Local airlines seek more policy support for aviation growth

The local airlines in Bangladesh hope that the inauguration of the much-anticipated third terminal in Dhaka airport will open doors to expand their fleets and increase flight frequencies to accommodate the rising number of international passengers. 

However, they express concerns about their ability to seize the growing aviation market from foreign competitors due to inadequate policy support.

The high cost of business capital, complications on rapid air service agreements with other countries, poor maintenance facilities and high duties are major reasons behind their struggling competition with foreign carriers.

Besides, the lack of sufficient number of trained human resources including pilots, engineers is a big issue for them to fulfil the industry demand as per their estimations.

"With the third terminal expansion to boost capacity, ongoing improvements in the traffic system, and enhancements in the refuelling system, it's clear that the number of foreign travellers is set to increase. However, there's a significant chance that a substantial portion of these travellers will opt for foreign airlines." Imran Asif, CEO of Air Astra, told TBS.  

Highlighting the disparity in cost of capital between Bangladesh airlines and their foreign counterparts, he emphasised, "If I take local financing (loan), the cost will be more than ten percent, twelve to thirteen percent. However, the cost of capital of foreign carriers based in the Middle East or Singapore, Malaysia is 4% or 5%."

He added, "If the cost of capital is less, then they are getting a big advantage in overall expenditure. Then it becomes challenging for Bangladeshi carriers to be competitive with international carriers."

Pointing out the intricacies of the air service agreement, he elaborated, "The air service agreement outlines the permissible frequencies or routes that can be operated between our country and another nation on a weekly basis. However, there are instances where Bangladeshi airlines aspire to expand their operations, only to find that the required frequencies are unavailable within the existing agreement. 

"In such cases, a specialised procedure must be undertaken to amend the agreement. Unfortunately, this process tends to be protracted due to bureaucratic complexities in Bangladesh. By the time this revision is completed, foreign airlines often seize the opportunity to enhance their capacity by deploying larger aircraft."

The Civil Aviation Authority of Bangladesh (CAAB) reported a notable surge in international passenger numbers, rising by 133% to 90.63 lakh in 2022 from 38.83 lakh the previous year.

Local airlines claim only a quarter of the total market share, with the remaining three-quarters attributed to the 33 foreign carriers.

These existing foreign carriers want to increase their flight frequency, and at least 12 foreign airlines are keen to operate flights in Bangladesh to capture the growing international passengers.

However, considering the poor air traffic management and operations of the 3rd terminal at Hazrat Shahjalal International Airport, the Civil Aviation Authority of Bangladesh (CAAB) has yet to permit them.

The CAAB is considering permitting a number of operation aspirant airlines after the complete inauguration of a third terminal by the end of next year.

"Even after the soft opening of the third terminal on 7th, there will still be a substantial amount of work left to be completed. If the second runway can be built as soon as possible according to the proper plan, then we will get the benefit of the third terminal soon," Mofizur Rahman, secretary general of the Aviation Operators Association of Bangladesh (AOAB) and managing director of Novo Air, told TBS.

"We will see basically how the passenger population is growing and what kind of growth is likely to happen in the future. Every year accordingly, we will increase the international flight to accommodate the additional passengers," he added.

However, he mentioned that the number of domestic passengers will decrease, as shown in Barishal and Jessore routes after the Padma bridge opening.

Boeing is forecasting air travel in Bangladesh to double in the next decade, driven by the country's growing population and expanding economy.

The aerospace company provided details about the increasing demand and capacity for air travel in Bangladesh in its Commercial Market Outlook (CMO), a yearly forecast of global and regional aeroplane demand presented in a briefing on Wednesday.

Through 2032, Bangladesh is expected to achieve an annual economic growth rate of more than 5% — double the global average — supporting annual air traffic growth at nearly 8.5% annually, according to Boeing.

Squadron Leader Lutfor Rahman, CEO of US-Bangla Airlines, said, "Aviation growth should encompass every facet. It's not a matter of someone simply introducing an aircraft and expecting immediate growth. Therefore, we need to address all aspects, ranging from infrastructure to the development of our human resources."

He went on to say, "While numerous planes may be entering the market, their maintenance will necessitate a significant number of skilled engineers. Currently, we heavily rely on foreign engineers for this task. Given this situation, it's crucial for the government to take proactive steps to cultivate a pool of engineers within the country."