Local airlines face headwinds as fuel price soars

Local airlines will have to face a severe blow losing their competitiveness globally due to an unprecedented hike in the price of jet fuel in the domestic market in one go. 

Padma Oil Company, a subsidiary of Bangladesh Petroleum Corporation (BPC), recently increased the price of jet fuel by Tk 19 per litre that came into effect from July 9. This took the rate to Tk 130 per litre.

Stakeholders in the aviation industry blasted the BPC for this whimsical decision, citing that there was no logic behind it as the price was decreasing in the international market.

This is the 16th time that Padma Oil Company raised the price of jet fuel in the last 20 months.

Previous hikes were in the range of Tk 2 to Tk 7. But the latest was termed unprecedented by sources at different airlines.

Air travellers will have to pay more for tickets for the hike, sources in aviation industry told The Daily Star.

In December 2020, the price of jet fuel, which accounts for up to 46 per cent of the operational costs of an airline, was Tk 48 per litre.

The price has increased 170 per cent in the last 20 months, according to sources in different airlines of the country.

there is no logic behind the BPC's decision when the international rate is decreasing, said Mofizur Rahman, secretary general of the Aviation Operators Association of Bangladesh (AOAB) and managing director of NOVOAIR.

Citing a report of International Air Transport Association, he said last week ended with the price down 8.4 per cent at $146.2 per standard barrel containing 42 United States gallons (bbl).

The price decreased 19 per cent worldwide compared to that last month but the BPC increased it by 18 per cent, said Mofizur.

He said the BPC was absolutely taking arbitrary decisions. "We don't have a say…On what logic has the BPC increased the price of jet fuel," he questioned.

"We want to get rid of the BPC's monopoly business and its whimsical decisions," said Mofizur.

"The airline industry of the country is on way to collapse due to the frequent increase of the price of jet fuel," he also said.

The country's airlines industry will not be able to survive if the government does not extend its cooperation, said aviation expert Kazi Wahidul Alam.

"In the present situation, the airline industry is facing a tough challenge maintaining an existence," he also said.

Kamrul Islam, general manager for public relations at US-Bangla Airlines, said, "The BPC is increasing the price of jet fuel almost every month. But we are at risk of losing passengers if we increase the price of tickets accordingly."

"On the contrary, air operators are at risk of going bankrupt if we do not increase airfares in tune," he said.

Islam also said the tourism and hospitality sector which involves 40 lakh people would also collapse if the aviation industry collapses.

Sources at private airlines US-Bangla Airlines and NOVOAIR said a year and a half ago, the fare on a domestic route was around Tk 2,500 or so but has since gone up to around Tk 5,000.

The BPC could not be reached for comment till 8:00pm last night.