted that while the Indian airline industry receives government subsidies, the one in Bangladesh does not, creating further discrepancies.

Travellers paying the price

A sales executive from a foreign airline said the lower price levels offered by Emirates for Bangladesh and India remain unchanged, but the lower slab tickets are no longer available in Bangladesh.

In essence, airlines have halted the sale of tickets from at least four lower-priced slabs in the Bangladesh market, while they are still accessible outside the country. Consequently, despite airlines not raising their ticket prices, Bangladeshi travellers are forced to pay higher fares due to the unavailability of lower-priced options.

A sales agent further explained that foreign airline operators ceased selling low-price tickets in Bangladesh approximately six months ago due to a severe dollar crisis in the country's banks. As a result, these airlines faced mounting blockages in their funds, compelling them to discontinue offering low-priced tickets in the Bangladeshi market to avoid exchange losses, causing air travellers including poor migrant labourers to suffer.

Operators also at a loss

The consequences of the fund blockage extend beyond inconvenience for air travellers, causing financial losses for air operators.

Prior to the current dollar crisis, foreign air operators usually faced a backlog of 3-4 months in remitting funds from Bangladesh due to the documentation process. The air operators would bear some exchange losses for the delay in the remitting process, but the loss was minimal as the dollar price was stable.

However, the high fluctuation of the dollar price over the past year has resulted in substantial losses.

For instance, air operators sold tickets based on a dollar price of Tk90, but they have been unable to remit the money back home. Consequently, they are now forced to buy dollars from the market at rates exceeding Tk110, incurring significant losses and leading to the sale of only higher-priced tickets in Bangladesh.

What Bangladesh Bank says

The Bangladesh Bank claimed that the fund blockage was a result of a scarcity of dollars in banks.

When contacted, Md Zakir Hossain Chowdhury, executive director and spokesperson of the central bank, however, said there is no embargo from the central bank regarding the remittance of funds for foreign airlines.

"The authorised dealer (AD) banks are responsible for remitting the airline funds but they have been unable to do so due to the scarcity of dollars. The Bangladesh Bank will not provide dollars from its reserves to remit these funds as AD banks have been granted licences to manage dollars," he said.

Ministry orders charging airfares in taka

Recently, the Ministry of Civil Aviation and Tourism issued a circular mandating that all local and foreign airlines operating in the country charge airfares in the local currency for international flights carrying passengers and goods, effective from 1 July.

This decision aims to create price stability and protect consumers from the adverse effects of currency fluctuations, considering the rising dollar prices.

Furthermore, the CAAB has proposed that the government sell fuel in the local currency instead of the dollar to facilitate air operators, although this proposal has yet to be finalised.

Top five countries with blocked funds  

According to an IATA report, Bangladesh ranks second among the top five countries with blocked funds. As of April 2023, the total amount of blocked funds in the airline industry has surged by 47% to reach $2.27 billion, compared to $1.55 billion in April 2022.

The countries with the highest amounts of blocked funds, accounting for 68% of the total, are Nigeria with $812.2 million, Bangladesh with $214.1 million, Algeria with $196.3 million, Pakistan with $188.2 million, and Lebanon struggling with blocked funds amounting to $141.2 million.

The escalating levels of blocked funds have raised concerns within the international aviation trade body, as they pose a significant threat to airline connectivity in affected markets.