Biman’s two Airbus purchase plan must be reviewed to make them financially viable

Biman Bangladesh Airlines, the national flag carrier, is grappling with a staggering Tk 4,000 crore cash shortfall following its agreement in principle to acquire two Airbus planes for Tk 8,000 crore.

The decision, made without a prior monetisation plan, was revealed during a recent board meeting, raising concerns over the airline’s financial stability.

The board has urged Biman to devise a strategy to make the new planes financially viable, even as a Memorandum of Understanding (MoU) between Airbus and Biman is in the drafting stage amid diplomatic pressures.

State Minister for the Ministry of Civil Aviation Md Mahbub Ali disclosed that Biman’s decision to purchase Airbus planes was influenced by a mix of diplomatic relations and commercial interests.

He emphasised the urgency due to diplomatic expectations, citing the interest shown by the French President and other EU countries.

However, concerns arose as the purchase decision preceded a viability study.

The board, on May 3, mandated a technical and financial evaluation before proceeding with the purchase.

The proposed purchase includes two A350-900s, with pre-delivery payments of $100 million.

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The techno-financial committee is currently grappling with raising funds, planning routes, estimating costs, and assessing revenue potential for the new planes.

The committee is yet to conduct a comparative analysis between Airbus and Boeing’s offers.

The decision to acquire new planes is further complicated by Biman’s outstanding loans, amounting to Tk 8,534 crore, with over 60 per cent of loans for most planes still unpaid.

Biman is eyeing new planes despite the underutilisation of its current fleet, with McKinsey & Company recommending maximising utilisation for economic viability.

Critically, Biman is set to incur significant costs in transitioning to a mixed fleet, including setting up a separate management system for the new Airbus planes.

The airline has yet to calculate these costs, but rival Boeing estimates the transition cost exceeds $146 million.

Diplomatic pressures underscore the urgency to finalise the Airbus deal.

Still, stakeholders emphasised the need for a thorough cost-benefit analysis and a comprehensive evaluation of the financial impact on Biman.

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