Biman Bangladesh Airlines struggles with operating costs

State-owned Biman Bangladesh Airlines is suffering from a liquidity crisis, despite making profits for three consecutive years. 

Biman is struggling to cover its operating costs, and it is paying staff salaries by loaning money from the bank. The audit for the 2017-2018 fiscal year is yet to be completed, but the airline’s authorities are concerned about possible losses, reports the Bangla Tribune.

A number of high-ups commented that the liquidity crisis will persist until the aircrafts, brought in under high-priced leases, can be returned.

The correspondent has identified a multitude of factors contributing to the financial losses of Biman Bangladesh Airlines, such as: a fuel price hike, fluctuating exchange rates for the USD, high-priced aircraft leases, a weak marketing team, and a loss of revenue for cargo transport.

Biman is also investing in different sectors—further increasing expenses.

High operating costs

In 2008, the airlines made a deal with the Boeing aircraft manufacturing company to procure ten planes for a cost of over 2 billion USD.

The state-owned airline is paying the money in regular installments. Six aircrafts have already been added to its fleet, while two more are scheduled to be added later this year. The remaining two will join the Biman fleet in 2019. 

Biman Bangladesh is also footing the bill for insurance fees for the aircrafts.

According to insiders, the airline is also investing in training more pilots, cabin crew, and engineers. There are also costs associated with procuring in-flight entertainment systems, ground servers, and other technical upgrades to ensure the smooth operation of the newly-purchased planes.

Equipment worth Tk100 crore has also been purchased to upgrade ground- handling operations.

Biman presently has a fleet of 13 airplanes. Of them, the airline owns four Boeing 777-300 ER planes and two 737-800 planes—the rest were leased from foreign companies. Two Dash 8 Q series aircrafts are being used for domestic flights.

Biman recently returned two leased Egypt Airlines Boeing 777 aircrafts, after suffering losses while they were in operation.

A Biman official, on condition of anonymity, told the correspondent: “We took the initiative to procure four aircrafts to handle increased pressure during the Hajj season. Three of them have already been added to the fleet.

“These aircrafts were procured under the ACMI system. This process ensures that the company that supplied those planes also takes care of crew training, aircraft maintenance, and insurance.”

The official added that to avail such facilities, Biman had to pay a high price for the aircrafts.

According to a number of Biman Bangladesh Airlines officials, fuel prices went up a total of six times in the 2017-2018 fiscal year—which in turn ramped up operating costs. 

However, Biman did not increase air fares despite the rapid fuel price increase.

Looming crisis

In the same fiscal year, the airline failed to achieve its targeted sales revenue, due to a weak marketing team, said Biman officials; adding that they have been trying to meet their sales target by selling tickets in advance, at a discount, since November last year. 

An internal audit revealed that Tk76 crore, as charges for inbound-outbound cargo handling from non-scheduled freighters, was not deposited to Bangladesh Airlines. Ali Ahsan was serving as the general manager of the cargo department at that time.

He was later appointed as the director of the Biman’s marketing department in April of 2017.

After the internal audit revealed the above-mentioned irregularities, Ali Ahsan was removed from his position, and Md Ashraful Islam was appointed the acting director.

Air Marshal (retd) Muhammad Enamul Bari, chairman of Biman Bangladesh Airlines, in several recent programs, had spoken out about the airline’s looming crisis.

On June 6, Enamul Bari said the Biman Bangladesh Airlines’ revenue has decreased in the past two months, and staff salaries are being paid through bank loans. He was speaking at an event organized by Biman Sramik League (CBA). 

Sources also revealed that the airlines had withdrawn money from two Fixed Deposit Receipt (FDR) accounts,  to mitigate the ongoing liquidity crisis. Those FDRs belonged to the flight catering centre and the poultry department. 

Addressing the issue, Biman's General Manager (PR) Shakil Meraj said: “We made consistent profits in the past few years, but the airlines sector across the globe is presently facing a recession.

“New aircrafts will be added to our fleet this August and November, and we will return leased planes. This ongoing crisis, caused by several reasons such as fluctuating USD rates, and fuel prices hikes, is a temporary setback.”

Commenting on the matter, Biman Managing Director AM Mosaddik Hossain said: “It is normal for a commercial organization to face a crisis from time to time. I am optimistic that we will endure the crisis.”

He concluded by saying the full account of profit and losses cannot be assessed until the audit is completed.