New Boeings for Biman

As invariably as the fiery orb rises from the east, Biman has got its Hajj pilgrim transportation duty in a mess for this year's season as well. The mess is the result of two major problems: the absolute lack of management skills at the Ministry of Religious Affairs, and the dwindling number of airworthy aircraft in Biman's fleet to perform the flights.
The way the Ministry of Religious Affairs (mis)handles the affair and gets take advantage of by the numerous agencies involved in Hajj business demands a write-up on its own. With this one, however, I will stick to the second of the two problems -- Biman's fast-eroding fleet of airplanes.
The urgency of renewing Biman's fleet reached its peak during the last BNP regime. Factors that spurred this urgency were the rising prices of jet fuel, rendering the ageing DC-10s uneconomical to operate, and the planes themselves were becoming way too expensive to maintain; and the double-digit annual growth of air traffic into and out of Bangladesh through the last seven years which required Biman to add capacity. However, all efforts to procure new aircraft went futile largely because of two men in the government at that time: one hailing from Sylhet and the other from Chittagong. I will not bet you to guess their names!
Throughout the last BNP regime, both Airbus and Boeing had made a number of offers for Biman's fleet renewal with new airplanes that could keep the airline in business. The airline's technical committee had evaluated the offers and had sought approval and support from the government, which never came through. At one point, both Airbus and Boeing were upset enough to decide they had enough of this nonsensical indecisiveness of the Bangladesh government and quit pursuing any business with Biman.
Faced with the question of survival, Biman managed to get Boeing to give it an offer for the umpteenth number of time, which it did in the last week of November. The highlights of the offer are:
* Four brand-new Boeing 777-200ER aircraft to be delivered from 2013, with options for two more.
* Four brand-new Boeing 787-8 aircraft to be delivered from 2017, with options for two more.
* Four Boeing 777-200ER aircraft to be on lease from 2009-2013 for Biman's interim capacity requirement.
* Four Boeing 787-8 aircraft to be on lease from 2011-2017 for Biman's interim capacity requirement.
* Signing of the Memorandum of Understanding (MoU) by January 15, 2008.
* Signing of the firm contract by February 15, 2008.
* 1% of the order value to be paid upon order placement
* 5% of the order value to be paid in 6-monthly instalments, starting from 24 months prior to the delivery of first brand-new aircraft.
* To avail the financing for the aircraft from Ex-Im Bank of the US, the government of Bangladesh (GoB) would have to sign the Cape Town Convention and its Aircraft Protocol.
With my little knowledge and experience in the industry, I would like to hereby discuss the key elements of this offer that will subject its acceptability and Biman's future as a whole:
Why only Boeing, and not Airbus too?
Without a doubt, Airbus is a as fine an airplane-maker as Boeing. However, Airbus simply does not have the right product in its portfolio to meet Biman's needs perfectly. The A330/A340 family will be a generation old in about three years from now, just like Boeing's early 777 models. And the new A350XWB, albeit very promising, is still on the drawing board and will be several years late for Entry-into-Service than its competing Boeing model, the 787. The 777 and 787 combination that Boeing has offered fits Biman's requirements in a more timely manner than what Airbus may pull themselves to offer.
Is Boeing's offer all perfect for Biman?
Not quite! But I am sure it can be fine-tuned to be so. Boeing has not offered Biman any aircraft to keep its domestic and regional operations going. I would rather say that instead of taking the optional frames for the 777s and 787s, Biman should instead ask Boeing to pack in four next generation 737s with their offer, which would be able to take care of Biman's revenue-yielding domestic and regional routes and therefore also feed passengers for its medium/long-haul flights. On the widebody front, Biman should take 777-300ERs instead of the brand-new 777-200ERs and take advantage of its superior economics. However, the 777-200ERs can be used for Biman's interim capacity requirement, for the 300ERs are likely not to be available on the lease market.
What should Biman negotiate with Boeing?
The delivery schedule of the aircraft, particularly the brand-new ones. With the current order backlog against the production capacity, Boeing should be able deliver both the 777s and the 787s at least two years sooner than the promised 2013 and 2017 dates for the respective models. The sooner these new planes are delivered, the lesser Biman would have to pay for the leased airplanes in the interim period. Another issue to negotiate is for Biman to be able to use Boeing's maintenance facility at Nagpur, India through a preferential agreement which should be a part of the aircraft order itself. If this is made a part of the deal, Biman would be able to take maintenance services directly from Boeing at competitive costs, and face minimal logistic issues due to the close proximity of the site from Bangladesh.
What is the Cape Town Convention, and should Bangladesh sign in?
The Cape Town Convention and Aircraft Protocol were negotiated over a five-year period under the auspices of UNIDROIT, the UN agency that deals with private law conventions, and ICAO, the International Civil Aviation Organisation. If Bangladesh signs in for the convention, it would allow Biman to get financing for the aircraft without the GoB having to issue any sovereign guarantee. If Biman defaults on the periodical payment for the aircraft, the convention would allow the financier, as the creditor, to take possession or control of the aircraft. This is a best-fit solution for Biman for it would then know that it must make enough money in order to make the payment and retain the aircraft ownership. It would also spare the GoB from having to issue a heavy sovereign guarantee which may be used for other national purposes.
Should Biman sign the MoU and the firm contract with Boeing?
I reckon so, because there is no better alternative available to it now, and it does not seem likely to be available in the foreseeable future. Sadly, though, the newly-constituted board at the post-PLC Biman is not seen to be any more efficient and independent than the previous ones, thanks to its predominantly bureaucratic (and professionally inexperienced) composure. And it is these people who should agree to go forward and convince the GoB to support by agreeing to ratify the Cape Town Convention.
Will Biman become profitable with the new airplanes?
No, not just like that! It takes a lot more than just flashy new planes for an airline to thrive in the ever-competitive global industry. But without efficient and dependable airplanes, an airline cannot even plan to operate with optimum capabilities. The airplanes will form the backbone of the airline, with everything else taking shape around it. Undoubtedly, Biman will have to work on its organisational and operational issues to make the most of these new airplanes to make money for the airline.
What if the GoB does not support Biman to renew its fleet?
If that comes to be the case, I would say the GoB should just stop hollering about all the good it intends to do for Biman and just wrap up the airline altogether. It has taken enough abuse through its 35 years of lifetime by means of corruption and the last thing it deserves is another abuse in the form of sheer irresponsibility and indecisiveness in part of the GoB.
The airline that is our own is now standing between death and glory, with over 35 years of service to the nation which became independent on this very month of December back in 1971. It took a lot of good intent and courage on the part of the people who fought for the glory of freedom. We all hope that good intent and courage will prevail for the government to take the roll of the dice for the sake of Biman's survival into the future. The clock, by the way, is ticking.
Imran Asif is an aviation industry consultant.