Saif
Senior Member
- Messages
- 17,685
- Likes
- 8,490
- Nation
- Residence
- Axis Group
Bangladesh Defense
Saif
Senior Member
- Messages
- 17,685
- Likes
- 8,490
- Nation
- Residence
- Axis Group
Can Biman have a fresh beginning?
Investment in efficient human resources and systems is never wasted and is crucial to achieving efficiency.
Can Biman have a fresh beginning?
Representational Image/Biman website
Following the July-August mass uprising, almost all service organisations, corporations, administrative bodies, and government offices in the country are experiencing significant changes, reshuffling, and overhauls. Previously stifled voices are now being heard, and we expect a new Bangladesh to emerge from the wreckage left behind by the Awami League government. The extent of embezzlement is staggering. Any honest person who envisions what could have happened if this money had been invested into the economy can't help but feel enraged by the fallen regime.
Towards the end of the regime, Salman F Rahman, the former adviser to the former prime minister on private industry and investment, spearheaded an attempt to purchase 10 new aircraft from Airbus. The intent was brazenly clear: to embezzle funds. That chapter is now closed. It's time to look forward and build a new Biman founded on professionalism, efficiency, transparency, and accountability.
The aviation industry experienced an unprecedented lull during the Covid pandemic, followed by a tremendous boom. Despite this, Biman has underperformed, especially considering it has a relatively young fleet.
In the aviation business, the margin for error is extremely narrow. A single poor decision can lead to total chaos for any airline. An accident can damage an airline's brand image so severely that it may take months to regain passenger confidence. Building a brand is a slow and painstaking process, but it can ensure a return on investment. For effective branding of Biman, key areas require attention.
A major complaint against Biman is its poor "on-time performance". In the recent past, the importance of punctuality has been largely ignored. The airline's vision and mission do not appear to be clearly communicated to its employees and departments. A concerted effort is essential to ensure flights are dispatched on time.
Aircraft serviceability is one of the most important areas for profit maximisation. Aircrafts must be serviceable and in good condition, including in-flight entertainment systems. An aircraft that sits idle is useless unless the airline's operations are so inefficient that it is cheaper to keep aircrafts grounded.
Another issue that needs focus is efficiency, which is essential in every aspect of the airline, from marketing and sales to dispatch, engineering, maintenance, pilots, and cabin crew. Investment in efficient human resources and systems is never wasted and is crucial to achieving efficiency. As such, it is essential to emphasise proper recruitment and training, especially of managers.
A positive work environment is critical. Disengaged employees can cause significant losses. Responsibility and ownership are key contributors to an airline's brand image and efficiency. We need empathetic, knowledgeable managers. Certain problematic individuals must be removed from sensitive positions immediately.
Modern aircraft have the unique ability to communicate their health status to engineers, even mid-flight. However, we often fail to take advantage of this technology due to inadequate spare parts provisioning. Delaying repairs because of cost-cutting can be disastrous. Aircraft should not be left idle for days due to a lack of necessary parts. The prospect of providing maintenance to more foreign carriers may be explored to expand the spares pool.
Many of our international flights include short segments, such as Dhaka-Sylhet or Dhaka-Chattogram, before proceeding to the ultimate destination, which highly increases operating expenses. These short flights waste valuable engine, landing gear and auxiliary power unit (APU) cycles. A better strategy would be to operate point-to-point international routes, like Dhaka to Dubai, Dubai to Chattogram, then Chattogram to Jeddah and so on. This would not only avoid unproductive short sectors but also save on engine, landing gear, and APU cycles. The short-sector flights are choking off domestic operators. The national carrier should not monopolise the market at the expense of underperformance.
Crew shortages should not hinder expansion or planning. Recruitment should be regular and recruitment numbers should be manageable within a set timeframe. Currently, because of crew shortage, and the reluctance of crew to stay over in Sylhet and Chattogram, direct flights from these cities cannot be operated. Inadequate crew numbers do not allow crew to take time off to attend to personal matters. Aspiring young pilots should be given the opportunity to join Biman, and current pilots who meet the requirements should be promoted in due time.
Biman is a relatively small airline with few airplanes. So, it is very important to take advantage of any opportunity to optimise operations that come our way. For instance, the decision to procure Boeing 787s, despite their delayed delivery, was influenced by the ability of pilots to fly both Boeing 787s and 777s simultaneously. However, when the 787s arrived, the crew for both aircraft types were segregated, causing problems in planning issues and crew dissatisfaction. There are also issues with aircraft allocation in different routes that should be revisited.
Biman must immediately focus on future fleet planning based on pragmatic business solutions and operational needs. Failing to plan ahead will lead to major operational problems. We are already in a stage where aircraft shortage is inevitable.
Another area is communicating delays. We often see passengers getting agitated at the holding area because of a lack of information regarding delays. Passengers readily accept a delay of less than 30 minutes or even more if they are updated about it along with the reasons. Biman traffic personnel needs training on providing updated delay messages to passengers without exception. Any delay of more than 15 minutes must be communicated to the passengers.
Lastly, sufficient executive power must be granted to the managing director and chief executive officer to hold them accountable for decisions. In recent years, the board and its subcommittees made almost all decisions, leaving central management unaccountable. This led to unnecessary delays, and in some cases, decisions were rendered ineffective by the time they were made.
Proper brainstorming will bring forth many more steps that can be taken for the advancement of Biman and improve its brand image.
Captain A M Maqsood Ahmed is captain of Boeing 777 with Bangladesh Biman and a former member of the fleet planning committee, that did the groundwork for the purchase of 10 new generation Boeing aircraft.
Representational Image/Biman website
Following the July-August mass uprising, almost all service organisations, corporations, administrative bodies, and government offices in the country are experiencing significant changes, reshuffling, and overhauls. Previously stifled voices are now being heard, and we expect a new Bangladesh to emerge from the wreckage left behind by the Awami League government. The extent of embezzlement is staggering. Any honest person who envisions what could have happened if this money had been invested into the economy can't help but feel enraged by the fallen regime.
Towards the end of the regime, Salman F Rahman, the former adviser to the former prime minister on private industry and investment, spearheaded an attempt to purchase 10 new aircraft from Airbus. The intent was brazenly clear: to embezzle funds. That chapter is now closed. It's time to look forward and build a new Biman founded on professionalism, efficiency, transparency, and accountability.
The aviation industry experienced an unprecedented lull during the Covid pandemic, followed by a tremendous boom. Despite this, Biman has underperformed, especially considering it has a relatively young fleet.
In the aviation business, the margin for error is extremely narrow. A single poor decision can lead to total chaos for any airline. An accident can damage an airline's brand image so severely that it may take months to regain passenger confidence. Building a brand is a slow and painstaking process, but it can ensure a return on investment. For effective branding of Biman, key areas require attention.
A major complaint against Biman is its poor "on-time performance". In the recent past, the importance of punctuality has been largely ignored. The airline's vision and mission do not appear to be clearly communicated to its employees and departments. A concerted effort is essential to ensure flights are dispatched on time.
Aircraft serviceability is one of the most important areas for profit maximisation. Aircrafts must be serviceable and in good condition, including in-flight entertainment systems. An aircraft that sits idle is useless unless the airline's operations are so inefficient that it is cheaper to keep aircrafts grounded.
Another issue that needs focus is efficiency, which is essential in every aspect of the airline, from marketing and sales to dispatch, engineering, maintenance, pilots, and cabin crew. Investment in efficient human resources and systems is never wasted and is crucial to achieving efficiency. As such, it is essential to emphasise proper recruitment and training, especially of managers.
A positive work environment is critical. Disengaged employees can cause significant losses. Responsibility and ownership are key contributors to an airline's brand image and efficiency. We need empathetic, knowledgeable managers. Certain problematic individuals must be removed from sensitive positions immediately.
Modern aircraft have the unique ability to communicate their health status to engineers, even mid-flight. However, we often fail to take advantage of this technology due to inadequate spare parts provisioning. Delaying repairs because of cost-cutting can be disastrous. Aircraft should not be left idle for days due to a lack of necessary parts. The prospect of providing maintenance to more foreign carriers may be explored to expand the spares pool.
Many of our international flights include short segments, such as Dhaka-Sylhet or Dhaka-Chattogram, before proceeding to the ultimate destination, which highly increases operating expenses. These short flights waste valuable engine, landing gear and auxiliary power unit (APU) cycles. A better strategy would be to operate point-to-point international routes, like Dhaka to Dubai, Dubai to Chattogram, then Chattogram to Jeddah and so on. This would not only avoid unproductive short sectors but also save on engine, landing gear, and APU cycles. The short-sector flights are choking off domestic operators. The national carrier should not monopolise the market at the expense of underperformance.
Crew shortages should not hinder expansion or planning. Recruitment should be regular and recruitment numbers should be manageable within a set timeframe. Currently, because of crew shortage, and the reluctance of crew to stay over in Sylhet and Chattogram, direct flights from these cities cannot be operated. Inadequate crew numbers do not allow crew to take time off to attend to personal matters. Aspiring young pilots should be given the opportunity to join Biman, and current pilots who meet the requirements should be promoted in due time.
Biman is a relatively small airline with few airplanes. So, it is very important to take advantage of any opportunity to optimise operations that come our way. For instance, the decision to procure Boeing 787s, despite their delayed delivery, was influenced by the ability of pilots to fly both Boeing 787s and 777s simultaneously. However, when the 787s arrived, the crew for both aircraft types were segregated, causing problems in planning issues and crew dissatisfaction. There are also issues with aircraft allocation in different routes that should be revisited.
Biman must immediately focus on future fleet planning based on pragmatic business solutions and operational needs. Failing to plan ahead will lead to major operational problems. We are already in a stage where aircraft shortage is inevitable.
Another area is communicating delays. We often see passengers getting agitated at the holding area because of a lack of information regarding delays. Passengers readily accept a delay of less than 30 minutes or even more if they are updated about it along with the reasons. Biman traffic personnel needs training on providing updated delay messages to passengers without exception. Any delay of more than 15 minutes must be communicated to the passengers.
Lastly, sufficient executive power must be granted to the managing director and chief executive officer to hold them accountable for decisions. In recent years, the board and its subcommittees made almost all decisions, leaving central management unaccountable. This led to unnecessary delays, and in some cases, decisions were rendered ineffective by the time they were made.
Proper brainstorming will bring forth many more steps that can be taken for the advancement of Biman and improve its brand image.
Captain A M Maqsood Ahmed is captain of Boeing 777 with Bangladesh Biman and a former member of the fleet planning committee, that did the groundwork for the purchase of 10 new generation Boeing aircraft.
- Messages
- 3,861
- Likes
- 2,056
Biman plans to get new Boeing jets as lease period of 2 aircrafts end
Biman has issued a Request for Proposals (RfP) to dry lease two B737-800s for 72 months from early 2025
Photo: Courtesy
Photo: Courtesy
Biman Bangladesh Airlines is looking to lease two new Boeing 737-800 aircraft as the lease period of its two Boeing planes has ended.
"The lease period of two of our medium capacity Boeing aircraft has ended. Those need to be returned. That is why we have already published advertisements for new aircraft leases," Bushra Islam, general manager (PR) of Biman Bangladesh Airlines, told The Business Standard today (15 October).
"With the Hajj season coming up, we are leasing new aircraft to maintain our capacity," she added.
Biman has issued a request for proposals (RfP) to dry lease two B737-800s for 72 months from early 2025.
The documents, seen by The Business Standard, indicates the state-owned carrier is looking for dual-cabin CFM International CFM56-7B-powered aircraft with winglets that are no older than 15 years and can be delivered in Biman livery, reports Ch-aviation on 15 October.
The RfP states the airline would like the first aircraft delivered by 1 February 2025, and the second by 1 April 2025.
Biman would prefer both aircraft came from the same lessor but says they will consider offers to provide one aircraft if that aircraft is suitable, adds the proposal.
Biman was on a deal with both aviation giant Boeing and Airbus to purchase new aircraft.
The negotiation on purchasing 10 aircraft from Airbus was on the table with Airbus, but the fall of Sheikh Hasina's government has changed the whole atmosphere.
Now, the process has become stagnant as per the Biman sources.
Biman currently has 21 aircraft, mainly Boeing-dominated.
- Messages
- 3,861
- Likes
- 2,056
Bismillah Airlines
This is what happens when ex-bus-owners and salt-field proprietors start a cargo airline.
Their other company is Molla Salt Industries which is the number one local brand.
They carry shrimp hatchlings from one end of Bangladesh to another. Pretty profitable actually and still early days.
Last edited:
- Messages
- 3,861
- Likes
- 2,056
Bangladesh's Bismillah Airlines confirms two incoming A321F cargo aircraft - plan may have been delayed by student uprising in August 2024.
Bangladesh's Bismillah Airlines confirms two incoming A321Fs
Bismillah Airlines (BML, Dhaka) will start operating an A321-200(PCF) over the IATA 2023/24 winter season, according to a Cargo Facts report. The...
www.ch-aviation.com
Saif
Senior Member
- Messages
- 17,685
- Likes
- 8,490
- Nation
- Residence
- Axis Group
Aviation industry: analysis of struggles
BANGLADESH has had 11 commercial airlines since its independence and of them, only four are still operational. The seven airlines that are now defunct primarily put the closure of the operation down to high operational costs and limited revenue. Of the airlines that are operational, Biman...
www.newagebd.net
Aviation industry: analysis of struggles
Mariha Tahsin 05 January, 2025, 00:00
BANGLADESH has had 11 commercial airlines since its independence and of them, only four are still operational. The seven airlines that are now defunct primarily put the closure of the operation down to high operational costs and limited revenue. Of the airlines that are operational, Biman Bangladesh Airlines is state-owned and the rest are private. In the 2023–24 financial year, Biman made a profit of $2.36 million. In the 53 years the airline has been in operation, it has recorded profits for only 17 years. But even in years when the airline makes a profit, the profit margin is considerably slimmer than the amount of losses incurred in loss-making years.
The other three airlines — Novoair, US-Bangla Airlines and Air Astra — are private that are not mandated to make public their financial statements. Episodes related to their management, however, indicate that these airlines are also struggling financially. In an interview in January 2023, Novoair’s managing director described the airline as ‘distinguished, if not profitable.’
In 2018, after a US-Bangla flight crashed during landing in Kathmandu, pilots employed by the airline revealed the airline’s risky cost-cutting practices. These included shooting approaches well below the minimum required visibility, departing for a destination with marginal weather or visibility, compromising on technical issues, flying without weather radars, forbidding pilots to give access to the engineering log, especially at outstations, to avoid grounding costs and employing inexperienced pilots on risky routes. One can easily deduce that the airline would not have to resort to such risky measures if it were operating on profit.
Air Astra began commercial operations only in November 2022. Thus, it is still early to comment on its profitability. The consistent financial struggles faced by almost all the airlines that have operated in Bangladesh indicate that the issue of low profitability extends beyond mere management challenges. This pattern suggests that the difficulties are rooted in deeper structural problems within the country’s aviation industry.
Global aviation industry
THE airline industry is notorious for its low profit margins. From the 1945 financial year to the 2024 financial year, the average profit margin across the global aviation sector has been a mere 0.92 per cent. However, profitability has improved in recent years, with the average profit margin rising to 3.6 per cent from the 2022 financial year to the 2024 financial year. However, this recovery has not been uniform across the world. North America and Europe have been the largest contributors to the industry’s positive financial outcomes, followed by the Middle East.
Several factors contribute to the relatively stronger performance of the airlines of these regions. High disposable incomes in these regions drive a greater demand for tourism, which in turn boosts profitability. Furthermore, extensive airport infrastructure and superior intercontinental connectivity give airlines in these regions a competitive edge by offering a diverse range of profitable international routes. The strategic location of Gulf hubs — often in popular tourist destinations — has also helped to elevate Gulf airlines as key connecting carriers within the global travel network.
However, there are factors that could potentially reduce the profitability of airlines in these regions. For example, major North American airlines such as Delta and Gulf carriers such as Emirates, Etihad and Qatar Airways have received billions of dollars in financial support from their respective governments through equity injection and nearly unconditional loans. If this government assistance were factored into their financial statements, it could push them into the loss-making category.
Additionally, the Gulf carriers have been criticised for allegedly benefiting from subsidised fuel, which disrupts fair competition. The allegations, however, are consistently brushed aside by the airlines. In contrast, Biman lacks several advantages enjoyed by North American and Middle Eastern airlines. It does not have access to subsidised fuel and operates in a country with low average disposable income. Its location is also not ideal for functioning as a major connectivity hub. Furthermore, Bangladesh faces several challenges such as a difficult law and order situation, restrictions on popular tourist activities such as drinking and gambling, a conservative societal outlook, limited tourist attractions and underdeveloped infrastructure. These factors make it unlikely for Bangladesh to attract significant tourist traffic. Additionally, its proximity to affordable and popular tourist destinations in South Asia further limits its appeal.
However, when comparing the financial performance of Biman Bangladesh Airlines to that of global airlines, it is evident that Biman’s results are in line with broader industry trends. From 2008 to 2024, the global aviation industry experienced an average loss margin of about 0.72 per cent. During the same period, Biman’s loss margin was slightly lower at 0.56 per cent, indicating that while Biman faces similar challenges, its losses are not worse than that of the global industry average.
Rationale for operating airlines
IT IS well established that airlines operate with low profit margins so much so that the interest earned from a regular savings account often exceeds the profits generated by the aviation industry. This raises the question: why do airlines continue to operate despite such slim margins? The reasons for running airlines vary significantly between governments and private entities. Many national carriers around the world such as Air India, Pakistan International Airways, Thai Airways and Malaysia Airlines have faced severe financial difficulties. Despite this, governments continue to provide financial support for their flag carriers, believing that airlines serve strategic national interests beyond mere profitability.
For tourism-dependent nations, a national airline is a key asset in attracting tourists at competitive prices. In countries such as Bangladesh, where remittances from migrant workers are a vital part of the economy, the national airline plays a crucial role in connecting these workers to their destinations. These workers often face language barriers, making a local carrier an essential services for their travel needs.
Governments sometimes run airlines with a political agenda, operating loss-making routes to satisfy certain segments of the population. A clear example of this is the Hajj flight operation of Biman Bangladesh Airlines. Although the flights are intended to be profitable, they often result in losses. Hajj agents have a financial incentive to shorten their clients’ stays in Saudi Arabia, leading them to skip pre-booked flights in favour of last-minute bookings. The last-minute changes increase costs, such as renegotiating airport fees in Saudi Arabia, purchasing tickets from other airlines for Biman’s passengers and under-using flights or leased planes. Despite the losses, the government continues to operate the flights to avoid offending religious sentiments of the Muslim majority.
Additionally, national airlines are seen as symbols of national pride, often referred to as an ‘embassy on wings.’ Air connectivity is crucial for stimulating economic activity across nearly all sectors. As a result, governments often provide private airlines with tax incentives such as exemptions from fuel taxes, reduced landing fees and corporate tax breaks. These incentives are designed to help airlines lower operational costs, support industry growth and remain competitive. For instance, Ryanair has received financial support from airports in Ireland and Italy to help it to operate at lower costs and expand its route network.
However, private Bangladeshi airlines do not enjoy similar policy support. Despite the lack of government assistance, several private carriers have emerged in the country in recent years, raising questions about the motivation behind their operation, especially when the likelihood of generating profits remains slim. The case of GMG Airlines provides some insight into the impetus of operating in Bangladesh’s aviation industry. The airline faced allegations of inflating revenue figures to mislead stakeholders and attract investments.
Reports suggested that funds were diverted for personal expenses of executives and tickets were sold that were never actually confirmed. In 2007, GMG Airlines reported profits of $84,000, but by 2010, this figure mysteriously ballooned to $6.6 million. This inflated financial data were used to convince the public to invest $25 million in a private placement at a 400 per cent premium. After raising funds from the public, the airline suspended its operation, promising to resume once it had updated its fleet. However, these plans were never realised.
While there is no concrete evidence to suggest that other private airlines in Bangladesh follow the same practices, these examples raise pertinent questions about the true motivation behind operating airlines in a market where profits are far from guaranteed.
What happens if Biman is shut down?
ALTHOUGH the financial performance of Biman Bangladesh Airlines is in line with the global aviation industry, there is ongoing debate about whether it would be more financially sensible to shut down the airline and redirect its resources to a more profitable venture. The answer largely depends on the role we expect the airline to play.
One perspective views the airline as a subsidised public service, essential for advancing the nation’s political interests, economic goals and maintaining national prestige. Among other functions, this would entail running routes that are not necessarily profitable for the airline to enhance connectivity; conducting VVIP flights — carrying the prime minister and their delegation to official visits — even if it disrupts regular flight schedules; transporting the bodies of deceased migrant workers when it is beyond the family’s financial capabilities and providing additional services to migrant workers to make their travel smooth. Beyond this, Biman creates jobs, sets competitive fare standards and forces other airlines to offer lower prices on certain routes. This improved connectivity supports business growth across various sectors of the economy.
If the airline is viewed as an economic venture, operational changes are necessary to reduce costs and make the airline profitable. This would involve scaling back functions driven by political or public interests, which do not align with the airline’s economic objectives. From this perspective, investing in enhanced in-flight services makes little sense as aviation is a price-sensitive industry. Ticket sales are primarily driven by competitive pricing, with service quality having a minimal impact on revenue.
The core issue is that Biman is expected to serve both these roles simultaneously which creates a conflict of interest. The objectives of operating as a public service and as an economically viable business are inherently contradictory. It is argued that if the national airline were shut down, the market gap would simply be filled by other airlines, both domestic and international. However, Bangladeshi private airlines have very limited international operations and have ceased such operations soon after attempting to expand abroad. This suggests that local airlines are unlikely to replace Biman on the international market. Even domestically, private aviation in Bangladesh faces significant financial and operational challenges, which could lead to inflated airfares in the absence of the national carrier setting the price benchmark.
Examples from other countries illustrate what can happen when a national airline is shut down without sufficient private carriers to absorb the market share. In such cases, international airlines often take the advantage of the gap, exploiting the market and consumers. A notable example occurred when South African Airways reduced its operations in 2019. As a result, private carriers like FlySafair and Kulula dominated the domestic market, increasing fares. International passengers flying from South Africa also saw a significant price increase because of the reduced competition in some markets.
The potential closure of Biman raises concern about how the market gap would be filled. While private airlines in Bangladesh face financial and operational difficulties, the absence of a national carrier could lead to higher airfares and reduced competition. Thus, the decision regarding whether to keep Biman hinges on the broader economic benefits of improved connectivity.
Mariha Tahsin is a PhD.
Mariha Tahsin 05 January, 2025, 00:00
BANGLADESH has had 11 commercial airlines since its independence and of them, only four are still operational. The seven airlines that are now defunct primarily put the closure of the operation down to high operational costs and limited revenue. Of the airlines that are operational, Biman Bangladesh Airlines is state-owned and the rest are private. In the 2023–24 financial year, Biman made a profit of $2.36 million. In the 53 years the airline has been in operation, it has recorded profits for only 17 years. But even in years when the airline makes a profit, the profit margin is considerably slimmer than the amount of losses incurred in loss-making years.
The other three airlines — Novoair, US-Bangla Airlines and Air Astra — are private that are not mandated to make public their financial statements. Episodes related to their management, however, indicate that these airlines are also struggling financially. In an interview in January 2023, Novoair’s managing director described the airline as ‘distinguished, if not profitable.’
In 2018, after a US-Bangla flight crashed during landing in Kathmandu, pilots employed by the airline revealed the airline’s risky cost-cutting practices. These included shooting approaches well below the minimum required visibility, departing for a destination with marginal weather or visibility, compromising on technical issues, flying without weather radars, forbidding pilots to give access to the engineering log, especially at outstations, to avoid grounding costs and employing inexperienced pilots on risky routes. One can easily deduce that the airline would not have to resort to such risky measures if it were operating on profit.
Air Astra began commercial operations only in November 2022. Thus, it is still early to comment on its profitability. The consistent financial struggles faced by almost all the airlines that have operated in Bangladesh indicate that the issue of low profitability extends beyond mere management challenges. This pattern suggests that the difficulties are rooted in deeper structural problems within the country’s aviation industry.
Global aviation industry
THE airline industry is notorious for its low profit margins. From the 1945 financial year to the 2024 financial year, the average profit margin across the global aviation sector has been a mere 0.92 per cent. However, profitability has improved in recent years, with the average profit margin rising to 3.6 per cent from the 2022 financial year to the 2024 financial year. However, this recovery has not been uniform across the world. North America and Europe have been the largest contributors to the industry’s positive financial outcomes, followed by the Middle East.
Several factors contribute to the relatively stronger performance of the airlines of these regions. High disposable incomes in these regions drive a greater demand for tourism, which in turn boosts profitability. Furthermore, extensive airport infrastructure and superior intercontinental connectivity give airlines in these regions a competitive edge by offering a diverse range of profitable international routes. The strategic location of Gulf hubs — often in popular tourist destinations — has also helped to elevate Gulf airlines as key connecting carriers within the global travel network.
However, there are factors that could potentially reduce the profitability of airlines in these regions. For example, major North American airlines such as Delta and Gulf carriers such as Emirates, Etihad and Qatar Airways have received billions of dollars in financial support from their respective governments through equity injection and nearly unconditional loans. If this government assistance were factored into their financial statements, it could push them into the loss-making category.
Additionally, the Gulf carriers have been criticised for allegedly benefiting from subsidised fuel, which disrupts fair competition. The allegations, however, are consistently brushed aside by the airlines. In contrast, Biman lacks several advantages enjoyed by North American and Middle Eastern airlines. It does not have access to subsidised fuel and operates in a country with low average disposable income. Its location is also not ideal for functioning as a major connectivity hub. Furthermore, Bangladesh faces several challenges such as a difficult law and order situation, restrictions on popular tourist activities such as drinking and gambling, a conservative societal outlook, limited tourist attractions and underdeveloped infrastructure. These factors make it unlikely for Bangladesh to attract significant tourist traffic. Additionally, its proximity to affordable and popular tourist destinations in South Asia further limits its appeal.
However, when comparing the financial performance of Biman Bangladesh Airlines to that of global airlines, it is evident that Biman’s results are in line with broader industry trends. From 2008 to 2024, the global aviation industry experienced an average loss margin of about 0.72 per cent. During the same period, Biman’s loss margin was slightly lower at 0.56 per cent, indicating that while Biman faces similar challenges, its losses are not worse than that of the global industry average.
Rationale for operating airlines
IT IS well established that airlines operate with low profit margins so much so that the interest earned from a regular savings account often exceeds the profits generated by the aviation industry. This raises the question: why do airlines continue to operate despite such slim margins? The reasons for running airlines vary significantly between governments and private entities. Many national carriers around the world such as Air India, Pakistan International Airways, Thai Airways and Malaysia Airlines have faced severe financial difficulties. Despite this, governments continue to provide financial support for their flag carriers, believing that airlines serve strategic national interests beyond mere profitability.
For tourism-dependent nations, a national airline is a key asset in attracting tourists at competitive prices. In countries such as Bangladesh, where remittances from migrant workers are a vital part of the economy, the national airline plays a crucial role in connecting these workers to their destinations. These workers often face language barriers, making a local carrier an essential services for their travel needs.
Governments sometimes run airlines with a political agenda, operating loss-making routes to satisfy certain segments of the population. A clear example of this is the Hajj flight operation of Biman Bangladesh Airlines. Although the flights are intended to be profitable, they often result in losses. Hajj agents have a financial incentive to shorten their clients’ stays in Saudi Arabia, leading them to skip pre-booked flights in favour of last-minute bookings. The last-minute changes increase costs, such as renegotiating airport fees in Saudi Arabia, purchasing tickets from other airlines for Biman’s passengers and under-using flights or leased planes. Despite the losses, the government continues to operate the flights to avoid offending religious sentiments of the Muslim majority.
Additionally, national airlines are seen as symbols of national pride, often referred to as an ‘embassy on wings.’ Air connectivity is crucial for stimulating economic activity across nearly all sectors. As a result, governments often provide private airlines with tax incentives such as exemptions from fuel taxes, reduced landing fees and corporate tax breaks. These incentives are designed to help airlines lower operational costs, support industry growth and remain competitive. For instance, Ryanair has received financial support from airports in Ireland and Italy to help it to operate at lower costs and expand its route network.
However, private Bangladeshi airlines do not enjoy similar policy support. Despite the lack of government assistance, several private carriers have emerged in the country in recent years, raising questions about the motivation behind their operation, especially when the likelihood of generating profits remains slim. The case of GMG Airlines provides some insight into the impetus of operating in Bangladesh’s aviation industry. The airline faced allegations of inflating revenue figures to mislead stakeholders and attract investments.
Reports suggested that funds were diverted for personal expenses of executives and tickets were sold that were never actually confirmed. In 2007, GMG Airlines reported profits of $84,000, but by 2010, this figure mysteriously ballooned to $6.6 million. This inflated financial data were used to convince the public to invest $25 million in a private placement at a 400 per cent premium. After raising funds from the public, the airline suspended its operation, promising to resume once it had updated its fleet. However, these plans were never realised.
While there is no concrete evidence to suggest that other private airlines in Bangladesh follow the same practices, these examples raise pertinent questions about the true motivation behind operating airlines in a market where profits are far from guaranteed.
What happens if Biman is shut down?
ALTHOUGH the financial performance of Biman Bangladesh Airlines is in line with the global aviation industry, there is ongoing debate about whether it would be more financially sensible to shut down the airline and redirect its resources to a more profitable venture. The answer largely depends on the role we expect the airline to play.
One perspective views the airline as a subsidised public service, essential for advancing the nation’s political interests, economic goals and maintaining national prestige. Among other functions, this would entail running routes that are not necessarily profitable for the airline to enhance connectivity; conducting VVIP flights — carrying the prime minister and their delegation to official visits — even if it disrupts regular flight schedules; transporting the bodies of deceased migrant workers when it is beyond the family’s financial capabilities and providing additional services to migrant workers to make their travel smooth. Beyond this, Biman creates jobs, sets competitive fare standards and forces other airlines to offer lower prices on certain routes. This improved connectivity supports business growth across various sectors of the economy.
If the airline is viewed as an economic venture, operational changes are necessary to reduce costs and make the airline profitable. This would involve scaling back functions driven by political or public interests, which do not align with the airline’s economic objectives. From this perspective, investing in enhanced in-flight services makes little sense as aviation is a price-sensitive industry. Ticket sales are primarily driven by competitive pricing, with service quality having a minimal impact on revenue.
The core issue is that Biman is expected to serve both these roles simultaneously which creates a conflict of interest. The objectives of operating as a public service and as an economically viable business are inherently contradictory. It is argued that if the national airline were shut down, the market gap would simply be filled by other airlines, both domestic and international. However, Bangladeshi private airlines have very limited international operations and have ceased such operations soon after attempting to expand abroad. This suggests that local airlines are unlikely to replace Biman on the international market. Even domestically, private aviation in Bangladesh faces significant financial and operational challenges, which could lead to inflated airfares in the absence of the national carrier setting the price benchmark.
Examples from other countries illustrate what can happen when a national airline is shut down without sufficient private carriers to absorb the market share. In such cases, international airlines often take the advantage of the gap, exploiting the market and consumers. A notable example occurred when South African Airways reduced its operations in 2019. As a result, private carriers like FlySafair and Kulula dominated the domestic market, increasing fares. International passengers flying from South Africa also saw a significant price increase because of the reduced competition in some markets.
The potential closure of Biman raises concern about how the market gap would be filled. While private airlines in Bangladesh face financial and operational difficulties, the absence of a national carrier could lead to higher airfares and reduced competition. Thus, the decision regarding whether to keep Biman hinges on the broader economic benefits of improved connectivity.
Mariha Tahsin is a PhD.
