Still Biman has a long way to go
Thursday, 13 March 2008
Shahiduzzaman Khan
'Biman will no longer limp, sit idle in other airports or be stranded in Dhaka, so said Chief Adviser's Special Assistant for Civil Aviation Mr Mahbub Jamil at a press briefing in Dhaka this week. Amid jubilation, he announced that Biman was going to buy eight new-generation aircraft from Boeing at a cost of $1.265 billion.
Biman's decision has enabled the Seattle giant to secure the contract, beating its European rival, Airbus, in a move seen vital to strengthen the financial health of the state-owned carrier that has been incurring losses year after year. Decisions have also been taken to re-brand the national flag carrier by 2009 through an international firm to do the exercise. Nevertheless, the outlook of Biman remains the same as it was 35 years ago. As such, this age-old scenario needs to be changed in order give it a new look. Airlines worldwide nowadays present most modern characteristics. The national flag carrier must have a facelift, a change of its interior design and exterior looks.
Of the new eight planes, the first consignment of four Boeing 777-300ER planes, with 463 passenger capacity, will be delivered in 2013 while the four 394-seater Boeing 787-8s will be handed over in 2017.
This is the first time Biman independently decided to buy aircraft without any political or government interference after its birth in 1972. Biman became a public limited company in July, 2007. The price of four Boeing 777-300ERs will be about $731 million while the four Boeing 787-8s will cost about $531 million.
Before the arrival of the new aircraft, Biman will have four Boeing aircraft on lease to meet the aircraft shortages and Boeing will provide necessary assistance in this regard. The management expects that there would be no more mismanagement in Biman's schedules. As per deal, Boeing will not only deliver aircraft, but also provide technical and financial support for staff training, route planning, and preparation of a marketing strategy for the carrier. It will assist Bangladesh upgrade the Zia International Airport (ZIA) so that wide-bodied Boeing 777-300 and Boeing 787-8 aircraft can land.
Amid aircraft shortages, Biman cut seven international routes and was forced to reduce flight frequencies on five profitable international routes like Riyadh, Jeddah and Kuwait. Out of a total of 11 planes of Biman fleet, only five are operating now while the rest are grounded. Biman's market share was down to almost one half of what it was in 1991. Biman will pay $1.54 million from its own fund to Boeing while signing the MoU on March 15. The US-based Exim Bank will provide 85 per cent of the rest as loan at six per cent interest and a consortium comprising different local banks will provide the rest 15 per cent of the money as loan. Biman will have to pay back the loan money within 12 years.
Biman management expects that it would be able to make profits from next year. It is likely to procure two more aircraft for short-distance routes. Airbus is to deliver a presentation of their products to Biman soon, after which Biman would decide about the planes.
Biman employees are apparently happy over the decision of the board to buy new aircraft. They said Biman's problems will be reduced greatly, once those eight aircraft are drafted into service. The financial woes forced the carrier, which became a public company last year, to shed as many as 2000 jobs and suspend flights to seven non-viable international and four domestic routes. Such a decision by the government about Biman was long overdue.
Successive governments in the past failed to take any firm decision on Biman and hence, the national flag carrier continued to sustain colossal losses year after year. Its annual losses range between Tk 40 billion and Tk 50 billion a year, reinforcing the need for immediate steps to prevent the state-owned entity from going bust. Candidly speaking, Biman should have been allowed to go out of business long ago to prevent the colossal financial losses it has amassed over the years due to inefficiency, financial irregularities, and ill-conceived opening of many domestic and international routes. It should have been privatised long years back on considerations of sustainable financial management and public welfare on the part of the state. Over the years, the unfortunate Biman served the interests of a section of greedy officials and employees.
Biman's route structures should be planned according to capacity and market demand and flights must be scheduled properly to reach that market. With the induction of new aircraft and the subsequent restructuring of routes and fares, it should be able to prepare a sustainable business plan for itself for the next 20 years. It should then release at least 51 per cent shares for offering to the public.
In the neighbouring countries of India and Pakistan, deregulation of the airline industry and allowing competition to the national carriers from private airlines have not only captured the market arising out of new traffic growth but also been a compelling factor for the national carriers to improve their efficiency in a competitive market. Experts are of the opinion that the same should be practised in Bangladesh. The civil aviation authority should set acceptably high-standards for local airline start-ups and allow any available routes they would like to operate on.
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 to-day's highly competitive aviation industry.
'Biman will no longer limp, sit idle in other airports or be stranded in Dhaka, so said Chief Adviser's Special Assistant for Civil Aviation Mr Mahbub Jamil at a press briefing in Dhaka this week. Amid jubilation, he announced that Biman was going to buy eight new-generation aircraft from Boeing at a cost of $1.265 billion.
Biman's decision has enabled the Seattle giant to secure the contract, beating its European rival, Airbus, in a move seen vital to strengthen the financial health of the state-owned carrier that has been incurring losses year after year. Decisions have also been taken to re-brand the national flag carrier by 2009 through an international firm to do the exercise. Nevertheless, the outlook of Biman remains the same as it was 35 years ago. As such, this age-old scenario needs to be changed in order give it a new look. Airlines worldwide nowadays present most modern characteristics. The national flag carrier must have a facelift, a change of its interior design and exterior looks.
Of the new eight planes, the first consignment of four Boeing 777-300ER planes, with 463 passenger capacity, will be delivered in 2013 while the four 394-seater Boeing 787-8s will be handed over in 2017.
This is the first time Biman independently decided to buy aircraft without any political or government interference after its birth in 1972. Biman became a public limited company in July, 2007. The price of four Boeing 777-300ERs will be about $731 million while the four Boeing 787-8s will cost about $531 million.
Before the arrival of the new aircraft, Biman will have four Boeing aircraft on lease to meet the aircraft shortages and Boeing will provide necessary assistance in this regard. The management expects that there would be no more mismanagement in Biman's schedules. As per deal, Boeing will not only deliver aircraft, but also provide technical and financial support for staff training, route planning, and preparation of a marketing strategy for the carrier. It will assist Bangladesh upgrade the Zia International Airport (ZIA) so that wide-bodied Boeing 777-300 and Boeing 787-8 aircraft can land.
Amid aircraft shortages, Biman cut seven international routes and was forced to reduce flight frequencies on five profitable international routes like Riyadh, Jeddah and Kuwait. Out of a total of 11 planes of Biman fleet, only five are operating now while the rest are grounded. Biman's market share was down to almost one half of what it was in 1991. Biman will pay $1.54 million from its own fund to Boeing while signing the MoU on March 15. The US-based Exim Bank will provide 85 per cent of the rest as loan at six per cent interest and a consortium comprising different local banks will provide the rest 15 per cent of the money as loan. Biman will have to pay back the loan money within 12 years.
Biman management expects that it would be able to make profits from next year. It is likely to procure two more aircraft for short-distance routes. Airbus is to deliver a presentation of their products to Biman soon, after which Biman would decide about the planes.
Biman employees are apparently happy over the decision of the board to buy new aircraft. They said Biman's problems will be reduced greatly, once those eight aircraft are drafted into service. The financial woes forced the carrier, which became a public company last year, to shed as many as 2000 jobs and suspend flights to seven non-viable international and four domestic routes. Such a decision by the government about Biman was long overdue.
Successive governments in the past failed to take any firm decision on Biman and hence, the national flag carrier continued to sustain colossal losses year after year. Its annual losses range between Tk 40 billion and Tk 50 billion a year, reinforcing the need for immediate steps to prevent the state-owned entity from going bust. Candidly speaking, Biman should have been allowed to go out of business long ago to prevent the colossal financial losses it has amassed over the years due to inefficiency, financial irregularities, and ill-conceived opening of many domestic and international routes. It should have been privatised long years back on considerations of sustainable financial management and public welfare on the part of the state. Over the years, the unfortunate Biman served the interests of a section of greedy officials and employees.
Biman's route structures should be planned according to capacity and market demand and flights must be scheduled properly to reach that market. With the induction of new aircraft and the subsequent restructuring of routes and fares, it should be able to prepare a sustainable business plan for itself for the next 20 years. It should then release at least 51 per cent shares for offering to the public.
In the neighbouring countries of India and Pakistan, deregulation of the airline industry and allowing competition to the national carriers from private airlines have not only captured the market arising out of new traffic growth but also been a compelling factor for the national carriers to improve their efficiency in a competitive market. Experts are of the opinion that the same should be practised in Bangladesh. The civil aviation authority should set acceptably high-standards for local airline start-ups and allow any available routes they would like to operate on.
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 to-day's highly competitive aviation industry.