Viability of Bangladesh Biman
Thursday, 7 October 2010
Syed Jamaluddin
Biman is likely to resume its New York flight to meet the government pledge despite fears of losses. Last time Biman counted a loss of Tk 3.5/4.0 million (35/40 lakhs) on each flight between Dhaka and New York. Biman in August 2006 shut its flights to New York along with Brussels, Paris, Frankfurt, Mumbai, Narita and Yangon in the wake of aircraft shortage and a record loss of Tk 4.54 billion (454 crores) in 2005/06 fiscal year. The national flag carrier made profit in 2007/08 after a lapse of four years. Such a performance is very rare in public sector organisations in Bangladesh. The credit goes to the caretaker government for this achievement.
Insiders say the airliner plans to reopen flights on loss-incurring Dhaka-New York route in line with the decision of the Prime Minister who assured expatriate Bangladeshis in New York that Biman's flight would resume in 2011. Biman authorities have informed the government of the risk of losses for reopening the New York flights and urged the government for support either in the form of compensation or fuel subsidy. Biman is now completing various formalities for opening the New York flight. It is not understood how Biman will be viable if decisions are taken to operate in the loss-making sectors.
Aircraft leasing is a fairly common strategy practised by most airlines. It reduces investment significantly. Nearly 40% of all aircraft with the airlines have been acquired on lease. But hardly any airline acquires aircraft on wet lease, simply because they have the capability to provide all the components required for operation like crew, maintenance, network and many other associated services developed through years.
There is a tendency in Biman to get an aircraft on wet lease basis instead of dry lease basis. Payment in wet lease is to be made on hourly basis while in dry lease, on monthly basis. There is a published dry-lease rate for different types of aircraft depending on date of manufacture and configuration, but there is no such reliable information on wet lease. A wet-lease aircraft has to be operated for a minimum guaranteed hours, whereas the use of the dry-leased aircraft is at the operator's discretion. Wet leasing is obviously more expensive.
Acquisition of aircraft on wet lease is done to address short-term capacity crisis. But in our airline, acquisition of aircraft on wet lease has become a regular practice. Support package for wet-lease aircraft always comes at a higher price. It is said that the airline is bleeding because of the wet-leased aircraft. They are becoming increasingly more expensive to operate. Viability of the airline cannot be expected under such circumstances.
Biman is one of the worst performing airlines in the world. Much remains to be done to regain its commercial viability lost due to poor planning, corruption and mismanagement. Biman could not even capitalise on its captive Hajj market. All the airlines flying to and from Dhaka, except our ill-fated national carrier, are doing good business. More airlines are trying to open routes from Bangladesh. This is because more passengers are available.
Rivalry between the minister, parliamentary standing committee, secretary and chairman of the board of directors of Biman has made the situation chaotic. The parliamentary committee has reportedly complained to the Prime Minister against the Minister for Civil Aviation and Tourism. The minister has also sought the intervention of the Prime Minister in his dispute with the members of the standing committee. The chairman of the board of directors has contradicted the minister about corruption in Biman. It is said that the Biman board of directors does not comply with the directives of the ministry. The ministry cannot take action against Biman employees because of legal complexities. It appears that there is no chain of command in the ministry/Biman for smooth running of the organisation. According to the Minister, there is a public demand for opening more domestic routes but Biman does not take interest in these matters.
Biman is losing passengers and going down in respect of management, efficiency and image because of poor delivery of services. It is losing money because of alleged corruption. Biman should not be flying the old aircrafts which are not viable. These aircrafts should have been phased out long ago but this was not done for lack of vision. Procurement of new aircraft is a complex matter in Biman.
Biman employees created problems for higher pay and other benefits. But Biman has not been providing good services. Employees have a responsibility to cater to the needs of the passengers. Biman is a highly overstaffed organisation without any regard for human resources development. Pay hike or benefit of any kind has to be commensurate with employees' performance.
There should be no dearth of passengers for Biman. Workers flying to the Middle East, Singapore and Malaysia are all willing to use Biman and they are doing so. We have virtually a captive market in London. But many of our VIP passengers travel by other airlines as they apparently do not rely on Biman. If Biman can operate on schedule and provide comparable facilities, it will not have to worry about passengers. Moreover, passengers from Kolkata, Nepal, Bhutan and north-eastern states of India will find it convenient to fly long distance via Dhaka.
More and more airlines from the Middle East have been operating from Dhaka. This is because they are getting plenty of passengers. There is no reason why Biman cannot have a share in this expanding market. If we can build up reputation, more and more people from Bangladesh will fly Biman. We will hardly need passengers from other nationalities. But Biman should not spread its wings to unprofitable destinations.
Biman is plagued with too many issues -- from flying to baggage management. Biman's problems have been highlighted in the media and in discussions at various levels. But no solution has yet been found. Unless the problems of Biman are resolved, the airlines cannot operate successfully. Decisive action is needed for overhauling the Biman management.
Some time back the Prime Minister took an initiative for revamping the airline but it is not known why this has not been followed up. This may be under process in the Prime Minister' Office (PMO). Making Biman viable and dependable is a challenge of this government. This is in line with their commitment of the Charter of Change,
The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com
Biman is likely to resume its New York flight to meet the government pledge despite fears of losses. Last time Biman counted a loss of Tk 3.5/4.0 million (35/40 lakhs) on each flight between Dhaka and New York. Biman in August 2006 shut its flights to New York along with Brussels, Paris, Frankfurt, Mumbai, Narita and Yangon in the wake of aircraft shortage and a record loss of Tk 4.54 billion (454 crores) in 2005/06 fiscal year. The national flag carrier made profit in 2007/08 after a lapse of four years. Such a performance is very rare in public sector organisations in Bangladesh. The credit goes to the caretaker government for this achievement.
Insiders say the airliner plans to reopen flights on loss-incurring Dhaka-New York route in line with the decision of the Prime Minister who assured expatriate Bangladeshis in New York that Biman's flight would resume in 2011. Biman authorities have informed the government of the risk of losses for reopening the New York flights and urged the government for support either in the form of compensation or fuel subsidy. Biman is now completing various formalities for opening the New York flight. It is not understood how Biman will be viable if decisions are taken to operate in the loss-making sectors.
Aircraft leasing is a fairly common strategy practised by most airlines. It reduces investment significantly. Nearly 40% of all aircraft with the airlines have been acquired on lease. But hardly any airline acquires aircraft on wet lease, simply because they have the capability to provide all the components required for operation like crew, maintenance, network and many other associated services developed through years.
There is a tendency in Biman to get an aircraft on wet lease basis instead of dry lease basis. Payment in wet lease is to be made on hourly basis while in dry lease, on monthly basis. There is a published dry-lease rate for different types of aircraft depending on date of manufacture and configuration, but there is no such reliable information on wet lease. A wet-lease aircraft has to be operated for a minimum guaranteed hours, whereas the use of the dry-leased aircraft is at the operator's discretion. Wet leasing is obviously more expensive.
Acquisition of aircraft on wet lease is done to address short-term capacity crisis. But in our airline, acquisition of aircraft on wet lease has become a regular practice. Support package for wet-lease aircraft always comes at a higher price. It is said that the airline is bleeding because of the wet-leased aircraft. They are becoming increasingly more expensive to operate. Viability of the airline cannot be expected under such circumstances.
Biman is one of the worst performing airlines in the world. Much remains to be done to regain its commercial viability lost due to poor planning, corruption and mismanagement. Biman could not even capitalise on its captive Hajj market. All the airlines flying to and from Dhaka, except our ill-fated national carrier, are doing good business. More airlines are trying to open routes from Bangladesh. This is because more passengers are available.
Rivalry between the minister, parliamentary standing committee, secretary and chairman of the board of directors of Biman has made the situation chaotic. The parliamentary committee has reportedly complained to the Prime Minister against the Minister for Civil Aviation and Tourism. The minister has also sought the intervention of the Prime Minister in his dispute with the members of the standing committee. The chairman of the board of directors has contradicted the minister about corruption in Biman. It is said that the Biman board of directors does not comply with the directives of the ministry. The ministry cannot take action against Biman employees because of legal complexities. It appears that there is no chain of command in the ministry/Biman for smooth running of the organisation. According to the Minister, there is a public demand for opening more domestic routes but Biman does not take interest in these matters.
Biman is losing passengers and going down in respect of management, efficiency and image because of poor delivery of services. It is losing money because of alleged corruption. Biman should not be flying the old aircrafts which are not viable. These aircrafts should have been phased out long ago but this was not done for lack of vision. Procurement of new aircraft is a complex matter in Biman.
Biman employees created problems for higher pay and other benefits. But Biman has not been providing good services. Employees have a responsibility to cater to the needs of the passengers. Biman is a highly overstaffed organisation without any regard for human resources development. Pay hike or benefit of any kind has to be commensurate with employees' performance.
There should be no dearth of passengers for Biman. Workers flying to the Middle East, Singapore and Malaysia are all willing to use Biman and they are doing so. We have virtually a captive market in London. But many of our VIP passengers travel by other airlines as they apparently do not rely on Biman. If Biman can operate on schedule and provide comparable facilities, it will not have to worry about passengers. Moreover, passengers from Kolkata, Nepal, Bhutan and north-eastern states of India will find it convenient to fly long distance via Dhaka.
More and more airlines from the Middle East have been operating from Dhaka. This is because they are getting plenty of passengers. There is no reason why Biman cannot have a share in this expanding market. If we can build up reputation, more and more people from Bangladesh will fly Biman. We will hardly need passengers from other nationalities. But Biman should not spread its wings to unprofitable destinations.
Biman is plagued with too many issues -- from flying to baggage management. Biman's problems have been highlighted in the media and in discussions at various levels. But no solution has yet been found. Unless the problems of Biman are resolved, the airlines cannot operate successfully. Decisive action is needed for overhauling the Biman management.
Some time back the Prime Minister took an initiative for revamping the airline but it is not known why this has not been followed up. This may be under process in the Prime Minister' Office (PMO). Making Biman viable and dependable is a challenge of this government. This is in line with their commitment of the Charter of Change,
The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com