Foreign airlines cut flights as dollar crunch ties up their earnings

Infographic: TBS

Turkish Airlines usually operates 14 flights weekly in Bangladesh through various international routes. But, the airline has been operating only seven flights a week since November last as it cannot remit around $24 million in proceeds from ticket sales from Bangladesh to Turkey. The money is deposited in local banks in Bangladeshi currency. A representative of the Bangladesh Bank said they can do nothing about the situation.

Like the Turkish airlines, most other foreign airlines including Malindo Air, Kuwait Airways, and Cathay Pacific have slashed their flight frequencies to and from Bangladesh over the same issue, according to the Association of Travel Agents of Bangladesh (Atab).

Meanwhile, Bangladesh by withholding $208 million of airline funds for repatriation ranks third in the world – after Nigeria and Pakistan – to, reportedly, use the funds to shore up its depleted reserves amid the global dollar crisis, according to an International Air Transport Association (IATA) press statement released on 7 December.

The IATA calls on governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities, in line with international agreements and treaty obligations.

Fund repatriation by foreign airlines operating in the country has remained suspended since March 2022.

Moreover, the carriers are having to pay for refuelling their aircrafts in Bangladesh by bringing in dollars through inward remittances, although their outstanding money is deposited in various banks in Bangladesh.

"Since we have a huge amount of money stuck, we have reduced the capacity. The reduction started in November," Sattar Siddique, head of sales and marketing at Turkish Airlines told TBS.

"Our head office is in Turkey. So, we have to remit to Turkey what is left here after meeting all expenses. About $24 million has been stuck since last March. The Bangladesh Bank says they do not have dollars at the moment, so they are not able to remit," he added.

Explaining how they face loss in sending money, he said, "We sell tickets in Bangladesh at a rate that is fixed by Bangladesh Airlines through the International Air Transport Association (IATA). It takes us a long time to prepare the documents and remit the proceeds. Ultimately when it comes to remitting, we are having to pay Tk106 for sending $1 dollar although when we sold the tickets the dollar rate was Tk85. This is one way we are incurring losses."

They now have to pay fuel bills in dollars, which is another problem for foreign airlines, noted Sattar, adding, "Earlier, we used to pay it [fuel bill] in taka, but we were asked to pay it in dollars several years ago."

Kazi Dilrose, traffic officer of Kuwait Airlines, told TBS, "Earlier, we operated 12 flights a week. But for the past one month, the number has decreased to 10 flights."

However, she did not want to say anything about the reason for reducing the number of flights.

Against such a backdrop, Atab wrote to the civil aviation and tourism ministry last week, seeking its intervention to resolve the crisis.

Officials of other airlines also said they were facing these problems for a long time.

"The number of outbound passengers in Bangladesh for various purposes including labour migration, Umrah, medical, business, and package tours is increasing day by day, but foreign airlines are reducing the number of flights from Bangladesh due to the ongoing crisis," said aviation expert Kazi Wahidul Alam.

Foreign airlines have entered Bangladesh with a view to doing business, he mentioned, adding, "And it is natural that they will reduce flights if they do not get money."

"When the airlines sell tickets, the dollar rate remains between Tk85 and Tk99 taka, but the rate goes up as high as Tk115 to Tk120 in the case of remittances. As a result, the airlines face a 15-20% loss," Atab informed the ministry through the letter.

Foreign airlines are now reluctant to do business in Bangladesh. Instead, they are flying to destinations where their profits are higher, the association further said.

The trade body also predicted that the number of flights by foreign airlines from Bangladesh may decrease by 60% in the next six months to one year.

Around 80-90 international flights operate from Dhaka airport each day, according to the airport authority.

Wing Commander Shahed Ahmed Khan, acting executive director of Dhaka Airport, however, said they are not aware of the fact that flight frequency has decreased due to the dollar crisis. Rather, some flights are landing at other airports due to the foggy weather in winter, he added.

But, airlines said although they change the flight landing and arrival times in winter, they do not trim flight frequency for this reason.

Asked about the air companies' money being stuck in banks, Md Mezbaul Haque, executive director and also the spokesperson of the Bangladesh Bank, told TBS, "It is a matter of the banks with which the airlines deal. There is no bar from our side."

Responding to complaints that remittances could not be made due to the dollar crisis, he said, "Now if an airline deals with a bank that is unable to remit their money, there is nothing we can do about it."

Ticket price hikes affecting passengers

According to Atab, foreign airlines are increasing ticket prices to adjust the "Cost of Fund" due to the fact that the ticket proceeds are stuck in Bangladesh indefinitely.

As a result, ticket prices for all types of passengers are increasing at an exorbitant rate and they are expected to go up 2-3 times in the next few months.

"A ticket which used to cost Tk50,000 is now selling for even Tk100,000. Workers have reduced remittance because of this extra cost," said Abdus Salalm Aref, general secretary of Atab.

Tickets getting costlier have adverse effects on the tourism industry, overseas passengers, transport costs, and travel agency business, he added.

He also mentioned that already the ticket sales of the travel agencies have come down to 50% and the agencies are about to close down. As a result, about two lakh people working in this industry are on the verge of becoming jobless, he added. 

How hundi is encouraged

Atab has informed the ministry that a ticket that a travel agency in Bangladesh buys for Tk100,000, can be bought from a foreign country for Tk70,000-80,000 using the ID of that country, as a result of which many passengers purchase air tickets using foreign IDs. And their money is smuggled abroad through hundi.

Due to the low price of tickets abroad, the relatives of Bangladeshis living abroad are also buying tickets online through them. As such, the government is deprived of the revenue that was supposed to be received from those tickets.