A case for non-stop Dhaka-NY flight
Monday, 17 August 2009
Shabbir A. Bashar
HAVING read a report in the August 14 issue of the Financial Express about Biman's resumption of its Dhaka-New York flights, I have a few comments to make and ask some questions to the CEO of Bangladesh's national flag carrier. Firstly, as a north-America resident of Bangladeshi roots I am delighted to hear the news because it can reduce of the time of my journey by as much as 40%. Secondly, as a well-wisher of the ailing carrier, I look forward to this becoming a profitable route. Thirdly, I want to know why the flight has to make a stop en route to Dhaka from New York, based on both technical and business reasons.
The report claims that there are some 200,000 Bangladeshis residing in the United States; let's add another 50,000 to cover those who live in Canada. We may assume that about 90% of these folks travel to Bangladesh at least once every two years, and 75% of them live east of the Texas-Ontario diagonal and are therefore likely to fly on the JFK-DAC route. This brings the total number of such customers to 168,750. In other words, there are 231 people who travel to Dhaka from New York every calendar day and an equal number who travel back.
The current cost of an average economy class return ticket from this region (Toronto, New York, Washington DC etc.,) on Etihad, Emirates and Kuwait Airways to Dhaka is about $1,150.00 (Tk 80,500). This is equivalent to $575 one-way (Tk 40,250). Therefore, the gross-earning for the airline operator per one-way flight is $132,825 (Tk 9.3 million). Interestingly, Biman claims they made a loss of Tk 7.5 million ($107,142) per New York-Dhaka flight using a full load of 274 customers in their ancient DC 10-30s. This implies the cost per one-way seat to Biman on this flight was $875 or 150% higher than the other carriers.
A Boeing 777-300 ER has a range anywhere between 5,200 and 9,300 miles with a capacity to carry 300 to 360 passengers. Such an aircraft is more than adequate to cover the 7,000 nautical miles over the Arctic between New York and Dhaka. Assuming an average speed of 550 miles/hr, such an aircraft would take about 12.7 hours for this flight. Recently, Biman wet-leased (cost includes aircraft, crew, maintenance, insurance, fuel and ground handling) a Boeing 747 at $5,300 per block (flying) hour. The current wet-lease cost of a Boeing 777 ranges between $10,000 and $14,000 per hour. Taking a mid-range value of $12,000 per hour, it would cost Biman $152,727 to operate one such flight. Assuming that there are 330 economy class passengers per flight, their cost per seat would be about $465. If Biman charges the same as what the foreign carriers are charging, they would make a profit of $110 per seat or $36,300 (Tk 2.54 million) per one-way flight instead of a loss Tk 7.5 million!
As a long-distance traveller, I'll pay $575 one-way for a non-stop flight that lasts less than 13 to nearly 24 hours it takes going via Abu Dhabi, Dubai or Kuwait. In fact, I would be more than happy to pay extra for the added convenience and avoiding the high risk of mistreatment by airport personnel in the Gulf countries. So there is a pure business case for Biman to start a Dhaka-New York non-stop service. All the complaints from Biman about political pressure from Bangladeshi expatriates in north America seem ridiculous. Besides, it is obvious that having such a direct flight between Dhaka and New York will benefit Bangladesh's trade with the region many times.
If one include a couple of hours of non-flying time for the leased aircraft, the total time per one-way flight comes to 15 hours. As 231 people travel everyday or 1,617 per week, 5 flights/week with 330 paying passengers would consume 100% of the market share. But if only 3 flights a week are operated (330 x 3)/1,617 to capture 60% share, Biman would still have a profit margin of ($110/$465) = 24% on this route. The odds for Biman get even better if they drop the profit margin lower or go after only 50% of the existing market share - i.e. operate 5 return flights over a two-week period. This will leave the aircraft unutilised 45% of the time over that period and the excess capacity thus created can easily be diverted to operate flights to Dubai, Kuala Lumpur and Singapore - routes that are clearly over-subscribed by the several million-strong expatriate labour force in those regions and fall in the 6-hour (flying plus non-flying time) per leg bracket. This is equivalent to one daily return flight to each of these busy regional destinations - currently being monopolised by foreign carriers who have a notorious reputation for mistreating Bangladeshi passengers.
While I am happy to see positive ideas emanating from Biman's management reflected by good business decisions, I think it would be a big mistake to break the New York-Dhaka journey by stopping in a third country like the UK. Not only will it take away the biggest attraction of a shorter travel time but it will also add to the anxiety of having to deal with travel restrictions on Bangladeshi passport holders in those countries, not to mention delays and elemental uncertainties related to any additional stop-over. I look forward to seeing Bangladesh's national flag carrier on US soil again soon! (Shabbir A. Bashar, PhD, resides in Vancouver, USA)
HAVING read a report in the August 14 issue of the Financial Express about Biman's resumption of its Dhaka-New York flights, I have a few comments to make and ask some questions to the CEO of Bangladesh's national flag carrier. Firstly, as a north-America resident of Bangladeshi roots I am delighted to hear the news because it can reduce of the time of my journey by as much as 40%. Secondly, as a well-wisher of the ailing carrier, I look forward to this becoming a profitable route. Thirdly, I want to know why the flight has to make a stop en route to Dhaka from New York, based on both technical and business reasons.
The report claims that there are some 200,000 Bangladeshis residing in the United States; let's add another 50,000 to cover those who live in Canada. We may assume that about 90% of these folks travel to Bangladesh at least once every two years, and 75% of them live east of the Texas-Ontario diagonal and are therefore likely to fly on the JFK-DAC route. This brings the total number of such customers to 168,750. In other words, there are 231 people who travel to Dhaka from New York every calendar day and an equal number who travel back.
The current cost of an average economy class return ticket from this region (Toronto, New York, Washington DC etc.,) on Etihad, Emirates and Kuwait Airways to Dhaka is about $1,150.00 (Tk 80,500). This is equivalent to $575 one-way (Tk 40,250). Therefore, the gross-earning for the airline operator per one-way flight is $132,825 (Tk 9.3 million). Interestingly, Biman claims they made a loss of Tk 7.5 million ($107,142) per New York-Dhaka flight using a full load of 274 customers in their ancient DC 10-30s. This implies the cost per one-way seat to Biman on this flight was $875 or 150% higher than the other carriers.
A Boeing 777-300 ER has a range anywhere between 5,200 and 9,300 miles with a capacity to carry 300 to 360 passengers. Such an aircraft is more than adequate to cover the 7,000 nautical miles over the Arctic between New York and Dhaka. Assuming an average speed of 550 miles/hr, such an aircraft would take about 12.7 hours for this flight. Recently, Biman wet-leased (cost includes aircraft, crew, maintenance, insurance, fuel and ground handling) a Boeing 747 at $5,300 per block (flying) hour. The current wet-lease cost of a Boeing 777 ranges between $10,000 and $14,000 per hour. Taking a mid-range value of $12,000 per hour, it would cost Biman $152,727 to operate one such flight. Assuming that there are 330 economy class passengers per flight, their cost per seat would be about $465. If Biman charges the same as what the foreign carriers are charging, they would make a profit of $110 per seat or $36,300 (Tk 2.54 million) per one-way flight instead of a loss Tk 7.5 million!
As a long-distance traveller, I'll pay $575 one-way for a non-stop flight that lasts less than 13 to nearly 24 hours it takes going via Abu Dhabi, Dubai or Kuwait. In fact, I would be more than happy to pay extra for the added convenience and avoiding the high risk of mistreatment by airport personnel in the Gulf countries. So there is a pure business case for Biman to start a Dhaka-New York non-stop service. All the complaints from Biman about political pressure from Bangladeshi expatriates in north America seem ridiculous. Besides, it is obvious that having such a direct flight between Dhaka and New York will benefit Bangladesh's trade with the region many times.
If one include a couple of hours of non-flying time for the leased aircraft, the total time per one-way flight comes to 15 hours. As 231 people travel everyday or 1,617 per week, 5 flights/week with 330 paying passengers would consume 100% of the market share. But if only 3 flights a week are operated (330 x 3)/1,617 to capture 60% share, Biman would still have a profit margin of ($110/$465) = 24% on this route. The odds for Biman get even better if they drop the profit margin lower or go after only 50% of the existing market share - i.e. operate 5 return flights over a two-week period. This will leave the aircraft unutilised 45% of the time over that period and the excess capacity thus created can easily be diverted to operate flights to Dubai, Kuala Lumpur and Singapore - routes that are clearly over-subscribed by the several million-strong expatriate labour force in those regions and fall in the 6-hour (flying plus non-flying time) per leg bracket. This is equivalent to one daily return flight to each of these busy regional destinations - currently being monopolised by foreign carriers who have a notorious reputation for mistreating Bangladeshi passengers.
While I am happy to see positive ideas emanating from Biman's management reflected by good business decisions, I think it would be a big mistake to break the New York-Dhaka journey by stopping in a third country like the UK. Not only will it take away the biggest attraction of a shorter travel time but it will also add to the anxiety of having to deal with travel restrictions on Bangladeshi passport holders in those countries, not to mention delays and elemental uncertainties related to any additional stop-over. I look forward to seeing Bangladesh's national flag carrier on US soil again soon! (Shabbir A. Bashar, PhD, resides in Vancouver, USA)