Bangladeshi air passengers are not benefiting from the nosedive taken by international jet fuel prices, which have hit their lowest levels in 11 years.
Globally, the slump in oil prices has been manna from heaven for flyers, allowing them to pay significantly less than before for airline tickets.
As Brent crude, the benchmark in oil prices on the international market, fell to an 11-year low at around $35 per barrel from previous highs of $120 per barrel, most American and European airlines reduced airfares by 11-14% last year.
“We’ve seen typical domestic prices drop about 14% over the past year,” Patrick Surry, chief data scientist at airfare prediction company Hopper, said to an international news agency about global airline ticket price trends.
Yet despite state-run Bangladesh Petroleum Corporation’s (BPC) reduction of A-1 jet fuel prices by 7.93% to $0.58 per litre on December 24 last year, local airfares remain unchanged. In some cases, tickets in this era of cheap fuel are more costly.
The BPC reduced the price of jet fuel twice previously last year – in February and August.
But Bangladesh is apparently impervious to these dramatic changes in commodity prices and airline operating costs.
One reason for this, a former airline industry leader says, is the burdensome fee and tax structure that has clipped the wings of the local aviation industry.
Former Civil Aviation Authority of Bangladesh (Caab) chairman and aviation expert Air Commodore (retd) Iqbal Hossain said the tax system must be altered in order to enable the aviation industry to soar.
“The airfare of local airlines is not very high compared with those in other countries. But they have to pay around 70% of the total fare as taxes and charges.
“That is why passengers are not benefiting from reduced jet fuel prices,” he said.
The failure of local airline ticket prices to decrease in tandem with declining costs has left Bangladeshi airline passengers high and dry.
In fact, while foreign travellers enjoyed cheaper tickets, Bangladeshis who bought their tickets here were actually charged more this year by some carriers on certain routes.
Ripon Kumar Das, who lives in Milan, bought his ticket in Italy for less than Tk50,000 from a major international airline. But he had to pay Tk20,000 more for the return ticket bought in Dhaka.
The Association of Travel Agents of Bangladesh told the Dhaka Tribune that airfares to some European destinations had actually increased by 10-12% last year, the same period that fuel prices were declining. Airfares to most American and Asian destinations remain unchanged.
Kazi Wahidul Alam, aviation expert and former member of Biman’s board of directors, said airfare does not just depend on fuel prices. “Prices depend on demand and supply,” he said.
But plane ticket prices are notoriously vulnerable to the ratchet effect, whereby an upward trend in cost appears irreversible and keeps prices high.
One airline company official explained that these high airfares would not last forever.
“When jet fuel prices stabilise, airline operators will be compelled to reduce fares. Most are now saving money.
“After a couple of months, passengers will benefit because airfares must be cut to survive the competition,” Imran Asif, CEO of Epic Air, said.
“But airfares will likely remain unchanged over the next few months while airlines observe the price situation,” he added.
Ashish Roy Chowdhury, chief operating officer of Regent Airways, said it is too early to review airfare because the price of jet fuel internationally is still lower than it is in Bangladesh.
“Airline operation costs in Bangladesh are very high. The authorities should reduce aeronautical and non-aeronautical charges,” he said.
Industry insiders say the relatively low price of jet fuel will likely continue throughout the year.
For each litre of jet fuel, international flights that take off from Dhaka airport have to pay $0.58 while flights leaving Chittagong airport pay $0.57, according to the BPC. The price per litre is Tk62 and Tk61 for domestic flights.
“Airlines do not waste time raising fares when the BPC increases jet fuel prices. But they are ignoring lower local jet fuel prices while airlines abroad are drastically reducing their fares,” Association of Travel Agents of Bangladesh Secretary General Aslam Khan told the Dhaka Tribune.
“We have urged the regulatory body at various times to intervene. If they take the necessary steps, then passengers will benefit from reduced fuel prices.
“But the response from the regulator’s end has not been promising,” he added, referring to the Civil Aviation Authority of Bangladesh.
