Why airfare so high in Bangladesh?

Thailand has become the most popular international travel destination for Bangladeshis. On 1 May, the lowest airfare for a Dhaka–Bangkok ticket was USD 231, while tickets for the Kolkata–Bangkok and Delhi–Bangkok routes were significantly cheaper at USD 167 and USD 140, respectively.

Saudi Arabia remains the primary destination for Bangladeshi expatriate workers. Additionally, a significant number of Bangladeshis regularly travel to the country to perform Umrah. On the same date, a Dhaka–Jeddah air ticket cost USD 552, whereas a Delhi–Jeddah ticket was priced at USD 307.

Airfares in Bangladesh are considerably higher than in neighbouring countries. Travel agents and ticket sellers blame this to airlines’ tendency to make excess profits, taking advantage of the limited competition in the market.

However, airline companies argue that the higher ticket prices are due to elevated government tariffs and various service charges at Bangladeshi airports.

The US-based trip.com is a popular website for buying air tickets online at cheaper prices. The lowest ticket price for a round trip from Dhaka-Singapore on 1 May and Singapore to Dhaka on 8 May is USD 409. The ticket price for Kolkata-Singapore round trips on the same date is USD 277. It means the price of Dhaka-Singapore air ticket is USD 132 higher than the price for Kolkata-Singapore air tickets despite almost the same distance. Fuel cost is not a major issue here as the distance of both flights are almost the same. Meanwhile, the Colombo-Singapore air ticket price is USD 206.

According to the trip.com, although the price of Dhaka-Singapore air ticket is USD 271, it is USD 212 for Singapore-Dhaka air ticket. It means the price rises by USD 59 if the ticket is purchased from Dhaka.

To verify the price gap, this correspondent checked another website and found the price of Dhaka-Singapore air ticket to be Tk 36,723 where the price is Tk 26,817 for an air ticket from Singapore to Dhaka.

The agencies involved in ticket business say a syndicate developed during the rule of Awami League government. State owned Biman Bangladesh Airlines started charging extra for tickets. They would hold the low-price tickets and sell the high-price tickets. As a result, everyone was bound to buy tickets at high prices. After selling those, the syndicate would sell the low-price tickets at higher prices too.

Thousands of Bangladeshi workers leave the country every year in search of employment abroad. At the same time, more than 10 million Bangladeshis travel internationally on a regular basis.

These expatriates and travellers form the primary customer base for airlines operating out of Bangladesh. However, many migrant workers are forced to spend a significant portion of their income on airfare.

Airlines often take advantage of high demand for certain destinations by inflating ticket prices. For instance, fares for Malaysia-bound flights soared to over Tk 100,000 just before the country suspended its labour market for Bangladeshi workers. Similarly, a syndicate reportedly began manipulating ticket prices for flights to Saudi Arabia at the end of last year.

In response to public outcry, the Ministry of Civil Aviation and Tourism issued a 10-point directive in February to curb the abnormal rise in airfares. According to industry insiders, the practice of hoarding tickets to artificially drive up prices has declined since the directive was issued, and the syndicate is now under pressure. Nevertheless, international airfare from Dhaka remains significantly higher compared to neighbouring countries.

Under the ministry’s guidelines, air tickets must be sold at rates approved by the Civil Aviation Authority of Bangladesh (CAAB). Additionally, airlines are required to offer discounted fares to expatriate workers.

The ministry probe committee has recently found evidence of forgery behind the high price of air tickets. The committee has already submitted the report to the ministry. A taskforce formed by the interim government is working on reducing the ticket price.

Speaking to Prothom Alo, CAAB chairman Air Vice Marshal Md Monjur Kabir Bhuiya said, “A taskforce formed by the ministry is working on reducing the ticket prices. The CAAB is monitoring the matter regularly as the regulatory agency. All the companies have already been served letters to rationalise the highest and lowest prices of air tickets. A tolerable ticket price would be helpful for the remittance warriors of the country.”

Relevant people identified several reasons behind the high price of air tickets. They say the fuel cost is higher in Bangladesh as compared to other countries. Besides, the costs of different services at the airport, including ground handling, are quite high in Bangladesh. The Biman Bangladesh Airlines is taking advantage of the dependency on a single airport and giving the sole control over ground handling to a single company. The Biman exercises absolute monopoly to set the service charges at the airports. As a result, the operating cost is rising.

The Board of Airline Representatives (BAR) Bangladesh members said the foreign airline companies get the money from selling their tickets every week in Sri Lanka, Nepal and India. Even in case of any unwarranted situation, the companies get the money within two to three weeks at most.

However, it takes around six to seven months for this in Bangladesh. Sometimes, it takes more than a year due to the dollar crisis. There is no interest on the money from ticket sales deposited to the banks. As a result, the cost further increases. The dollar price was low last year.

However, now per dollar is being purchased at a price of Tk 120-125. For these reasons, the companies set the ticket prices including an additional profit from each ticket. Otherwise, the companies will incur a massive loss. However, the interim government already has reduced the time limit to pay the foreign airline company.

The Biman Bangladesh is in charge of ground handling at the airport. Sources in the company say airports are run commercially by private companies in many countries. They came up with lucrative offers and reduced different fees to attract more airlines.

However, in Bangladesh, the fees are set by the government and the National Board of Revenue fixes the customs duties.

However, the ticket prices depend on competition. When the demand is 700 against a capacity of 500 seats, the price will rise naturally.

Speaking to Prothom Alo, Biman Bangladesh managing director, Md Shafiqur Rahman said, “Reasonable ticket prices are set by comparing ticket prices in other countries. The ticket prices are cheaper as compared to several countries. It is the market which sets the ticket prices based on the demand and availability. It is not possible to hold any tickets of Biman Bangladesh airline anymore. Anybody can buy a ticket of Biman Bangladesh. As a result, the ticket prices of Biman Bangladesh Airlines have fallen. Besides, there are discounts on ticket prices for expatriate workers.”

However, the airline companies are saying that an AI-based special software fixes the ticket prices based on the demand and supply. So the prices fluctuate automatically.

The number of planes operating on domestic and international routes has increased. The number of passengers also has increased. So the ticket prices were supposed to decline. However, it is rising instead. The tendency to make extra profit becomes more prominent during the rush hours and different festivals. The popularity of air travel in the country and subsequent costs are rising simultaneously.

The airline companies say competition is higher in the countries where there are more airlines. And the more the competition, the lesser the ticket prices. Local companies occupy at least 50 per cent of the aviation business in most of the countries.

However, in Bangladesh, 75 per cent of the business is under the control of foreign companies. Had there been more local companies in the business, the ticket prices would have been much lesser. Instead, many local companies had to close their operation due to excessive losses they incurred. Several foreign airline companies want to launch operations in the country. However, they are not showing interest due to the extra operative costs and the delay in the repayment of the money from ticket selling.

Aviation sector business owners say the cost to fly from Dhaka is three to four times higher than the other countries. The passengers have to pay more than Tk 10,000 for each air ticket on the Dhaka-Singapore route. The amount of tax dwindles to only 3,000 taka on the same route when the ticket is purchased from Singapore. It is the same with the other countries.

Aviation sector expert Kazi Wahid Ul Alam told Prothom Alo, “The air ticket price is the highest in Bangladesh. However, the standard of the services at the airports is the lowest in Bangladesh as compared to any other countries in the world. The customs duty is also quite high. The passengers have to pay a tax of Tk 1,100 for a ticket worth Tk 3,000. The direct tax against a ticket worth Tk 100,000 is Tk 40,000. Adding to that is other additional fees. The sector must be aviation-friendly to reduce ticket prices.”

Association of Travel Agents of Bangladesh (ATAB) is the regulatory agency of the companies that sell air tickets. It says the government cost and fuel cost might be higher than other countries, but the sector was absolutely beyond its control in the last one decade. A specific business group was given the opportunity to establish absolute monopoly in the sector. There was no competition. That company used to set ticket prices arbitrarily. They would increase the ticket prices whenever there was a rush.

Speaking to Prothom Alo, ATAB president Abdus Salam Aref said, “The prices of air tickets have fallen to some extent following the issuance of the government circular in this regard. If Biman reduces the ticket prices, then the private companies will be bound to do the same. The ticket prices are still higher as compared to other countries. Ticket prices will decline with more competition in the sector. The CAAB can set the ceilings for the highest and lowest ticket prices.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu