The Aviation Operators Association of Bangladesh (AOAB) has demanded immediate adjustments to jet fuel prices for domestic and international airlines, as inconsistencies between the two are putting domestic airlines under undue pressure while putting the Bangladesh Petroleum Corporation (BPC) at risk of significant losses.
The BPC currently sets jet fuel prices for domestic airlines based on rates in eight neighbouring countries, while jet fuel prices for international airlines are based on London-based jet fuel price monitor Platts.
In late October, the Padma Oil Company, a subsidiary of BPC, increased jet fuel price for domestic airlines by Tk5 to Tk130 per litre. At the same time, the price of jet fuel for international airlines dropped from $1.09 to $1 per litre.
According to AOAB data, the current rates would lead to the BPC earning Tk2.25 crore per month from the sale of jet fuel to domestic airlines, while losing Tk50.3 crore per month from the sale of jet fuel to international airlines. When the amounts are aggregated, this amounts to BPC losing about Tk600 crore each year.
Increasing jet fuel prices for international airlines by even a single cent would drastically increase the BPC's revenue, AOAB said.
Private air operators pointed out that rising jet fuel prices for domestic airlines have pushed air ticket prices beyond the purchasing power of passengers, resulting in a steep decline in passenger demand.
As a result of domestic airline passenger demand dropping to less than one third of what it normally is, the total tax collected by the government will be less than TK7.2 crore per month. Currently, private airlines carry 75% of passengers on the seven domestic routes.
According to BPC, around 4.5 million litres of jet fuel are required for domestic airlines and 50.3 million litres for international airlines each month.
AOAB said Bangladesh often has to purchase jet fuel, especially for domestic flights, at prices 30-40% higher than the international market price. Airlines such as GMG, United and Regent went bankrupt as a result.
As the Padma Oil Company has sole authority to sell jet fuel, airlines are denied the opportunity to purchase jet fuel at competitive prices, the association added.
AOAB asked why jet fuel costs 15-20% more for domestic airlines than international airlines when it is the same fuel?
The domestic aviation sector is now at risk due to regular increases in jet fuel prices for domestic airlines as 40-46% of the airline's operating expenses are dependent on fuel costs, it further said.
Considering the situation, AOAB has urged the government to permit private airlines and helicopters to buy jet fuel from Partex Petroleum.
It has also demanded permission to export jet fuel, noting that airlines of neighbouring countries can export as needed.
On November 1, Mofizur Rahman, managing director of Novoair, told Dhaka Tribune: “We want a level playing field and reasonable jet fuel prices so that the country's aviation sector can stay afloat.”
US-Bangla Airlines spokesperson Kamrul Islam said: “We are now in an unequal competition with international airlines. Private airlines are not subsidized by the government and run on private investment.”
AOAB wrote a letter to the state minister of power, energy, and mineral resources on Sunday, explaining the circumstances and calling for effective steps.