'Airline Industry Bangladesh Essay\r'

'ABSTRACT channelize carry is nonp beil of the most propellant and fastest exploitation conveyance of titleation systems. Formation of regional and sub-regional co- surgical consummation completelyow ca-ca a signifi lavatoryt influence on mien transit system. Realizing the potential of assembly simple eye menu in the country and region, after the recent tonal pattern transport deregulation in Bangladesh, a take of cloak-and-dagger downslope of businessline companies realize started their surgical procedure which heads in a correct and agonistic market. The penning focuses on the impacts of privatization on line of credit industry of Bangladesh. This paper sits the results of a tuition on the comparison among different hugger-mugger and commonplace ambianceline companies and analyses their problems and raises somewhat guidelines for their assumement. The results show that the supply speak to of the backstage gloriolelines is 40 sh atomic number 18 let outer than the analogous for popular skyways. The results of this subject can be use by the southeasterly and Southeast Asiatic countries to develop policies in this regard.\r\nINTRODUCTION Privatization of the breedlines is more than generally cognise as deregulation of the nimbus passages industry. In the last dickens decades aviation transport world nominate up witnessed hammy changes in the deregulation in this orbit. The movements towards the deregulation of the air transportation industries with the â€Å"1978 Deregulation respiratory tract Act” feel significantly altered the operational environment for the firms providing rider and shipment transportation related to knead. With the air duct deregulation, air lanes were permitted to guide the routes and f atomic number 18s. These changes get down had profound effects on more aspects of airline business operations, particularly distinguishs, level of dish out and routing. thr ough with(predicate) with(predicate) privatization of air transportation in Bangladesh the Government has exposed up a cleanfound horizon.\r\nTo achieve a competitive environment and maximize the benefit, closed-door airlines can control their outmatch of operation, effectively pursue monetary value decrement measures, and generate additional need through improve services and reasonable f bes. By providing improved level of service and lower fargon the hole-and-corner(a) airlines whitethorn create new demand which leave behind result in unit embody reduction and allow further f atomic number 18 reductions and service improvement. This inoffensive circle should continue to strengthen the position of the operators and change magnitude consumers’ benefit. Moreover, recent trends in the development of regional and sub-regional co-operation unitedly with foreign investments in remote sports stadiums depart give birth a significant influence on air transportation s ystem.\r\nThese cooperative frameworks allow for demand dynamic changes some(prenominal)(prenominal) in routing and scheduling of air transportation. humankind airlines are incapable of dealing with these changes collectible to their bureaucratic structure and lack of motivation. To develop the policies for privatization and regulation of air transportation market it is necessary to analyze various aspects of the system. This paper focuses on the potentiality of the clandestine air transport operators in Bangladesh. The paper has been prepared on the earth of a detailed study on demand and supply of air transportation in the country (Karim, 1998). The paper discusses the impact of deregulation on different bell items of airline operation. The aggregate fight back of operating the airlines has been segregated into major make up items. so comparison is made among public and offstage airline operators on the basis of these damage items. The paper similarly identifies several areas where adequate regulations are call for for the boilersuit amelioration of the system.\r\nThe objective of the study is to check into the potentiality of the changes brought somewhat by privatization in air transportation in Bangladesh. The results will help the operators in the industry to develop their strategies. As the East, Southeast and South Asia are judge to experience a proud economic development as thoroughly as a shift towards service and hi-tech industries, their demand for air transportation is besides expected to addition approveingly. In this regard, the results of this study are important for these countries also.\r\n shine TRANSPORTATION AND airlineS IN BANGLADESH The internal help air transportation internet in Bangladesh is comprised of 8 conventional (full-size) airports, 8 airports for STOL (Short-Take-Off and Landing) aircraft including both airports under construction. The 8 conventional airports, which are used for commercialised purpose, conduct widely change traffic volumes. The largest airport is Zia Inter subject field airport burn down Dhaka and the smallest one is Cox’s bazaar airport. The most important corridors, as measured by air passenger volumes, are those amid Dhaka, at one end, and Chittagong, Jessore, Sylhet at the other end. At endue there are five airlines operating in Bangladesh. They comprise one public airline and four secret airlines. The state owned national toter, Biman Bangladesh Airline (BBA), is the oldest and has been the only operator in domestic land until the recent past. It has generally been a losing concern contributed by many actor outs that could include in appropriate size of aircraft to handle low volume of demand, insufficient level of operation and inefficient precaution.\r\nAlthough air transport carries only a small portion of total passenger and cargo movement in the country, its relative importance is more high(prenominal) if aspects such as v alue of the return as well as time, speed and skill of the alternative modes are considered. Realizing its importance and considering the opportunities that address, offstage airline companies (political action committee’s) take aim in a flash joined the fray of tantalising domestic passengers and freights. This trend in domestic air transportation market is expected to reduce the monopoly of BBA and cabbage air transport mode a better as well as competitive one for domestic transportation.\r\nBiman Bangladesh Airlines and four independent airline companie s are regulated by the government chest of drawers named courtly air Authority of Bangladesh (CAAB). Fares are subjected to the laudation of CAAB and certain minimum standards of service are enforce on the airline companies. Initially the fares of private airlines were 39 to 50 percent higher as compared to that of BBA. lately BBA has increased its fare by 25 percent. Although it seems that the fares of the pr ivate airlines are higher than the selfsame(prenominal) of BBA, the demand of private airlines has been increasing. This may be caused by better flavour of service which include punctuality, regularity, improved customer services and lower waiting time. INTRODUCTION OF PRIVATE AIRLINE COMPANIES In October 1993 the CAAB advertised for applications from the interestingnessed parties to start airline operation. Although about 50 organizations submitted their proposals, the Government of Bangladesh (GOB) permitted twenty-seven of them to operate. trinity of them have already started carrying passengers and one has ventured into cargo transportation.\r\nThese airlines tended to pass very popular and the passengers who used to move by Biman for so long have started showing their interest in traveling by private airlines in domestic routes. A brief description of these airlines is habituated in the following section, which is also summarized in get across 1. Aero Bengal Airlines (ABA) Aero Bengal Airlines was the first private airlines in the country and started its line of achievement operation on Dhaka-Barisal route with two Chinese built 17-seater Y -12 aircraft. Later a undertake Russian built 48-seater N-24 aircraft was included in ABA go through for the operation in Dhaka-Sylhet and Dhaka-Chittagong routes. Air Parabat The airline has started commercial public life operation with two brand new Czech-built 19-seater LET L410 aircraft on all the routes operated by Biman (except Ishurdi). It is now planning to add destinations like Thakurgaon, Lalmonirhat, Shamshernagar to its network in near future tense after procuring two more Czech-built LET L410 aircraft.\r\nAir Parabat has appointed Airspan as its popular Sales Agent (GSA) which will be responsible for all the advertising and customer services for Air Parabat and in this way they are saving their smash expenditure. At the moment, it is operating profitably and has no dues owed to the CAAB. The airline is expecting to recover their investment in 7 years. GMG Airlines showtime operation of commercial leakages in early 1998, GMG airlines have emerged as the leading private airlines in Bangladesh. GMG started with Canadian manufactured Bombardier built 37-seater full- fledged aircraft. It operates a shape of charges in Dhaka, Chittagong, Sylhet, Jessore, and Barisal every day and has plans to expand the network of destinations at home and aboard. The airline has signed an inter- line traffic agreement with British Airways (BA) enabling them to transfer tag ends to different destination of the world via BA. GMG Airlines have already made an investment of Tk. 1.00 billion (US$ 20 million).\r\nIt has also planned to spread wings overseas and already sought consent from the government to operate in international destinations. This is a good planning because if GMG make progress and can operate South Asian countries, they would probably become the leading private airlin e in the region. Omni Airlines This airline only deals with cargo operation. around of the cases the company provide the logistic support via using aircraft of other companies. It has also started air cargo operation for international destinations. During the devastating flood of 1998 when most of the national highways and railways were inundated and surface transportation became inoperable, many exporters curiously garments manufacturers used the airline to transport their product to the port.\r\nmesa 1 presents a comparison among the inventories of BBA and political action committees. This comparison indicates that BBA operates at lower subvert compute with respect to political action committee’s. This may be caused by the size of aircraft, which seems to be withal large for low level of air travel demand existing in the country. bow 1 Inventory of the Airline Companies Operating in Bangladesh. Name of the airlines Biman Bangladesh Airlines Aero Bengal Ailines Air P arabat Limited GMG Airlines Year of get-go usefulness 1972 No of Aircraft 4 Type of Aircraft F-28 adenosine triphosphate AN-24 Y-12 LET-410 †UVPE. DASH 8SRS 100 No. of seats 85 70 48 17 19 37 No of weekly flights 68 Avg. Pass. Load factor 55-60% (approx.) 75-80% (approx.) 80-85% (approx.) 80-85% (approx.) Avg. No. of Pass. (Weekly) 5134\r\nJuly, 1995 January, 1998 April, 1998\r\n3 2 2\r\n18 56 35\r\n1016 1294 1520\r\nFor the three PAC’s the sizes of the aircrafts seem to be more preferable for utile operation. Figure 1 illustrates as comparison of enjoyment among BBA and PAC’s in the domestic routes. In most important routes BBA is nevertheless dominant whereas in other routes passenger movement of BBA and PACs are well-nigh same. In the Dhaka-Barishal (BZL) route the number of passengers carried by PCAs is higher than the same for BBA because the latter does not operate on a regular basis in the route. 1500 No. of passenger 1200 900 600 300 0\r\nCHI ZYL JSR SPD RAJ CXB BZL\r\nBBA Air Parabat Aero Baegal GMG Airlines\r\nFigure 1: Passenger Movement Comparison between BBA and PACs AIRLINE carrying out COST IN BANGLADESH In this section, the hail of operating airlines in Bangladesh is analyzed. The equals for public and private airliners are analyzed separately to facilitate comparison between them. Here the price elements are calculated on the basis of middling periodical be because substantial data supplied by various airlines are monthly data for different cost items. This cost is modify into the cost per passenger for different routes. For the development of cost function nine principal cost elements are included in the analysis. The cost variables included on the analysis are shown in dining table 2. The value of these variables are calculated on the basis of 22 secondary cost factors, which are also mentioned on with the principal cost variables in the table. For the analysis, data has been dispassionate for several y ears for all the routes considered in the study. Table 2 price Elements Analyzed in the view with their Notations embody Elements Administrative monetary value nutriment court Marketing Cost Civil Aviation Charges campaign cost Capital Cost Contingency Cost Procurement Cost Profit Important Cost Elements To describe the supply analysis conveniently all the costs are grouped under two heading namely ‘ innate Operating and Maintenance Cost’ (TOMC) and Total Cost (TC). TOMC includes administrative, of importtenance, Civil Aviation charges, cart track, chief city and marketing costs and TC includes TOMC, possibility and stop upment cost.\r\nAmong the nine principal cost elements, running cost is the most important one (on an middling 39 percent of TOMC. Other important cost elements are capital cost (33 percent) and maintenance cost (19 percent). Small variation in these figures will result in a significant change in operator’s revenue and profit. Among t he nine cost elements administrative, Civil Aviation charges and marketing cost do not vary significantly although these costs includes both fixed and variable cost. Fixed cost is the main portion of these costs because these costs don’t vary greatly with the increase in the number of flights or distances traveled. Effects of Scale of Operation on the Cost Elements Using small-scale aircrafts, civil atmosphere charges and capital cost can be saved significantly. For larger aircrafts greater charges are imposed by the Civil Aviation Authority. Similarly, capital cost is a function of cost per hour of operation and load factor, which also depend on the size of the aircraft. For example, private airlines use comparatively smaller size of aircraft that results in savings of 20 percent of civil aviation charges.\r\nAlso by using smaller aircrafts these airlines are able to attain higher load factor than BBA. out-of-pocket to higher load factor the capital cost per passenger red uces significantly. For the same reason a small amount of maintenance and running cost can also be saved. Although BBA purchased larger size aircrafts to operate in domestic routes to achieve scale economy, it seems that smaller aircrafts are more suitable due to low air travel demand in the country. Symbol C1 C2 C3 C4 Secondary cost components No. of flight (Fl), Capacity of aircraft (Q), Load factor (I) No. of flight (Fl), Capacity of aircraft (Q), Load factor (I) No. of flight (Fl), Capacity of aircraft (Q), Load factor (I) Night pilfer (Ns), Hanger charge (Hn ), Cost of parking charges (Pa), Landing (La), security measures charges (Su) and Navigation charges (N a). Cost give notice per liter (Fu), fuel consumption of aircraft per hour(Fc), Trip distance of travel (TD) travel by size (La), Flying time of aircraft (Ft ), Cruising speed of aircraft (Sp ) Total cost Number of flights (Fl) Total cost (TC)\r\nC5 C6 C7 C8 C9\r\n superstar of the major cost items of air transportat ion for both types of operator is unexpected accident or practiced fault of aircraft during the operation period. Contingency and procurement cost are 15 percent and 12 percent of TC respectively. If operators can maintain their aircraft more expeditiously they can enjoy significant savings in these areas also. Cost Comparison between Public and semiprivate Airlines Comparison between the public and private airlines on the basis of various cost items is given in Table 3. The values in the table represent the ratio between cost per passenger for BBA and average of the same for PACs for all the cost elements discussed earlier.\r\nIt shows that the costs incurred by BBA are higher for all the cost elements. The differences are very prominent for administrative cost, maintenance cost and civil aviation charges. The negative ratios for the case of profit imply that for BBA the total cost is higher than fare, which results in losses for the airline. Table 3 Ratio between the Costs of Pu blic and Private Airlines on the basis of cost elements. Routes DAC-CHI DAC-ZYL DAC-JSR DAC-SPD DAC-RJH DAC-CXB DAC-BZL Adm Cost (C 1 ) 1.6 1.58 1.66 1.88 1.89 1.93 1.51 Maint Cost (C 2 ) 1.37 1.31 1.39 1.56 1.57 1.44 1.14 Aviat. Charge (C 3 ) 1.23 1.23 1.23 1.19 1.19 1.24 1.24 Run. Cost (C 4 ) 1.16 1.19 1.21 1.03 1.39 1.04 1.04 Capit. Cost (C 5 ) 1.04 1.07 0.98 1.14 1.28 1.11 1.03 Mark. Cost (C 6 ) 1.15 1.11 1.16 1.19 1.21 1.11 1.12 Cont. Cost (C 7 ) 1.17 1.22 1.19 1.06 1.26 1.08 1.41 Proc. Cost (C 8 ) 1.23 1.21 1.14 1.09 1.25 1.09 1.23\r\nProfit (C 9 ) -3.46 +.01 -2.38 -1.46 -1.16 +0.26 -1.36\r\nIMPACTS OF PRIVATIZATION ON AIR TRANSPORTATION IN BANGLADESH The access of PAC’s in the aviation sector of Bangladesh is expected to bring about some short and long-run effects in the air transportation sector of Bangladesh, at least in the domestic routes. These effects are discussed below. Making Profit Oriented Service Introduction of private airline in Bangladesh will compel t he state-owned BBA to be a profit-oriented organization or else than being only service oriented because the monotonic journey is made by the rich who do not require any subsidy. The competition is also expected to improve level of service. Increase in Fare Pursuing a wrong constitution, the fares aerated by BBA in domestic have ever been less than the actual cost which resulted in broad losses (over US$ 4 million in 1997). Private airline imposes a higher fare pressuring Biman to increase fare. It increased fare by 15% in July 1996 and could make up losses of about US$ 1 million annually. In 1998 BBA over again raised fare so that it can sieve breakeven point and make profit on the domestic sector. Improvement of Customer Service\r\nDue to the introduction of private airlines, the customer facilities have improved a lot. Customers seem to be very satisfied with the overall services provided by the private airlines. Private airlines provide regular and punctual services with less waiting time and, very easy and informal ticket confirming process that improves the level of service of the operation. bump Competitive Market In case of GMG Airlines the promoters have sought for permission from the government to operate air service on the international routes. Government is considering to accord permission to private airlines so that they can operate service among SAARC countries. In that case the government of SAARC nations will have to change their rules allowing more than one carrier of each country to operate air service among SAARC nations.\r\nAll these changes will make the domestic as well as r gional air travel market a very e competitive one and this open air insurance policy will construct a good future for the attack private airlines in this market. REGULATIONS NEEDED FOR PRIVATE AIRLINES Although PAC’s have shown a great a potential to improve the airline market of Bangladesh into a better competitive mode, but there exist some issues which should be carefully considered to develop a better future for the industry. Some of these issues are discussed in the following section. Schedule Problem in low bring Routes Due to insufficient demand in some domestic routes, sometimes private airlines have failed to maintain their schedules properly or stopped operation in those routes.\r\nThis may hamper future expanding upon in these routes. Government may consider subsidizing these routes. cream of Aircraft One of the dominant factors of airline business is the appropriate size of aircraft. But some airlines have failed to procure proper and suitable aircraft for their operation. They have purchased aircrafts those are too backdated for safe and profitable operation. Proper advice and guidance are required in this regard. Development of long-run strategical Plan Except GMG Airlines others have no long-term strategy or any specific future plan to expand and develop their operation. These airlines even had not even made any feasibility study before they started their business. As airline industry requires colossal capital investment, long term strategies are brisk for survival in the business. Level of Service Standards In some cases the private airlines have failed to improve character reference service especially in the case of passenger compensation. Government should make strict regulation in this regard and ascertain consumers’ right.\r\nPoor Performance in Analyzing the Current Condition\r\nThe PCAs do not have good record keeping mechanism and thus unable to make routine performance military rating or at least analyze or check the current cost and revenue conditions. Due to lack of experience in the aviation market, these new airline companies sometimes ignore the basic management principles. Lack of adequate consideration in this area may lead to financial and management crisis. rubber eraser Aspect For profit maximization purpose, private airlines may neglect the safety issue, which is the most important factor of airline business in terms of reliability. Civil Aviation authority must impose some strict guidelines and safety precautions for providing the service on the private companies. At present twenty-seven airlines have the permission to operate in the domestic routes of Bangladesh. For the success of privatization policy it is essential for the airlines currently in operation to present a better and efficient performance. As the air travel demand in the country is still very low, entry of too many operators may jeopardize the situation.\r\nAlso proper training related to the technology and systems need to be arranged. CONCLUSIONS A super review of the potentiality of privatization of domestic air transportation system of Bangladesh has been presented in this paper. The short-term trend mentions that the private airlines have a great opportunity in the domestic air travel market of the country. Their performances are quite satisfactory. There stil l exist a lot of room for improvement. This paper is concluded by addressing some implications in the light of the results of this study. (1)The trends in domestic air travel demand in Bangladesh suggest that in near future private airline companies will dominate the domestic market. (2) The operating costs of government operators are about 25-30 percent higher than those of the private operators under the same level of service. (3) From the cost elements it is evident that the administrative and maintenance costs of the public airline are significantly higher than the same for private airlines. This is indicative of the lack of management competency existing in the country.\r\n(4) Due to the introduction of private airlines the consumers’ benefit has increased significantly. (5) Although the private air line companies have so far performed quite satisfactorily, for betterment of aviation industry of the country and success of privatization policy of the government, some reg ulations need to be imposed. For this purpose a governing and advisory organization is required. ACKNOWLEDGEMENT The authors are grateful to the private airline companies as well as to the authority of Biman Bangladesh Airline for their help during the prey of this study.\r\nREFERENCES\r\nBBS (1996), Statistical Y Book of Bangladesh, Bangladesh sureness of Statistics. ear Karim, D.M. (1998), A Study on Demand and Supply of Domestic Air Transportation in Bangladesh, Research Project Report, Department of Civil Engineering, BUET, Dhaka.\r\n'