gf-a330
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Biman Needs To Sustain Growth

Mon Dec 20, 2004 7:04 am

Biman needs to sustain growth

Biman Bangladesh Airlines is in urgent need of more capacity to sustain the growth in traffic and revenue it achieved last year (2003-2004 fiscal). The national flag carrier has performed wonderfully well against heavy odds.

"Biman now needs additional capacity to maintain and increase the growth and market share", said M. Mahmooudur Rahman, Managing Director (Acting) and Director of Marketing and Sales while talkingto me at his office recently.

"If there is no capacity increase, the growth and market share are bound to fall", Mahmood warned.

The growth

Rahman, said that during the fiscal 2003-2004 Biman has achieved system wise passenger growth of 08 per cent and revenue growth of 17 per cent-a all time high growth rate. The system wide growth in cargo is modest, but it achieved significant growth from Dhaka station, he disclosed.

Judging from the traditional growth rate of five per cent per annum, Biman seems to have done very well and 2003-2004 would remain as a memorable year in terms of growth.

The growth, Mahmudur Rahman said was achieved despite fleet constraints and increased number of frequencies with higher capacity aircraft by foreign airlines. During the year, Biman carried 1.54 million passengers-the highest so far and 0.03 million more than the previous year. He attributed the achievement to hard work of all Biman Staff and supervision, monitoring and encouragement of Mir Mohammad Nasiruddin, State Minister for Civil Aviation and Tourism as well as Chairman of Biman's Board of Directors."16 foreign carriers, most of them with modern much higher capacity aircraft-operate to and from Bangladesh. Competition is also very stiff and Biman's constraints are many. So it is almost miracle to achieve this growth", Mahmood said.

The praiseworthy traffic growth has enabled Biman to secure a market share of 44 per cent in passenger traffic and 37 per cent of the air cargo volume. Apart from offering higher belly capacity, a number of foreign carriers are operating dedicated freighters, he mentioned.

Few years back, it may be mentioned, market share of Biman in the passenger traffic hit its' low to only 41.69 per cent. The same was in cargo-the share was only 36.33 per cent.

Additional capacity

Mahmoodur Rahman is very much interested to get additional capacity (aircraft) as early as possible. The additional aircraft is going to immensely benefit Biman in number of ways, he said. The aircraft is going to help Biman maintain its growth by increasing the capacity; help reduce the utilisation time of existing fleet and maintain schedule regularity.

At present DC-10-30s are being used 12 hours per day on an average and Airbus A310-300 about 11 hours. This very high utilisation of existing international fleet is not leaving enough ground time for proper maintenance. As a result, technical faults have become frequent and so is the flight disruption and schedule irregularity.

Over all, Mahmud said, performance of Biman last year is certainly praiseworthy. Addition of capacity soon would create a scope for the airline to get back its market share further. Slowly Biman is re-gaining and the efforts are to have a market share of at least 50 per cent, he said. Capacity increase would also help improvement of schedule regularity and to achieve all round improvement in the performance of all the stations in general and losing stations in particular, he added.

It may be noted that the biggest victim of the fleet constraints is the marketing department of the airline. With limited capacity and total uncertainty over maintaining schedule, the marketing department is finding difficult to sell its product-seat.

Moreover, against global average of between 75 and 85 per cent schedule regularity of scheduled carriers. Biman's schedule regularity is persistently poor. With ageing limited number of highly committed aircraft, nothing better could be expected.

Bangladesh air travel market is growing at a healthy rate. But Biman's inability to offer capacity as per growth of the market harmed its cause. The foreign airlines took the advantage of the situation by providing additional capacity through frequency increase, to meet the growing demand. The demand is most likely to continue and a number of foreign airlines are seeking more increase in frequency of their operations. So increase of the capacity of Biman has become a must.

The weakest area

Fleet the mainstay of any airline has remained the weakest area of Biman. It is the only airline, which was established without any aircraft and since then no serious effort, has been made to equip it with proper and dependable fleet. So, suffering continues.

In the absence of perspective and long-term plan, Biman Bangladesh Airlines is once again facing a nightmarish period and struggling hard to halt its down-sliding image from hitting the bottom. It has become essential to replace the ageing DC-10-30 fleet as soon as possible.

Plan to replace DC-10-30s

Mahmood said that the government and management of Biman has decided to replace DC-10-30 with new generation aircraft. After studies, both Boeing and Airbus submitted their offers. Boeing has offered B777 and Airbus A340 as replacement of Biman's existing fleet of DC-10-30s.

A committee headed by Shafiqul Islam, Secretary Ministry of Communication is now evaluating the offers. Even if the decision of the committee comes soon, lengthy procedure before placing order for aircraft is laying ahead. Moreover, time between order and delivery is also not short.

Mahmood is very much aware of the situation and in favour of taking interim measure to maintain the growth and market share. "Since replacement of DC-10-30 with new generation aircraft will take time and addition of capacity is urgent, it is not wise to wait that long. Pending induction of new generation aircraft in the fleet Biman can add capacity by taking more DC-10-30s on dry lease," he said

Meanwhile, Biman has already decided to replace its fleet of F-28s by either Boeing B737 family or Airbus A 320 family aircraft. Mahmood said the airline has already invited offers in the regard.

Subject to the addition of the capacity, Biman plan to increase frequencies on some Gulf and Middle East and Far East routes, extend Hong Kong flight to Jakarta and rssume operation to Tripoli, Mahmood said. There is no plan to add frequency to Europe and North America, he added.

Impact of fuel cost

The Managing Director (acting) lamented that all the positive impact of traffic and revenue growth has been negated by the rising fuel cost. The fuel price in Dhaka has gone up from 29 cent per litre to 41 cent per litre in Dhaka and 22 cent to 40 cent in Chittagong. The airline will have to shoulder the burden of addition Taka 2300 million due to rise in fuel price this year. Biman, which budgeted Taka 5180 million as fuel cost Will now be required to increase cost by another Taka 2300 million.

Privatisation

The Managing Director (Acting) said that the government has decided to offer share of Biman in the market to help the national flag carrier to generate cash inflow.

As per existing Biman ordinance, 49 per cent share of the airline can be floated, he said.

He, however, declined to specify exact time frame saying that "it is a lengthy process and lot of works are to be done before share could be offered".

Despite number of constraints and operating against various odds the performance of Biman is certainly commendable. This has proved that equipped properly, the national flag carrier can bring pride to the nation. Now it is up to the government to take appropriate action to help the airline carry forward the good work.
 
HB-IWC
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RE: Biman Needs To Sustain Growth

Mon Dec 20, 2004 2:56 pm

The only reason why BG can uphold the market share mentioned above is because consistent and excessive protectionism of the chronically underserved DAC market by the Government Bangladesh. Airlines like EK and QR would be willing to upgrade frequencies in a jiffy if it weren't for the rejection of the government. The whole market there is very much centered around anti competition whilst protecting BG. I'm sure many here remember what happened to KLM when they were deemed too successful at DAC...

 
IndianGuy
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RE: Biman Needs To Sustain Growth

Mon Dec 20, 2004 3:22 pm

What you are seeing is a classic example of the negative effects of protectionism. India is the best example of this. Ultimately thepeople who suffer due to protectionism are the passengers. Highly protected markets tend to show high prices and poor service: something that we in India are only too aware of.

Once there was competetion domestically, services improved, fares crashed and resulted in a boom in the market. Internationally though, the Govt chooses to continue to protect Air India, which means that the Indian passenger has very little option but to pay up the obscene fares and put up with shoddy service on run-down antique aircraft.

Biman is in a similar situation as Air India. What are the fares that Biman is charging, say to-and-from India? I think IC is the cheapest from DAC to BOM (atleast it was when i checked in Jan) even though it involves routing via-DEL or CCU. Also Biman is more expensive than SQ or EK out of DAC! Hwo did this happen?

But its not Biman we should be talking about. Its Bangladeshi aviation. If there is to be respite for the Bengali passnger, the Govt should talk of opening up Bangladeshi aviation to private enterprise, and Biman needs to be dragged, kicking and screaming if need be, into the real world.

Ditto for Air India.

-Roy
 
AirbusCanada
Posts: 524
Joined: Mon Nov 15, 2004 5:14 am

RE: Biman Needs To Sustain Growth

Mon Dec 20, 2004 5:22 pm

"At present DC-10-30s are being used 12 hours per day on an average and Airbus A310-300 about 11 hours. "

That is indeed very impressive. 12 hours utilization rate for 20 year old dc-10.

By the way, biman's board seemed to approved $78 million dollar purchase of three
Dash- 8 Q400 on December 12. Did they put up the order yet? the media seemed to be very critical of biman's board for not choosing Atr-72.
 
planemannyc
Posts: 939
Joined: Wed Aug 06, 2003 12:54 am

RE: Biman Needs To Sustain Growth

Mon Dec 20, 2004 11:33 pm

AirbusCanada,

I think a new tender is going out for the Dash-8s. I think the initial tender was for ATR or Dash 8. Now it's only Dash 8. I have not seen the tender anywhere (Biman's website or Flight International).

In my opinion, things at Biman are not likely to improve until the government truly lets the airline operate as an independent entity -- whether as a government owned company -- or ideally -- as a private (publicly traded) company. Currently, it is at the mercy of the whims of the goverment and bureaucrats. And additional competition will definitely help. Look at the UK market after BA became de-nationalised. And Canada, Holland and scores of others. The consumer in all those markets is the clear winner. And in my opinion, that is the only party the government should be looking after.

Best,

Wasim / Planemannyc
 
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American 767
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RE: Biman Needs To Sustain Growth

Mon Dec 27, 2004 9:15 pm

Anyone has any idea of what aircraft type Biman Bangladesh may acquire in the future? New or second hand? Biman is one of the very few airlines in the world, with Northwest, still flying the DC-10 in pax hauling. Their fleet consist of the Mc Donnell Douglas DC-10-30 and Airbus A310-300 Series aircraft on international flights, and the Fokker 28 on domestic flights within Bangladesh. They used to fly the Boeing 707 on long hauls, and they had operated in the recent past 737-300's on short international flights such as Dacca-Bankhok. My impression is that they are not planning to add a new aircraft at all. They will have to sooner or later, the A310-300's may still fly for a few more years although they are not so young anymore but the DC-10's are getting very old.

I see two possibilities for fleet renewal in the long run, and folks this is no A vs B war.
If they go Airbus:
A340 replacing the DC-10
A330 or A350 replacing the A310
A319 replacing the F28
If they go Boeing:
B777-200ER replacing the DC-10
B7E7 or 767-300ER replacing the A310
B717 replacing the F28

Yes, I know the A319 is not a direct competitor to the 717 because the latter has a shorter range and smaller capacity. An other possibility is, whether they choose A or B, is the ERJ-170 replacing the F28.

Ben Soriano
Brussels Belgium
Ben Soriano
 
FCKC
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RE: Biman Needs To Sustain Growth

Mon Dec 27, 2004 9:31 pm

American767

With BG we never know !!!!!!!!!!!

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