Hike in Jet Fuel Price: Local airlines brace for another blow

The increasing jet fuel price will deliver a severe blow to the local airline industry which might even lose its competitiveness in the global market.

Jet fuel prices have been hiked by 25 percent since December last year as Padma Oil Company Limited, a subsidiary of Bangladesh Petroleum Corporation, increased the price four times.

Airlines officials said air travel will inevitably get costlier as a consequence.

After the latest hike came into effect on Wednesday, a litre of the fuel now costs Tk 60, up from Tk 55.

In December, each litre cost Tk 48.

There is no logic behind BPC's price hike at a time when prices have been stable in the international market for three months, said Mofizur Rahman, secretary general of Aviation Operators Association of Bangladesh.

"We will have no alternative to increasing air fares and it is the passengers who will have to bear the cost," said the managing director of Novoair.

The country's airline industry is on the verge of collapse due to the pandemic, he told The Daily Star.

"The increased jet fuel cost will be an additional burden on the industry. Such a monopoly in business and whimsical decisions from the BPC should come to an end."

A flyer might have to pay an additional Tk 800 to Tk 900 for tickets to domestic destinations.

"But... we will gradually increase the air fare, not in one go."

Between 40 and 46 percent of an airline company's operation cost is spent on fuel, Mofizur said.

"We will be bankrupt if we don't adjust air ticket prices in accordance with the fuel price."

Kamrul Islam, general manager (public relations) of US-Bangla Airlines, 1old this correspondent that the latest hike will deliver a severe blow to the local industry.

"This will affect our operation cost, and, ultimately, the people will pay more for a ticket," he said.

He added that his company will keep the passengers in mind when increasing the ticket prices.

A top official of Biman Bangladesh Airlines, the national flag carrier, said fuel cost directly affects the company's profitability and sustainability.

"It has become a big challenge for us to compete with foreign airline companies because of the high price of jet fuel in the country," the official said, requesting anonymity.

The BPC fixes fuel prices and increases it in violation of articles 34 and 22 (kha) of Bangladesh Energy Regulatory Commission Act, aviation officials said.

Contacted, Syed Mehdi Hasan, director (operations and planning) of BPC, told The Daily Star that the local price corresponded to those in the international market.

"Jet fuel still costs less in Bangladesh, when compared to the prices in our neighboring countries, including India," said Mehdi, head of a committee that decides jet fuel prices.

"We didn't hike the price to make profits. We did it to keep up with the international market," he added.