Regional Jets Make their Debut in Dhaka

NOVOAIR is on course to showcase how regional jets can bring greater convenience for passengers and help airlines tap the expected growth in domestic air travel

It is rare to see regional jets parked at the Hazrat Shahjala International Airport but NOVOAIR co-founder and Managing Director Mofizur Rahman is hoping his fleet of Embraer E145s will soon be a familiar sight at Dhaka and at airports across Bangladesh. The new Bangladeshi airline commenced domestic operations on January 9 this year after receiving two E145s on November 30 and December 6 last year. The aircraft are configured with 49 seats in single class and are owned by the airline. The acquisition is noteworthy; not only are these the first regional Jets registered in the country but they are also operated by a new scheduled airline. Mofizur Rahman’s vision for jet aircraft at NOVOAIR can be traced back to his days as a pilot in the Bangladesh Air Force. Early in his flying career, he had flown missions in Africa and met several other pilots from the Brazilian Air Force. Interactions with fellow military pilots got him interested in Embraer – a Brazilian aircraft manufacturer making both military and commercial aircraft. That led eventually to a trip to Embraer’s factory in São José dos Campos in Brazil. The visit made a lasting impression that would turn out to influence the choice of an aircraft for his new airline.

Evaluating Options

The founders of NOVOAIR considered adopting a business model that utilised 50-seat turboprops yet they felt a need to introduce a differentiated product. Another option focused on regional jets to capture premium fare, time-sensitive travellers who value speed and a business-oriented flight schedule. Regional jets would also allow for growth in the longer term and a more diverse NOVOAIR network, including international destinations. The attractiveness of building the airline by opening new routes to foreign cities was a key driver in the decision to acquire regional Jets.

According to Mofizur Rahman, “We are pleased to offer an all-jet domestic service which will appeal to the business traveller in Bangladesh. In the future, we aim to connect our key cities with other top destinations in the region.” Airlines registered in Bangladesh are required to demonstrate their operating competency in the domestic market for one year before they can apply to fly internationally. If NOVOAIR is successful in complying with that stipulation, it sees an opportunity to add a third E145 within one year to expand operations to Kolkata, Bengaluru, Kathmandu, Yangon, Kunming and Chiang Mai. As of now, the E145s link five domestic cities – Dhaka, Jessore, Chittagong, Sylhet and Cox’s Bazar.

Can Regional Jets Work?

NOVOAIR is counting on continued strong growth in passenger movement to make its new venture viable. In 2011, Bangladesh recorded 6,27,000 domestic enplanements, nearly 20 per cent more than the previous year. Strong annual traffic growth is predicted through to 2020. But a sound regional business model relies on more than a just steady stream of passengers to generate healthy load factors. There is an operating formula that successful airlines follow to ensure positive returns.

When regional jets first came on the market in the early 1990s, their higher speed generated more available seat kilometres per day than slower turboprops. It was good news for airlines and even better news for passengers who could make same day return trips and avoid inconvenient and costly overnight hotel stays. Consistently-scheduled peak morning and evening departures are essential in attracting business travellers who value their time and are willing to pay premium ticket prices.

A high-frequency schedule also creates high daily aircraft utilisation which, in turn, lowers the hourly operating cost. North American airlines flying undepreciated, factory-new regional jets in the 1990s had to maximise daily utilisation to offset the high ownership costs. Those days are long gone as those carriers migrate to larger-capacity aircraft and pare down their 50-seat jet fleets. High fuel prices and declining fares have put downward pressure on regional jet operating economics in the United States, the world’s largest domestic market. The surplus of regional jets has resulted in a plentiful inventory of pre-owned aircraft with bargain lease rates and attractive purchase prices. For NOVOAIR, the new, low ownership cost of the E145s was instrumental in the decision to acquire jets.

The Formula for Success

Air Namibia in southern Africa is adhering to the regional jets operating formula with tremendous success. It flies each of its 37-seat Embraer E135 jets in excess of 3,000 annual block hours. It deploys its pre-owned regional jets on prime-time round-trip morning flights to short-haul domestic cities from its Windhoek hub, sends the aircraft to medium-haul destinations at noon and returns them in time to operate the peak evening round-trips to pick up the same-day business travellers from earlier that morning.

While Bangladesh is hardly Namibia, the principles of the regional jet business model apply to both countries. A welltimed flight schedule and high daily utilisation are fundamental to earning the loyalty of premium-fare passengers and generating maximum revenue. Speed on the ground is just as important as speed in the air and smaller capacity regional jets have very short turn-around time between flights.

NOVOAIR is on course to showcase how regional jets can bring greater convenience to passengers and help airlines tap the expected growth in domestic air travel. The airline has recruited an impressive team of flight operations professionals that includes a roster of pilots from scheduled airlines and the military who have accumulated in excess of 1,00,000 command hours. Moreover, many of these were qualified flight instructors on Boeing 767 and Lockheed L-1011. That experience seems to be paying off. After the first 30 days of scheduled service, 99.5 per cent of NOVOAIR’s E145 flights departed on time, according to Lutfor Rahman, Head of Operations.

Small Can Be Beautiful and Profitable

The regional jet revolution that swept North America and Europe in the 1990s with their massive, well-developed markets, deregulated environments, easy access to aircraft financing and high airfares, never reached the Indian subcontinent. Consequently, there is limited knowledge of how regional jets can work in parts of the world where large fleets of smaller-capacity aircraft are non-existent. After the shake-out in India’s domestic industry that has seen bankruptcies, bailouts and restructuring, pre-owned regional jets, with their low acquisition costs and the new-generation of larger regional jets may be welcome alternatives. Bigger may not necessarily be better. NOVOAIR may yet prove that domestic airlines can prosper in the new environment pursuing a strategy of controlled growth and flying a fleet of right-sized airplanes.