Taking Biman again to 'take-off' stage
Sunday, 24 June 2007
Shahiduzzaman Khan
THE caretaker government is set to complete the process of turning Bangladesh Biman into a public limited company (PLC) by June 30 and appoint an operator for managing the airline. Biman Bangladesh Airline will be renamed Bangladesh Airlines after its turning into a PLC.
The new operator should be a well-managed airline like Singapore Airline or Thai Airline but the operator will be appointed through open tender. The draft of the proposal for turning the public sector corporation into a public limited company was finalised at a recent inter-ministerial meeting. The experts at the meeting said it needed 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. The proposal was scheduled to be placed before the advisory council meeting on Saturday.
The inter-ministerial meeting also finalised the draft of the memorandum of association and memorandum of articles of the new company while the government would promulgate an ordinance in this regard after approval of the advisory council. After becoming a public limited company the airline would be free from government control. The airline will purchase new aircraft or collect aircraft on lease on the basis of the operator's suggestion for reviving the ailing organisation.
In the first phase, the government will hold 100 per cent share of the new company but later up to 49 per cent of shares will be off-loaded. Seven to eleven directors -- all from secretary-level government officials -- will operate the company that will be later registered with the registrar of joint stock companies. The government would bear long-term and short-term liabilities of the Biman, and the new company would start with zero liabilities.
Meanwhile. the number of retirement seeking Bangladesh Biman officials and employees far exceeded the airline's target as 2,140 persons responded to the Voluntary Retirement Scheme (VRS) on the last day of applications for the programme. On June 5, the Biman offered the VRS in order to trim its staff to 3,400 from existing 4,800.
The scheme is part of the government's plan to turn the national flag carrier into a PLC and make it a healthy and profitable commercial venture. A committee has already started scrutinising the respondents' applications from last week to decide which applications will be accepted. Seven out of 13 aircraft of Biman Bangladesh Airline are now in operation.
The authorities are trying to bring Man-Equipment Ratio (MER) [ratio of aircraft to manpower] of Biman to a reasonable level to reduce its expenses by 40 to 45 per cent, Against the 'acceptable' ratio of 1:200, Biman's MER at present is 1:367 while Singapore Airlines' MER is 1:152, Malaysian Airlines' MER is 1:146 and Emirates' MER is 1: 294. The airline is also trying to ensure that its skilled officials and employees do not go into retirement under this scheme. Nobody will be allowed to leave the job if he is considered necessary for Biman.
Of the eight directorates of Biman, staffs and officials of engineering directorate responded largely to VRS, while 170 staffs out of 192 from Biman Flight Catering Centre responded to VRS. Many Biman staffs said they accepted the VRS as they got benefit under the programme. However, some others said they had no other option to respond to the VRS as the Biman authorities put pressure on them.
The Council of Advisers on May 20 approved a proposal to turn Biman Bangladesh Airline into a PLC by June. Under the VRS scheme, Biman offered special packages to its employees whose service period exceeded five years. Implementation of the scheme will require Tk 2.97 billion and the World Bank has already provided the amount to the government. A company board would be formed comprising the organisations that will take all decisions regarding the Biman. The airlines has reportedly been incurring an annual loss of around Tk 40 to 50 billion on an average due to overstaffing, corruption, and mismanagement.
When one compares Biman with other airlines, the common parameters are the balance sheet, management, skill level of the workforce, remuneration, safety record and image. Biman does not score high on any of these, and its image gets a bite. All previous moves to bring about changes did not bear fruit because of resistance from within the organisation. Everyone in Biman, starting from the leaders to the union bosses and senior executives, had a partial remedy for Biman's woes, but nothing worthwhile ever materialised.
Moreover, airlines all over the world are largely software dependent but Biman has lagged behind, and the flow of information is slow and not always easily accessible to all. The most common complaint about Biman is that potential passengers are told that the flight is full, but after getting on board one finds many seats empty. The quality of service has suffered at all levels, on the ground and in the air. Because Biman has been a losing concern for most of its life, it does not even generate enough interest among the board members, with the exception of a few. They have little time for a full, detailed review of Biman's activities.
Making a six-point recommendation, a high-powered committee suggested that the national flag carrier should take resolute steps to make it a commercially-viable enterprise in a fiercely-competitive global aviation industry. With just four of the nine wide-bodied aircraft operational, Biman is faced with severe capacity shortage, which is allowing international airlines to take away whatever passenger market Biman is left with. The airline should immediately be allowed to lease four large Boeing or Airbus aircraft for operations to the Middle-East and Europe, and three medium-sized Boeing or Airbus for domestic and regional routes. These leased aircraft should serve Biman until 2014 when the new-generation aircraft should replace them. The orders for the new-generation aircraft should be placed now in order to receive them in time in 2014, and both Boeing and Airbus would be obliged to arrange at least 80 percent of the financing required if the government is convinced to issue a sovereign guarantee in their favour. The remaining 20 percent can come from nationalised commercial banks as well as from private commercial banks.
Biman has as many as 10 labour unions with the Bangladesh Biman Employees Union acting as the collective bargaining agent. Experts suggest that certain rights of the unions should be curtailed for a stipulated timeframe that it may take for Biman to go through the restructuring process. 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, Biman should be able to prepare a sustainable business plan for itself for the next 20 years. It should then release at least 51 percent shares for offering to the public.
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. None is ready to see a 'clinically dead' organisation any more.
THE caretaker government is set to complete the process of turning Bangladesh Biman into a public limited company (PLC) by June 30 and appoint an operator for managing the airline. Biman Bangladesh Airline will be renamed Bangladesh Airlines after its turning into a PLC.
The new operator should be a well-managed airline like Singapore Airline or Thai Airline but the operator will be appointed through open tender. The draft of the proposal for turning the public sector corporation into a public limited company was finalised at a recent inter-ministerial meeting. The experts at the meeting said it needed 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. The proposal was scheduled to be placed before the advisory council meeting on Saturday.
The inter-ministerial meeting also finalised the draft of the memorandum of association and memorandum of articles of the new company while the government would promulgate an ordinance in this regard after approval of the advisory council. After becoming a public limited company the airline would be free from government control. The airline will purchase new aircraft or collect aircraft on lease on the basis of the operator's suggestion for reviving the ailing organisation.
In the first phase, the government will hold 100 per cent share of the new company but later up to 49 per cent of shares will be off-loaded. Seven to eleven directors -- all from secretary-level government officials -- will operate the company that will be later registered with the registrar of joint stock companies. The government would bear long-term and short-term liabilities of the Biman, and the new company would start with zero liabilities.
Meanwhile. the number of retirement seeking Bangladesh Biman officials and employees far exceeded the airline's target as 2,140 persons responded to the Voluntary Retirement Scheme (VRS) on the last day of applications for the programme. On June 5, the Biman offered the VRS in order to trim its staff to 3,400 from existing 4,800.
The scheme is part of the government's plan to turn the national flag carrier into a PLC and make it a healthy and profitable commercial venture. A committee has already started scrutinising the respondents' applications from last week to decide which applications will be accepted. Seven out of 13 aircraft of Biman Bangladesh Airline are now in operation.
The authorities are trying to bring Man-Equipment Ratio (MER) [ratio of aircraft to manpower] of Biman to a reasonable level to reduce its expenses by 40 to 45 per cent, Against the 'acceptable' ratio of 1:200, Biman's MER at present is 1:367 while Singapore Airlines' MER is 1:152, Malaysian Airlines' MER is 1:146 and Emirates' MER is 1: 294. The airline is also trying to ensure that its skilled officials and employees do not go into retirement under this scheme. Nobody will be allowed to leave the job if he is considered necessary for Biman.
Of the eight directorates of Biman, staffs and officials of engineering directorate responded largely to VRS, while 170 staffs out of 192 from Biman Flight Catering Centre responded to VRS. Many Biman staffs said they accepted the VRS as they got benefit under the programme. However, some others said they had no other option to respond to the VRS as the Biman authorities put pressure on them.
The Council of Advisers on May 20 approved a proposal to turn Biman Bangladesh Airline into a PLC by June. Under the VRS scheme, Biman offered special packages to its employees whose service period exceeded five years. Implementation of the scheme will require Tk 2.97 billion and the World Bank has already provided the amount to the government. A company board would be formed comprising the organisations that will take all decisions regarding the Biman. The airlines has reportedly been incurring an annual loss of around Tk 40 to 50 billion on an average due to overstaffing, corruption, and mismanagement.
When one compares Biman with other airlines, the common parameters are the balance sheet, management, skill level of the workforce, remuneration, safety record and image. Biman does not score high on any of these, and its image gets a bite. All previous moves to bring about changes did not bear fruit because of resistance from within the organisation. Everyone in Biman, starting from the leaders to the union bosses and senior executives, had a partial remedy for Biman's woes, but nothing worthwhile ever materialised.
Moreover, airlines all over the world are largely software dependent but Biman has lagged behind, and the flow of information is slow and not always easily accessible to all. The most common complaint about Biman is that potential passengers are told that the flight is full, but after getting on board one finds many seats empty. The quality of service has suffered at all levels, on the ground and in the air. Because Biman has been a losing concern for most of its life, it does not even generate enough interest among the board members, with the exception of a few. They have little time for a full, detailed review of Biman's activities.
Making a six-point recommendation, a high-powered committee suggested that the national flag carrier should take resolute steps to make it a commercially-viable enterprise in a fiercely-competitive global aviation industry. With just four of the nine wide-bodied aircraft operational, Biman is faced with severe capacity shortage, which is allowing international airlines to take away whatever passenger market Biman is left with. The airline should immediately be allowed to lease four large Boeing or Airbus aircraft for operations to the Middle-East and Europe, and three medium-sized Boeing or Airbus for domestic and regional routes. These leased aircraft should serve Biman until 2014 when the new-generation aircraft should replace them. The orders for the new-generation aircraft should be placed now in order to receive them in time in 2014, and both Boeing and Airbus would be obliged to arrange at least 80 percent of the financing required if the government is convinced to issue a sovereign guarantee in their favour. The remaining 20 percent can come from nationalised commercial banks as well as from private commercial banks.
Biman has as many as 10 labour unions with the Bangladesh Biman Employees Union acting as the collective bargaining agent. Experts suggest that certain rights of the unions should be curtailed for a stipulated timeframe that it may take for Biman to go through the restructuring process. 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, Biman should be able to prepare a sustainable business plan for itself for the next 20 years. It should then release at least 51 percent shares for offering to the public.
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. None is ready to see a 'clinically dead' organisation any more.