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So many hurdles [ Business ] 08/06/2014
So many hurdles
Two new private airlines — US-Bangla Airlines and Epic Air — are going to spread their wings in Bangladesh’s sky, and plan to go beyond the country’s borders. They will become the fourth and fifth scheduled operators in the country’s domestic aviation market, which has not been fully tapped yet.

The domestic air sector, experts believe, will get a new fillip after the new airlines make their entry. Though the airlines will initially fly only on the domestic routes, they have plans to open up new markets and create greater connectivity in the region. The new airlines plan to enter the domestic market at a time when the national flag carrier, Biman Bangladesh Airlines, also plans to resume flights on all domestic routes within this year. The spurt in economic activities and the awful traffic gridlock on roads are two major reasons why companies have decided to enter the aviation business in Bangladesh.

Air traffic in Bangladesh has been gradually increasing on domestic routes in recent years with the growth in business and domestic tourism, according to aviation experts. Despite its potential, Bangladesh’s aviation market has underperformed over the years, as most airline activities are controlled by the government with the aim of protecting Biman Bangladesh Airlines.

Of the two new airlines, the US-Bangla Airlines is set to begin its journey soon with a pair of aircraft, each having 76 seats, including six of business class. One of these aircraft has already arrived in Dhaka and the next one will come within a week.

Epic Air, a consortium of some local firms, has already applied to the Civil Aviation Authority, Bangladesh (CAAB), seeking a no objection certificate (NoC). With plans to start services by October this year, Epic Air is on a mission to change the country’s traditional aviation culture by putting it on a par with international standards.

Epic Air aims to bring low-cost travel to the country with an initial fleet of two Boeing 737s. The aircraft could come in from either the US or Europe by August or September. In addition to its plan to connect the remotest locations in the country and to utilise idle airports, the start-up airline also wants to introduce small turbo propellers in the aviation industry here, said Epic Air chief executive officer (CEO) Imran Asif, who was a former chief of Regent Airways.

The US-Bangla Airlines will operate five flights a day on the Dhaka-Chittagong-Dhaka route from the very beginning of the operation. Two flights will run on the Dhaka-Jessore-Dhaka route each day while one fight each will fly on the Dhaka-Cox’s Bazar-Dhaka and the Dhaka-Sylhet-Dhaka routes daily. According to a source with the US-Bangla Airlines, the airliner has another plan to expand its wings, to the closest distances on international routes such as Kolkata, New Delhi, Bangkok, Kathmandu and Yangon.

According to aviation experts, air travel has been registering steady growth over the last couple of years for two reasons: the country’s higher economic growth and the long tailbacks on its roads. “Corporate travellers have urgency for their business meetings and cannot afford to waste time on road or rail journeys,” said Kamrul Hasan, an aviation expert. He added that the country will also witness significant growth in domestic air travel in the coming years as the government is set to fast-track six mega projects involving USD 15.5 billion.

The projects are the Padma Multipurpose Bridge project, a deep-sea port, a metro railway, the 1,320-MW Rampal power plant, the 1,000-MW Rooppur nuclear power plant, and an LNG terminal for importing liquid natural gas. “There will be greater mobility of foreign experts and officials as a result of the projects,” said Hasan, adding that the closure of Biman’s domestic operations had further brightened the prospects.

Private airlines started operations in Bangladesh nearly 18 years ago. More than 10 private airlines have started business since then, but most of these had to cease operations shortly after take-off.

At this point of time, besides Biman Bangladesh Airlines, there are only three private airlines in the country — United Airways, Regent Airways and Novoair — operating flights on the domestic routes. The local carriers fly mainly on four domestic routes out of Dhaka — Chittagong, Cox’s Bazar, Sylhet and Jessore.  Followed by the Dhaka-Jessore route, the Dhaka-Chittagong route has the highest flow of air traffic in the country.

Currently, United Air carries the highest number of passengers on the domestic routes. Besides, Novoair celebrated its first year of operations last month, with a record 97.3 per cent on-time departures in more than 4,500 flights, carrying 150,000 people across five major cities.

According to CAAB, a total of 5.96 lakh domestic passengers travelled in 2009, while 5.23 lakh passengers journeyed in 2010, 5.28 lakh in 2011, 5.89 lakh in 2012 and 6.48 lakh in 2013. This is in spite of the fact that around 1 billion Bangladeshis live abroad and air traffic is growing at a rate of 7.0 per cent every year in Bangladesh, which is the fastest in this region. The dearth of skilled manpower is the main challenge for the airlines now, according to another analyst. He urged the private carriers to focus more on developing the workforce.

In 1993, the government decided to allow private airlines to operate on selected domestic routes, with ‘short take-off and landing (STOL)’ aircraft. Local entrepreneurs then evinced interest for the first time in the aviation business, and GMG Airlines launched its flights, forming the country’s first ever airline venture in April 1998.

The government opened up regional and international routes to private airlines in 2003. The last decade also saw the launch of some private airlines: Best Air, United Airways and Royal Bengal Airways in 2007, and Regent Airways in 2010. Aero Bengal and Air Parabat, which started operations in the mid-1990s, and Royal Bengal Airways in 2007, have also closed down their operations. Air Bangladesh operated only a single old jet aircraft in 2004 and was banned from entering EU airspace. It closed in 2005 because of safety deficiencies and poor transparency in the airline’s operations.

Started in 1999 Best Air had also been inoperative for a long time. About 80 per cent Best Air’s share was subscribed by the Destiny Group in 2010 and is trying to spread its wings again. But the present hostility against the group may make it almost impossible for it to fly in the near future. GMG Airlines, the longest serving private airline of the country, suspended operations from March 30, 2012, for what it called “strategic restructuring against rising fuel prices and a competitive global market”. GMG Airlines started operations on local routes in 1998 and introduced international flights in 2004. To succeed in the aviation business, according to experts, one has to at least have knowledge about aircraft, passenger demands, policies of different countries related to air traffic and international regulations related to air traffic, knowledge about other airlines, and knowledge about oil prices. “The major issue has been that almost all the private airlines in Bangladesh have started their businesses prematurely,” said Imran Asif. He also pointed out that most of the entrepreneurs started business without having enough financial capital or knowledge about aircraft and the business in general.

Things change constantly in this business and, to keep up with these changes, a huge amount of liquidity is needed to back up the business. “However, most of the private airlines in Bangladesh did not have the required liquidity to back up the business and hence ran into debt and had to cease operations,” said another aviation expert.

Among most of the private airline operators in Bangladesh, the mindset is that they first start domestic operations with a Dash 8 Q-100 or Q-300, and after a few years, they start their international operations with cheap and old but gas-guzzling, inefficient aircraft, such as the MD-80’s.

Experts point out that the problem arises when they spread their wings in international skies. They try to acquire as many aircraft as possible so that they can expand their network in a very short time, and also make profits in a very short period. The old aircraft not only entail high operation and maintenance costs, but also break down often. This causes delays in flights oreven flight cancellations, impacting flight schedules.

If an airline is not able to maintain its schedule, then it becomes unreliable and unattractive to most passengers, even if it offers lower tariffs. Aviation experts say the absence of proper policy support, accompanied by rising aviation fuel prices, wrong selection of aircraft, shortage of qualified pilots and technical manpower, and high taxation and airport charges have driven them out of business.
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