Biman is set to restart domestic operation_ a good news for air travellers, but great risk for the carrier

Biman_bg_137371104Dhaka : Biman Bangladesh Airlines Limited is all set to resume full domestic operation; early next month (April). This is certainly good news for air travellers, but in the backdrop of past performance, not so for the carrier.

The national flag carrier is entering this ‘traditional loss making sector,” when some people consider it as not so necessary and unwise. They expressed apprehension that it may enhance negative results for Biman, as well as may adversely affect the nascent airline industry of the country.

Under the circumstances, right from the beginning, Biman will need to take lesson from the past and take measures to scale down overhead costs and avoid areas of leakages. The airline will need above average operational expertise, to make the renewed venture a success.

On January 4, 1972, only 20 days after the birth of Bangladesh as an independent state, following a devastating war, Biman_ named and styled as_ Air Bangla International was born, through a presidential order. In the first decade, between 1972 and 1981, Biman extended its services to seven destinations. During the second decade between 1982 and 1991, one more domestic destination was added to the route network. But in the following years different adverse situations forced Biman to suspend most domestic operations except Chittagong and Sylhet.
On February 17, Biman signed lease agreement for two Dash-8 aircraft and next day announced “major growth to its flights within Bangladesh” in new schedule from April 6, 2015.

“In additional to adding significantly more frequency on existing domestic routes between Dhaka and Chitta-gong and Dhaka and Sylhet; the national carrier will start flight operations between Dhaka and five more domestic cities_ Cox’s Bazar, Jes-sore, Rajshahi, Syedpur and Barisal. The airline previously had services to some of these points many years ago but suspended them due to fleet constra-ints,” the anno-uncement said.

The carrier said that, with effect from April 6, per week, it would operate 6 flights to Cox’s Bazar, 5 to Jessore, 3 to both Rajshahi and Syedpur and 2 to Barisal. Furthermore, it will add up to 25 additional frequencies per week on Chittagong and Sylhet routes.

The additional destinations will be operated by recently acquired 74-seat Dash-8-Q400 aircraft. Both Chittagong and Sylhet will also get other aircraft types, depending on market demand on the routes.

“In total, the airline will see massive growth in flights within Bangladesh, operating over 120 flights per week. The total number of seats will grow almost 80 per cent weekly to a considerable 14,010,” the announcement boasted. The additional flights and new destinations opened for sale on February 25. The airline released its pricing structure and launched promotional offers at the same time.
Two Dash 8-Q400

On February 17, Biman signed an agreement with Smart Avia-tion, Egypt for dry lease of two Dash8-Q400 aircraft, for a period of 5 years. Dry lease means, Biman’s cockpit and cabin crew will operate the aircraft.

The two aircraft_ each with capacity of 74 seats in single class configuration_ are expected to arrive in Dhaka and join fleet of Biman in late March and will enter into commercial services shortly after.

Kyle Haywood said, “We are delighted to be adding these aircraft to our fleet. It allows us to significantly improve both the frequency on existing domestic flights as well as add a number of new domestic services. We will be announcing our new domestic operations, effective April 6, very shortly.”

With the acquisition of the said two Dash-8-Q400s, the number of aircraft in Biman fleet stands at 12_ four Boeing B777 300ERs, two Airbus A 310s, two Boeing B777 200ERs, two Boeing B737 800s and two Dash-8-Q400s. Biman has also floated Request for Proposal for lease of another Boeing B737-800.

Losing sector
The past history of domestic air services of Biman will show that it was always been a losing sector due mainly to high overhead cost, lack of appropriate size aircraft, efficient level of operation and efficient management. Moreover, the domestic services of Biman were never allowed to run on commercial basis.

Political consideration was the override factor in selecting destinations.
It may be recalled that Biman enjoyed monopoly in domestic market for over two decades until private airlines were allowed to operate in 1993, but never made enough money to avoid operational loss. The airline always claimed that domestic operation was sustained from income of international services.

Not so wise
So when Biman is in financial ill health and not on solid track operationally, the decision to re-enter in domestic sector and that too in a big away is not being accepted universally. Those who do not like the decision, find no solid justification behind it, because domestic market was never profitable operation for the national carrier. In the absence of other airlines, Biman served the domestic market in the past, as national service.

There is no such compulsion now, as four private airlines_ United Airways, Regent Airways, Novo Air and US-Bangla Airlines_ are operating on domestic routes.

Compared to the demand, these four airlines are offering more seats in the market. Examining the existing situation in market, it can be said that entry of Biman is likely to generate unhealthy fare war among the airlines and ultimately harm the nascent airline industry of the country.

Private airlines of BD
Through privatisation of air transportation in Bangladesh the government has opened up a new horizon, but has not taken necessary follow-up measures to guide and support the nascent industry. For the betterment of aviation industry of the country and success of privatisation policy of the government, some government policy support is urgently required.

It may be recalled that in 1993, the government in its bid to catch up with the rest of the world, decided to allow private airlines to operate on domestic, regional and international routes.

A look at the short and troubled history of the private airlines will show that the rate of survival of private airlines of Bangladesh is comparatively very low. Since the opening of airline industry to private sector, more private airlines have gone out of operation than the number now flying.

In little over a decade five airlines_ Aero Bengal, Air Parabat, Royal Bengal Airways, Best Air and GMG_ has become history.

It is sad to say that the brief history of the private airlines of the country is not a happy one. There are number of reasons_ some external and some internal for the situation.

For a number of reasons_ some external and some internal private airline industry of the country is yet to stand on solid ground. The government has responsibility to provide policy support and extend cooperation to protect the huge investments that the four operating airlines have made.

But the government is yet to take appropriate measures for the healthy growth of aviation in the country. In a market where there are more airline seats than demand, the move to offer substantially more seats cannot be considered as judicious move.

It should be noted here that, in addition to imposing decision on Biman to re-open domestic operation, the government has also granted permission for two more airlines in the private sector.

Demand & supply
Bangladesh is a small country where the distances between the major cities are not big enough for air transportation to be urgent and very necessary. But it is competitive with other modes, if surface and water transportation times are considered. Most of the country is crisscrossed by rivers of different sizes, which is a great barrier for faster surface transportation.

Moreover, increase in economic activity has marked an impact on domestic air transportation. Its importance increases further, if the element of time, speed and efficiency of other modes of transportation of the country, are considered.

In Bangladesh there are three international airports_ Hazrat Shahjalal International Airport in Dhaka; Shah Amanat Interna-tional Airport in Chittagong and Osmani International Airport in Sylhet. In addition there are five domestic airports in Jessore, Cox’s Bazar, Rajshahi, Saidpur and Barisal.

The passenger traffic in domestic sector was steadily growing till 2007 when the number increased to 7,07,708. In the following years, the number declined. According to statistics available from operating private airlines, the size of domestic air travel market is around 5,700,000 a year. On an average, 1,550 passengers travel on domestic routes per day.

Of the total domestic passenger traffic, highest number of 900 passengers travels on Dhaka-Chittagong-Dhaka route per day. Even without Biman, the operating four private airlines are offering 2000 seats per day on this high density domestic route. This shows that, at present there are more supply of airline seats in the market than demand from passengers.

The principle of demand and supply has already made domestic air travel market of Bangladesh a ripe ground for unhealthy price war. Under the circumstances, the re-entry of Biman and possible entry of two more airlines, bound to generate fierce competition in the market.

From the point of view of the consumers, healthy competition in the market is always welcome. But if the competition is unhealthy, the situation is bound to affect the yield of the operating airlines and they are expected to fight hard to survive.

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