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Beximco to buy 50pc stake of GMG Airlines

Thursday, 18 June 2009


Kayes M Sohel
The country's leading conglomerate Beximco Group said it will buy 50 per cent stake of the cash-strapped GMG Airlines to foray into the aviation business.
The country's largest private airline needs Tk 700 million to give a new lease of life to weather the financial losses caused by the global financial downturn and slump in traffic flow.
"We have inked a deal to buy 50 per cent stake of the airline today (Wednesday)," Salman F Rahman, deputy chairman of the Beximco Group told the FE.
"The private airline needs a total of Tk 700 million to give a new lease of life, of which Tk 300 million will be paid by the airline after issuing new shares while Beximco Ltd, a subsidiary of the Group, will give Tk 400 million as credit," he added.
The private airline, however, needs approval from the Securities and Exchange Commission (SEC) to issue the new shares.
Despite repeated attempt to contact the GMG authority, no comment was available regarding the disposal of its stake.
Asked if aviation business will be viable against the backdrop of the global economic downturn and the slump in traffic flow, Rahman said, "I think it will be commercially viable as it has licenses to operate on many lucrative routes."
"Moreover, we'll add new aircraft in order to improve our services and compete with foreign airlines operating in Bangladesh," he said adding that GMG would buy two wide-bodied Boeing 767s to boost its current six-plane fleet.
Two of its existing fleet are now grounded. But those would be brought back to operation with the Beximco cash.
Starting operation since mid-1998, the GMG Airlines now operates from Dhaka to Barisal, Chittagong, Cox's Bazar, Jessore and Sylhet on the domestic network.
Its current international routes include India's Kolkata (India), the UAE's Dubai, and Malaysia's Kuala Lumpur.
Last year, GMG cut its flights on the Dhaka-Dubai route to recoup its losses from spiraling fuel prices, fierce competition and the huge payout to Boeing 747-300 it leased out. It also suspended its Dubai , Bangkok , New Delhi , Kathmandu and Kuala Lumpur flights in 2008.
A mountain of liabilities and losses has brought the airline to its knees, forcing it to axe as many as 150 staff last year. Its accumulated liabilities, according to lenders, will be in the territory of Tk 1.0 billion and Tk 1.5 billion.
With jet fuel prices making a freefall in the international market, industry insiders say, the airline has begun reviving its services on international routes. It has already resumed flights to all the routes suspended earlier.