Many people compare bus or train fares with plane fares considering the distance to be the same. Just because it takes less time to reach the destination traveling by air, they cannot accept the difference in the ticket price.
Last month the air fare from Dhaka to Saidpur was Tk 4300 and now it is Tk 5000. How is this possible? Is airlines are cutting passengers’ pockets with arbitrary fares whenever they want?
A passenger was making the remarks withgreat regret.
An airline determines the passenger fare of a route by making various calculations, be it domestic or international route.
If fares are set lower than an airline’s operating costs, the airline is likely to see the final milestone ahead of time. There are many domestic and international airlines around the world who once flew in the world aviation but now those airlines are in the pages of history.
An airline’s choice of route, time, or choice of a wrong decision can inevitably bring devastating end results for it.
The 50-year history of Bangladesh Aviation is very bumpy. There is no way to say that the journey of Biman Bangladesh Airlines was very smooth. And 8 to 9 private airlines like GMG Airlines, United Airways or Regent Airways have also become history due to various reasons. US-Bangla Airlines and NovoAir are fighting for survival. The two airlines are trying to move forward through various adversities.
When determining the fares of all the routes of all the airlines around the world, different types of fares are usually determined in a few steps. The only source of income for an airline is passenger fares. And in determining that fare, all kinds of expenses have to be taken into consideration. For every step of the way, from fixing the fare, to rearranging every moment, the airlines have a department, that is, Yield Management or Revenue Management.
Fees for aeronautical charges (landing, parking, security, route navigation), various types of non-aeronautical charges (office space, boarding bridge, hangar facility) etc should be taken into consideration while determining the fares of a route. Fluctuations in the price of unrestrained jet fuel in the world market have a serious impact on fares. About 40 percent of the cost of operating any route is jet fuel.
When determining the fare, various charges including airport tax, security fee, embarkation fee, excise duty of different countries have to be given priority. Insurance surcharge also has to be considered. The exchange rate of the dollar with the world market also plays a role in determining the fare.
The airlines’ operating costs have risen sharply as income tax and VAT have been added to the cost of aircraft leases or supplements. Our domestic airlines are not able to compete with the foreign airlines as similar income tax and VAT are not applicable in many countries of the world.
Value Added Tax Policy Advance tax management is a very rare policy in the world. Foreign airlines do not have to pay advance tax in their country. However, in Bangladesh, crores of taka are paid in advance when importing aircraft, engines or parts. As a result, due to unequal competition with foreign airlines, domestic airlines are being severely affected. In cases where leased aircraft, engines and parts are returned to foreign owners, the advance tax paid is not refunded by the government to the airlines. As a result, such expenses have to be taken into consideration while determining the fare due to unreasonable expenses.
Watch hour extensions may be required due to inclement weather or inconvenience caused by VVIP flights at the airport, air force drills and other reasons, or the airport or runway being closed due to a plane crash. Airlines are in no way responsible for the increase in watch hours, but Civil Aviation Authority, Bangladesh (CAAB) charges higher hourly rates for watch hour extensions, which also plays a role in determining fares.
The aeronautical charges for international routes are about 8 to 9 times higher than those charged for operating flights on domestic routes which affects the fares of international routes. Again, the price of jet fuel is about Tk 11 to 12 more per liter for domestic flights which directly affects the passenger fare.
There are administrative costs. From the cost of any trade to the cost of aviation pilots, engineers, cabin crew, there are various costs, including fly allowances. All costs affect the fares.
If an airline survives commercially, it will have the opportunity to serve passengers or become a part of history. Everyone expects good service and on-time flight management not low fares in airlines. Expected service will enable domestic airlines to establish a strong and long lasting position in the international arena.
Kamrul Islam is General Manager (Marketing Support and Public Relations)
US-Bangla Airlines