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How to Setup Aviation Business in Bangladesh

Aviation industry is rapidly growing in both domestic & international routes all over the world. Bangladesh, a small country of South-East Asia has joined the flying party a little late. But, the potential of the aviation market in Bangladesh is not one to sneeze at.  With a population of a little over Seventeen Crores and a growing economy with a lot of foreign direct investments, Bangladesh has the potential to grow as one of the strongest aviation markets in the sub-continent. This is evident from the entrance of several aviation companies entering the Bangladesh market over the last decade. The number of commercial flights has also soared exponentially in the same period owing to the fact that Bangladesh is a man power hub having a huge chunk of its population travelling to different countries relatively regularly. The tourism industry and the overall requirement for business travel has also increased every year. 
Bangladesh has its’ own State fleet known as Biman Bangladesh Airlines, which has recently upgraded its lineup of aircrafts. There are few other companies already competing to get ahead on the market share. Since Bangladesh government allowed private companies to operate airline business in Bangladesh, the aviation business sector is rising especially in domestic routes. There is a number of companies which tried to run airline businesses, but only a few in number are able to operate the business successfully in the competitive market.  As this is a growing industry, there is still a lot of scope for development in this area. Bangladesh is also working on a plan for a new airport and a deep sea port, which is expected to increase business and as a result increase air travel in the near future.
The demand for legal supports in aviation sector is increasing due to the huge volume of transactions in present time which includes registration of aircraft, leasing of the aircraft machinery & aircraft, passenger baggage and cargo related claims, compensation for death and injury of the passengers, debt recovery, supply of the equipment and machinery, employment matters, service-related claims, insurance claims etc.

How to Setup Aviation Business in Bangladesh
LICENSE AND REGISTRATION PROCESS 

So, what kind of license and registration requirements are there if you want to enter this business in Bangladesh. Of course, firstly, the basic requirement is the registration of an airline company. All sorts of registration and regulations with regards to aviation is controlled by the Civil Aviation Authority of Bangladesh also known as CAAB which is the regulating authority under the Ministry of Civil Aviation and Tourism. To operate an airline, one also has to adhere to the regulations of the International Air Transport Association and the International Civil Aviation Organization.

To start an airline, one must first attain an Air Operator Certification or AOC from CAAB. The requisite documents and the completed forms with all the necessary information must be submitted to the CAAB office along with the necessary fees for processing under the Civil Aviation Act 2017. The AOC actually consists of two parts i.e. the AOC itself and also the part of the operational service. This other license required for Operational Services is called the Operational Services Provider License or OSPL. This is required for operational services such as getting flight clearance(s), preparing flight documentation(s), flight planning, providing ground transports for the crew and passengers to and from the aircraft, handling of excess baggage formalities, etc. These two licenses are at the base of starting an airline. 

Of course, there are other pre-requisites to this such as incorporating limited liability company under the Registrar of Joint Stock of Companies (RJSC/Company House)  , obtaining trade license to run the business, obtaining VAT registration certificate and TIN (Tax identification number) from Nation Board of Revenue (NBR), experience in the airline industry on account of the owners, requisite capital for running the company, etc.

Then there are two ways to operate an aircraft in Bangladesh, either the aircraft can be purchased in full or it can be leased out. There are separate licenses required for the aircrafts themselves. Now, the lease of an aircraft can take place in three ways, i.e. dry lease, damp lease and wet lease. The type of lease differs from one another based on whether the aircraft is being leased all by itself or whether complete crew, maintenance and insurance are accompanying it. Damp and wet lease is the same thing fundamentally, but it differs on the type of crew accompanying the aircraft.

CAAB is then responsible for other matters such as the registration of the aircraft, which is a must if the aircraft is to operate under the flag of Bangladesh. The airline company must extract a Certificate of Air-Worthiness, which will entail whether the aircraft is fit to fly for its purpose. All foreign airlines are required to obtain permit from CAAB to operate airline operation in Bangladesh. Appointment of local General Sales Agent (GSA) is mandatory for all foreign airlines operating in Bangladesh under Civil Aviation Act 2017. CAAB has the authority to issue permit and oversee the entire GSA operations. General Sales Agent is required to be registered in Bangladesh and must be hundred per cent owned by a Bangladeshi citizen. GSA may be either registered in RJSC or be authorized to conduct business as partnership/proprietorship. 

One of the most important aspect is the personnel licensing which mainly relates to the pilot and engineers who operate the aircraft. This is obtained by the individual pilot from CAAB once he or she has qualified through the requisite examinations and the required flying hours. Any Bi-lateral agreement between other countries or operators outside Bangladesh who wish to operate their aircraft through scheduled flights in the country must also be examined and approved by CAAB.  

LEGAL ISSUES 

Bangladesh has just entered an era of light after stepping into the Montreal Convention era, which took some time. Thus far, the aviation industry in Bangladesh was mainly driven by the Warsaw Convention and it took the US- Bangla BS-211 accident in March 2018 to realize the massive gaps in the rules and regulations that govern the airline industry. There were gaps in every aspect of the operations of commercial airlines both passenger and cargo and because the penalties from the previously operating Carriage by Air (International Convention) Act 1966, which was a law predating Bangladesh itself were so archaic, the aviation industry, the insurers or the regulating authorities were not driven for excellence.
Bangladesh has recently ratified Montreal Convention 1999 which will bring about a massive change in this area. This update mainly offers protection to the travelers on a different level. The compensation for accidents has been raised 6 times and if the rationale on the negligence of the carrier is established, the cap is removed and the compensation amount can go up to any height which can be justified for both deceased and injured passengers. This also makes a big difference in the value of cargo, both passenger and commercial cargo. The compensation for cargo has also gone exponentially up in comparison to the previous law. This will make sure that the airlines are much more cautious in handling their customers going forward because the claims now will be bigger but at the same time this will ensure that the service is better overall. 

Civil Aviation Authority Act 2017 has specified the powers and responsibilities of the CAAB under one umbrella. The functions of the CAAB include providing air navigation services and aeronautical communication services, implementing air traffic management system, providing licenses to operate the airplanes, managing the security system of the flights, inspection, executing any aviation agreement, etc.

CAAB by a Circular No. 3 of 2018, dated 03.12.2018 has instructed all foreign airlines operating schedule flights to and from Bangladesh, to appoint their local sales agent. The circular specified the minimum number of the employees which is 20 and also specified the size of the office which is minimum 3000 square feet. The permit with an option for renewal shall be valid for a period of 3 years. The CAAB has the authority to perform the periodical surveillance, if necessary.


Introduction of FMA and its services

It is important for anyone entering the aviation industry in Bangladesh to have a clear vision of the legal dos and don’ts. As a developing sector, the legal kinks need to be addressed in a manner which ensures that there are no loopholes in the proper operation of the business.

FMA is one if the leading law firms in Bangladesh. It is a full-service law firm which deals with all aspects of the aviation industry. FMA’s practical experience in the aviation industry is unparalleled in certain situations specifically with regards to airline insurance and compensation. FMA also has extensive experience in the leasing, import and registration of aircrafts and engines coming into Bangladesh for several airlines. 
FMA can also provide full assistance to any entity exploring the aviation industry in Bangladesh with regards to the setting up of the company with RJSC, ensuring full compliance with the labor, environment, taxation and any other relevant departments of the government. FMA can also assist in drafting and vetting of any bi-lateral agreements, power of attorneys and any other agreements required to conduct business in Bangladesh. FMA also has experience in working with companies providing aviation equipment and accessories to airline operators and CAAB with regards to licensing and import of such products. 

FMA’s expertise includes working with the legal aspects of airport customs and the aviation cargo industry. FMA’s apt team can deal with any disputes arising out of the aviation industry in the Courts of Bangladesh, through arbitration, mediation or negotiation. FMA’s practical approach makes sure that there is full compliance with CAAB and IATA regulations. 

COVID-19 impact on business

Since the inception of commercial aviation, these few months have probably been the darkest. Almost 90% of the world’s airline fleet have been grounded due to the Covid-19 crisis. It is a mortal crisis but at the same time it is one that has affected the aviation industry in the most negative manner possible. Firstly, the effect is on the airlines who spend millions on maintaining their fleet on a daily basis, but the generation of revenue has stopped since most of them are currently not flying. Secondly, the effected are those who work in the aviation industry, starting from pilots, cabin crews to people working in the airport and runways maintenance and business. The effects of this lockdown have been profound on them. Even though almost all governments are declaring re-imbursement packages to assist them, it will not be enough to help the private airlines. Also, failure of these aircrafts to fly will lead to billions of US dollars in losses in the air cargo industry, let alone the passengers. The legal implications from unfulfilled contracts at the end of this crisis is likely to be humongous. Until the end of the whole Covid-19 situation, the entire length and tenure of the crisis, its’ full impact on the global airline industry cannot be determined.   
If the airline is shut down due to the Covid-19, coronavirus outbreak, then the airline companies have the option to lay off/retrench the employees. The employees, who have completed at least 1 (one) year of service shall be entitled to the amount of compensation which shall be equal to half of the total basic salary of the employees and equal to the full amount of housing allowances that would have been payable to them if they had not been so laid-off. Alternatively, the employer may terminate the employees on the ground of redundancy which is known as retrenchment. If the employee has been in continuous service under the employer for not less than 1 (one) year, the employer, in the case of retrenchment of such employee, shall give him 1 (one) months’ notice in writing mentioning the reasons for his retrenchment or, in lieu of such notice pay him wages for the period of notice.

Taxation

This sector is still in its growing stage, in Bangladesh it comprises of only four airlines, including one national carrier, operating through the country. Typical tax rates (32.5% on profit) applies on profit of an airline business. Generally, airlines need to form a Limited Company in RJSC to operate within Bangladesh as a Limited Company. Nominal requirements for a limited company formed locally includes a number of reporting to be done to NBR, such as: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to its employees, Quarterly Advance tax deposition, Yearly Tax return submission, attending appeal/hearing session as required on behalf of the company, Monthly VAT return etc. FMA can advise and assist to satisfy all regulatory compliances to enable the company to run smooth and hassle free.  

Conclusion

The commercial aviation industry in Bangladesh has a lot to offer. It is one of the fastest growing and emerging sectors in the country which still has a lot of growth potential. Bangladesh is welcoming a lot of foreign direct investment and this is a sector where such investment is possible. If you have any queries or interest in the airline business, FMA is a firm which is well equipped and experienced to provide any support in the aviation industry.

EXECUTIVE SUMMARY 

Bangladesh is a new player in the commercial aviation industry which has a lot of potential in the upcoming days. There has been steady growth in this industry over the last decade with a lot of new service providers entering the industry and a fair competition brewing up to make the scenario interesting for business. As this is a country with a high population and the demand for air travel growing from year to year, the prospect is enticing.

Civil Aviation Authority of Bangladesh or CAAB is the regulatory authority of all sorts of aviation in Bangladesh. If an airline wants to operate in Bangladesh, it must obtain an Air Operator Certification or AOC and an Operational Services Provider License or OSPL. These licenses have to be attained from CAAB by submitting the requisite documents and the required processing fees. There are pre-requisites to this step, which have to be satisfied as per the forms and requirements provided by CAAB. These two licenses together can be considered as the necessities for an operator. Once these licenses are there an operator can purchase its’ aircraft for operation, or it can lease aircrafts in one process of either dry, damp or wet leasing.  After purchase or lease, the aircraft must be registered in Bangladesh before it can fly under as a Bangladeshi carrier. It must also obtain an Air-Worthiness Certificate from CAAB which will ensure that the aircraft is fit to fly for its purpose. CAAB also vets and approves any bi-lateral agreements between the government and any other foreign authority willing to operate in the aviation industry in Bangladesh. CAAB also looks after licenses of personnel flying the aircraft. All foreign airlines are required to obtain permit from CAAB to operate airline operation in Bangladesh.
Bangladesh has stepped into a new era with adoption of the Montreal Convention. This will drastically change the scenario of protection that was previously provided to the passengers. Commercial flight passengers will now be able to obtain compensation as mandated by the Montreal Convention which does not necessarily have a limit if it is possible to show that there was negligence on the part of the carrier. Even within the cap, the passengers are able to claim much more from the airlines on the event of a mishap. The same also applies to the air cargo business. 
FMA being one of the best law firms in the country has a lot of experience in dealing with the aviation industry. FMA is able to provide assistance for licenses of airline companies. At the same time FMA has experience in leasing and registration of new aircrafts coming into Bangladesh. FMA can draft all sorts of agreements, power of attorneys etc. required for the purpose of commercial aviation. FMA also has extensive experience in the field of airline insurance and compensation which is a unique trait.

In conclusion, the Bangladesh airline industry can make a lot of waves in the ocean of commercial aviation industry. It is already catching up to the world and it is only expected to grow outwards going forward. FMA will be happy to assist with any legal queries with regards to aviation industry in Bangladesh.