Needed, a holistic approach to salvage Biman
Sunday, 12 August 2007
Shahiduzzaman Khan
YET another report on irregularities in Biman revealed the national flag carrier's pitiable state of affairs. It appeared that the Biman was never allowed to operate independently and its key management personnel were involved in corruption and irregularities in the national airlines, leading to its bankruptcy.
Discussants on the report on Biman irregularities demanded exemplary punishment of those responsible for sending Biman Bangladesh Airlines in the red through mismanagement and corruption. They said efficiency of Biman must be raised to make the airlines competitive. Biman has a very bright future if it can build capacity and associate stakeholders with it for smooth operation. The country needs to chart a roadmap salvaging the airlines, which has now turned into a public limited company.
According to a Transparency International, Bangladesh (TIB) research report on Biman that has been released to the media last week, Biman was made a public limited company without conforming to the preconditions that include audit of the assets and liabilities of the national airlines. Biman has incurred a total loss of Tk 19 billion so far since its inception in 1972, according to the report, which mentioned that around $45 million were misappropriated in the process of leasing aircraft during the last five years. It has been alleged in the report that the Biman manpower has been downsized without any assessment and evaluation of their performance.
The report said the Biman authorities ate up an estimated US$45 million in aircraft lease alone in the last five years, causing a perennial financial hemorrhage to the national airlines. But its incumbent managing director MA Momen claimed that the figures estimated by the TIB would be much higher. Major corruption in Biman took place in the process of aircraft lease and procurement. Arbitrary decision by Biman chairman, excluding technically sound professionals in tenders, ignoring technical and legal aspects due to lack of expertise and non-participation of chief executive officer in the process are some of the reasons behind the massive corruption and irregularities in aircraft procurement and lease.
Besides huge graft in overseas stations, corruption also took place in maintenance and repair of old fleets, bidding process, and ticket purchase and re-confirmation. The TIB found that of the annual relevant allocations of Tk 900 million, at least Tk 500 million got lost, as a handful of agencies dominated the business, using political influence and cronyism.
About corruption in foreign stations, the research report said staff recruitment on political consideration, financial bungling by country managers, excess manpower and continuation of country offices despite route closure were the main reasons behind the losses of overseas offices. In the last four years, the Biman's annual maintenance budget swelled to Tk 4.89 billion from Tk 2.15 billion, although the number of aircraft came down to 13 from 17 during the same period. Until 2006, the accumulated losses of the erstwhile Biman stood at Tk 19 billion. The national flag carrier did not follow the business fundamentals since its inception.
Experts opine that if the newly formed airlines could cut costs and handle the dedicated passengers efficiently, it could be made profitable. Its chief executive officer said from now on, Biman would operate on routes to be considered commercially viable. He made it clear that if Biman started its journey like any other commercial enterprises, VIPs, who used to avail themselves of the reduced fares, would no longer be allowed to fly at discounted fares.
There is no denying that successive governments had turned a blind eye to the endemic corruption in the national flag carrier since independence, making it a burden on the nation. A large number of ground engineers and pilots either went abroad or joined foreign airlines, as the state-owned corporation failed to evaluate their services properly.
The caretaker administration transformed Biman into a public limited company on July 23, 2007 and registered it as Bangladesh Airlines Limited. It also decided to downsize its manpower, appoint foreign operator to run the airline and change the governing council. Had the governments in the past acted on the recommendations of the Parliamentary Standing Committee on civil aviation and tourism ministry, Biman would not have faced such a pitiable situation. In the past, no government took steps to address the large number of Biman's audit objections.
Arbitrary handling of aircraft purchases in recent years has affected Biman's reputation among airplane manufacturers and suppliers so much that now the airline is failing to attract a single bidder in its attempt to purchase or lease wide-bodied aircraft. Following the DC-10 disaster in Chittagong, Biman sought lease of one or two DC10-30 aircraft in a tender. But none participated in it. Sources said that DC-10 aircraft have now become so obsolete that there is a lack of suppliers.
Similarly, a section of officials and employees of Biman's purchase department had allegedly embezzled Tk 50.0 million through purchase of spare parts for the aircraft and other materials. They pocketed the huge amount of money in collaboration with some 'fake firms' that supplied the spares and other materials during 2001-2005.
It was alleged that these officials and employees purchased many important parts for aircraft of Biman at higher rates compared with the market prices. For example, they purchased a part at US$3,000 although the real price was only $100. In 2004, the purchase department bought 2000 pieces of silk sarees at a total cost of Tk 3.4 million but it paid Tk 5.0 million to the firm that supplied the items. In one instance, the authorities had to buy a spare part at $7000, which is available at $125 in the international market.
Biman's main corruption point was engineering maintenance. Here, fake bills were prepared in millions of dollars every month. There are instances where 10 times more was paid and it was discovered later that wrong spare had been bought. They purchased parts at higher price from the companies like M&S, USA, Air Source, USA, Big Air, USA, Air Parts International, USA, Interturbine Logistic, Germany, Hyper Coat, Singapore and Ansett Aircraft, USA. Sources said Messrs M&S, USA is a 'fake' company but a local supply firm-New Generation Graphics Limited-supplied a good number of parts to Biman in the name of this company. With the support of local agents, the purchase department prepared indents or demand schedule so that they could win tender to supply parts and other materials for Biman.
Corruption in Biman's marketing and sales division had also reached an alarming proportion. Managers of this section sucked Biman dry in collusion with general sales agents (GSAs) and travel agents. Biman was no symbol of pride anymore. Biman was bleeding the country's hard earned resources. It held the country's financial institutions hostage single-handed.
After Biman was made a public limited company, the operations and management of the Biman may be handed over to an overseas operator through open tender. What is needed at this stage is that it requires a holistic approach to salvage Biman from the perennial losses since turning it into a public limited company would not help improve the situation, if the authorities failed to rid Biman of corruption and mismanagement.
Running an airline profitably in today's fiercely competitive world requires concentrated focus and skills. Biman needs to confront the challenges for its own survival and the government should be there as the safety net only. Restructuring, if properly implemented, should keep the national flag carrier afloat in the highly competitive aviation industry.
YET another report on irregularities in Biman revealed the national flag carrier's pitiable state of affairs. It appeared that the Biman was never allowed to operate independently and its key management personnel were involved in corruption and irregularities in the national airlines, leading to its bankruptcy.
Discussants on the report on Biman irregularities demanded exemplary punishment of those responsible for sending Biman Bangladesh Airlines in the red through mismanagement and corruption. They said efficiency of Biman must be raised to make the airlines competitive. Biman has a very bright future if it can build capacity and associate stakeholders with it for smooth operation. The country needs to chart a roadmap salvaging the airlines, which has now turned into a public limited company.
According to a Transparency International, Bangladesh (TIB) research report on Biman that has been released to the media last week, Biman was made a public limited company without conforming to the preconditions that include audit of the assets and liabilities of the national airlines. Biman has incurred a total loss of Tk 19 billion so far since its inception in 1972, according to the report, which mentioned that around $45 million were misappropriated in the process of leasing aircraft during the last five years. It has been alleged in the report that the Biman manpower has been downsized without any assessment and evaluation of their performance.
The report said the Biman authorities ate up an estimated US$45 million in aircraft lease alone in the last five years, causing a perennial financial hemorrhage to the national airlines. But its incumbent managing director MA Momen claimed that the figures estimated by the TIB would be much higher. Major corruption in Biman took place in the process of aircraft lease and procurement. Arbitrary decision by Biman chairman, excluding technically sound professionals in tenders, ignoring technical and legal aspects due to lack of expertise and non-participation of chief executive officer in the process are some of the reasons behind the massive corruption and irregularities in aircraft procurement and lease.
Besides huge graft in overseas stations, corruption also took place in maintenance and repair of old fleets, bidding process, and ticket purchase and re-confirmation. The TIB found that of the annual relevant allocations of Tk 900 million, at least Tk 500 million got lost, as a handful of agencies dominated the business, using political influence and cronyism.
About corruption in foreign stations, the research report said staff recruitment on political consideration, financial bungling by country managers, excess manpower and continuation of country offices despite route closure were the main reasons behind the losses of overseas offices. In the last four years, the Biman's annual maintenance budget swelled to Tk 4.89 billion from Tk 2.15 billion, although the number of aircraft came down to 13 from 17 during the same period. Until 2006, the accumulated losses of the erstwhile Biman stood at Tk 19 billion. The national flag carrier did not follow the business fundamentals since its inception.
Experts opine that if the newly formed airlines could cut costs and handle the dedicated passengers efficiently, it could be made profitable. Its chief executive officer said from now on, Biman would operate on routes to be considered commercially viable. He made it clear that if Biman started its journey like any other commercial enterprises, VIPs, who used to avail themselves of the reduced fares, would no longer be allowed to fly at discounted fares.
There is no denying that successive governments had turned a blind eye to the endemic corruption in the national flag carrier since independence, making it a burden on the nation. A large number of ground engineers and pilots either went abroad or joined foreign airlines, as the state-owned corporation failed to evaluate their services properly.
The caretaker administration transformed Biman into a public limited company on July 23, 2007 and registered it as Bangladesh Airlines Limited. It also decided to downsize its manpower, appoint foreign operator to run the airline and change the governing council. Had the governments in the past acted on the recommendations of the Parliamentary Standing Committee on civil aviation and tourism ministry, Biman would not have faced such a pitiable situation. In the past, no government took steps to address the large number of Biman's audit objections.
Arbitrary handling of aircraft purchases in recent years has affected Biman's reputation among airplane manufacturers and suppliers so much that now the airline is failing to attract a single bidder in its attempt to purchase or lease wide-bodied aircraft. Following the DC-10 disaster in Chittagong, Biman sought lease of one or two DC10-30 aircraft in a tender. But none participated in it. Sources said that DC-10 aircraft have now become so obsolete that there is a lack of suppliers.
Similarly, a section of officials and employees of Biman's purchase department had allegedly embezzled Tk 50.0 million through purchase of spare parts for the aircraft and other materials. They pocketed the huge amount of money in collaboration with some 'fake firms' that supplied the spares and other materials during 2001-2005.
It was alleged that these officials and employees purchased many important parts for aircraft of Biman at higher rates compared with the market prices. For example, they purchased a part at US$3,000 although the real price was only $100. In 2004, the purchase department bought 2000 pieces of silk sarees at a total cost of Tk 3.4 million but it paid Tk 5.0 million to the firm that supplied the items. In one instance, the authorities had to buy a spare part at $7000, which is available at $125 in the international market.
Biman's main corruption point was engineering maintenance. Here, fake bills were prepared in millions of dollars every month. There are instances where 10 times more was paid and it was discovered later that wrong spare had been bought. They purchased parts at higher price from the companies like M&S, USA, Air Source, USA, Big Air, USA, Air Parts International, USA, Interturbine Logistic, Germany, Hyper Coat, Singapore and Ansett Aircraft, USA. Sources said Messrs M&S, USA is a 'fake' company but a local supply firm-New Generation Graphics Limited-supplied a good number of parts to Biman in the name of this company. With the support of local agents, the purchase department prepared indents or demand schedule so that they could win tender to supply parts and other materials for Biman.
Corruption in Biman's marketing and sales division had also reached an alarming proportion. Managers of this section sucked Biman dry in collusion with general sales agents (GSAs) and travel agents. Biman was no symbol of pride anymore. Biman was bleeding the country's hard earned resources. It held the country's financial institutions hostage single-handed.
After Biman was made a public limited company, the operations and management of the Biman may be handed over to an overseas operator through open tender. What is needed at this stage is that it requires a holistic approach to salvage Biman from the perennial losses since turning it into a public limited company would not help improve the situation, if the authorities failed to rid Biman of corruption and mismanagement.
Running an airline profitably in today's fiercely competitive world requires concentrated focus and skills. Biman needs to confront the challenges for its own survival and the government should be there as the safety net only. Restructuring, if properly implemented, should keep the national flag carrier afloat in the highly competitive aviation industry.