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Experts stress the need for Biman to expand its fleet to remain competitive. But uncertainties loom over the flag carrier's ability to attract a larger passenger base
Published : 03 Nov 2023, 02:08 AM
At a time when Bangladesh Biman Airlines is struggling to operate at full capacity, the government's decision to purchase 10 new aircraft from the French manufacturer Airbus has ignited widespread concerns and debates.
Airbus asserts that foreign airlines have been capitalising on Bangladesh's burgeoning aviation market, fueled by the presence of approximately 7.5 million Bangladeshi expatriates worldwide.
Additionally, a survey report from the American multinational aircraft manufacturer Boeing predicted that the number of flights to and from the Middle East and India would double in the next 10 years due to regional traffic trends. This means that local airlines will not be able to accommodate this surge in flights without adding new aircraft to their fleets.
However, Bangladesh has opted for Airbus aircraft this time, sidelining Boeing's offerings. The decision was reaffirmed during a recent visit by Emmanuel Macron to the country, where Bangladesh assured the French president of its intent to acquire 10 Airbus jets.
Biman authorities argue that the aviation market in Bangladesh is substantial and that local airlines must acquire new aircraft to remain competitive. They also believe that procuring Airbus aircraft now may enable them to negotiate better prices with Boeing in the future.
However, an aviation expert noted that Biman is lagging due to its insufficient infrastructure, highlighting the need for the national flag carrier to prioritise market management and minimise operational inefficiencies to ensure profitability.
ENHANCING CAPACITY: A STRATEGIC MOVE FOR BIMAN
As Biman Bangladesh Airlines assesses its current fleet, it's evident that the airline operates with a diverse range of aircraft, comprising Boeing models exclusively. Among its jets, there are 10 wide-bodied aircraft and 11 single-aisled ones.
The airline possesses six Boeing 787 Dreamliners, accommodating between 271-277 passengers each, as well as four Boeing 777-300 ER aircraft with the capacity to carry 418 passengers.
Biman's fleet also includes six Boeing 737s, configured for 162 passengers. In addition, the airline deploys five Dash-800 jets for shorter domestic and regional routes, offering seating for 74 passengers on each aircraft.
Bangladesh Biman Airlines' struggle to operate at full capacity prompts concerns over the government's decision to acquire 10 new Airbus aircraft.
A survey report by Boeing predicts a doubling of flights to and from the Middle East and India in the next decade, necessitating more aircraft for local airlines.
Biman authorities argue that Bangladesh's aviation market is substantial and the acquisition of Airbus aircraft is vital for staying competitive.
An audit reveals that Biman's current capacity is underutilised, with empty seats on international and domestic routes, as well as unused cargo space.
Airbus forecasts a 5.2% annual growth in passenger numbers traveling to and from Bangladesh from 2019 to 2042, highlighting the need for additional aircraft.
Biman's mixed fleet, combining Boeing and Airbus planes, raises questions about operational challenges and costs.
Biman connects Bangladesh to a host of international destinations, including key cities in Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Qatar, the United Kingdom, Canada, Japan, China, and several Southeast Asian countries. Moreover, the airline operates domestic routes with regular connections to India and Nepal.
The recent decision to purchase 10 Airbus jets, comprising eight for passengers and two for cargo transport, is a strategic move approved during a Biman Bangladesh Airlines board meeting on May 3.
Biman's Managing Director and Chief Executive Officer Shafiul Azim said the acquisition of these jets is expected to be completed by 2030.
An audit conducted in February as part of the Air Operator Certificate renewal process exposed Biman's underutilised capacity. The report highlighted that, in 2022, Biman sold 2.05 million tickets out of its 2.7 million available seats on international routes, translating to a significant 25 percent of empty seats.
Similar inefficiencies were observed on domestic routes, with 24.14 percent of the available 1.14 million seats remaining unbooked.
The cargo capacity of Biman Airlines was also underutilised, with 94.36 percent of the 498,435-tonne capacity going unused in the previous year.
Even on domestic routes, a considerable portion of cargo space was occupied by passenger baggage, causing substantial space wastage.
In response to these findings, Biman's MD emphasised that maintaining an 80-82 percent seat occupancy rate is not the standard.
The routes on which the new Airbus jets will operate were determined through a rigorous and data-driven process, devoid of speculation, he said.
"More Passengers, Fewer Jets: The Case for Expanding Bangladesh's Fleet"
In early October, several Bangladeshi media representatives visited the French manufacturer's headquarters in Toulouse to gain insights into why the acquisition of Airbus aircraft could be beneficial for Bangladesh.
Rodrigo Lezama, Airbus Widebody Market Development Director, shared findings from a study conducted by Airbus on why investing in their aircraft would be advantageous.
The study revealed that many Bangladeshi passengers prefer foreign airlines to travel abroad.
Airbus projected an annual growth rate of 5.2 percent in the number of passengers travelling to and from Bangladesh from 2019 to 2042.
In 2019, Bangladesh's airlines operated with a fleet of 50 jets, of which 25 were wide-bodied. If these projections hold true, Bangladesh would require 105 single-aisled jets and 55 wide-bodied aircraft by 2042 to meet the escalating demand.
Considering Bangladesh's GDP, population, and the size of its expatriate community, Airbus emphasised that the number of jets currently operated by local airlines is "insufficient".
Despite having the highest population among a group of countries with similar GDPs, Bangladesh lags behind in terms of aircraft numbers. For instance, while Bangladesh operates 36 jets, Vietnam has 187, the Philippines 172, and Ethiopia 149.
Airbus officials underscored that over 7.5 million Bangladeshis living abroad predominantly choose foreign airlines for their travel needs. By expanding its fleet, local airlines in Bangladesh could enhance their competitiveness in serving this expatriate market.
Lezama pointed out that wide-body jets like the Airbus A350 could provide Bangladesh with the necessary tools to compete effectively with foreign carriers. Additionally, he suggested that Bangladesh's strategic geographical location could enable it to establish itself as an "aviation hub" in the heart of Asia.
Boeing's Commercial Market Outlook also predicted significant growth for Bangladesh, with the country's GDP expected to rise at a rate of over 5 percent until 2032, more than double the global GDP growth rate. Furthermore, Boeing anticipated an annual growth rate of 8 percent in air travel.
According to Boeing's Commercial Market Outlook, the number of jets in fleets worldwide is expected to double over the next 20 years. In 2019, the South Asian market had 700 jets, and by 2041, the region is projected to require 2,300 jets. It is estimated that South Asian countries will acquire as many as 1,900 new jets in this period, including replacements.
Airbus's Global Market Forecast also stressed the need for new aircraft, estimating a requirement for 40,000 new passenger and cargo jets between 2023 and 2042. The Asia Pacific region, excluding China, is expected to demand 9,000 new planes, with 2,000 of them being wide-bodied.
Neighboring India has already taken steps to address the growing need for aircraft. Air India and IndiGo announced plans to purchase 950 new jets earlier this year. In June, Air India issued purchase orders for 470 jets, including 250 from Airbus and 220 from Boeing, with a total budget of around $70 billion.
Budget-friendly airline IndiGo also made headlines by ordering 500 narrow-bodied jets from Airbus, marking the first time an airline has placed such a large order at once.
These Airbus A320neo Family jets are scheduled for delivery between 2030 and 2035.
Kazi Wahedul Alam, a former member of Biman's board, highlighted the urgency of expanding the fleet to accommodate traffic growth.
"Bangladesh will need more jets beyond the initial 10 to meet the demands of our fleet in the coming decade. In that case, securing an agreement with Airbus can provide us with valuable leverage when negotiating with Boeing in the future," he said.
Alam also noted that local airlines currently hold a market share of 20-22 percent, while the majority of passengers opt for foreign carriers, falling short of the ideal 40-50 percent market share.
He highlighted the need for improved marketing capacity and strategic planning to enhance the performance of local airlines, as they currently operate with less effective planning compared to their foreign counterparts.
NAVIGATING THE CHALLENGES OF A MIXED FLEET
In aviation terminology, a mixed fleet refers to the inclusion of aircraft from different manufacturers within an airline's fleet. Industry experts have raised concerns about whether Biman would encounter similar issues if it shifts its focus from Boeing to Airbus aircraft.
Dave Schulte, Boeing's regional marketing managing director for Asia Pacific and India, explained during a briefing in Dhaka on May 11 that maintaining a mixed fleet can be costlier for airlines with smaller fleets.
When an airline operates planes from different manufacturers, it must maintain separate teams of pilots and engineers for each aircraft type, resulting in higher operational costs. Additionally, distinct sets of spare parts must be managed when operating planes from different manufacturers.
Schulte pointed out that if an airline sticks to a single manufacturer, it can streamline operations by utilising the same maintenance crew and allowing the same pilots to operate all aircraft.
He also provided a cost estimate, indicating that having a mixed fleet, such as a combination of five Boeing 787s and five Airbus A350s, would increase costs by Tk 6.40 billion annually.
In contrast, Airbus officials have a more optimistic view of mixed fleets.
During a recent briefing in Toulouse, Airbus spokesperson Justin Dubon pointed out that the manufacturer offers a diverse range of aircraft, from smaller models like the A320to larger ones like the A350, which use 25 percent less fuel than older models and offer efficient, cost-effective, and environmentally sustainable technology.
Moreover, the same pilot can operate both narrow-body and wide-body Airbus aircraft, reducing airline costs.
Biman MD Azim emphasised the flag carrier's capability to effectively manage a mixed fleet. He referred to the airline's experience operating both Boeing and Airbus planes, highlighting that it required only minor adjustments.
Azim stressed the similarity between Boeing and Airbus aircraft and noted that many US airlines successfully operate both in their fleets.
He also believes offering passengers the choice between Airbus and Boeing can enhance their travel experience.
Azim noted that collaborating with two major manufacturers can provide diversification, boost the airline's capacity, and facilitate competitive pricing.
Former Biman board member Alam acknowledged the potential for increased operating costs with a mixed fleet, but expressed confidence in Biman's ability to handle it.
"For small fleets like ours, which may have 10, 20, or 50 aircraft, managing a mixed fleet can be tough. However, Biman has previous experience with mixed fleets, as it used to operate both Airbus A310 and DC-10 aircraft simultaneously, demonstrating its capability to manage such fleets."
"We understand that Airbus's new aircraft will take five to 10 years to arrive. During this time, the existing Boeing aircraft will be phased out. Biman's 12-year-old Boeing 777s may need to be retired in five to seven years. Adding Airbuses to the fleet shouldn't be a problem."
THE IMPORTANCE OF WIDE-BODY AIRCRAFT
Despite the size of its fleet, Biman faces questions about how effectively it can utilise its wide-body aircraft.
So, why is Airbus still keen on providing these aircraft to the airline?
Morad Bourouffala, Airbus's chief representative in Bangladesh, pointed out that the recent opening of a new terminal at Dhaka's Hazrat Shahjalal International Airport, increasing the annual passenger capacity from eight million to 20 million, underscores the growing demand for air travel in Bangladesh.
Rodrigo Lezama, Airbus's wide-body marketing director, pointed to the substantial passenger flow from Bangladesh to the Middle East as a strong indicator of the demand for wide-body aircraft.
"We believe deploying wide-body aircraft can be highly profitable for Bangladeshi airlines.”
US-Bangla Airlines in Bangladesh is introducing wide-body planes into its fleet for the first time, and they have chosen Airbus for this purpose, according to him.
This reflects a broader recognition within the industry of the importance of wide-body aircraft in achieving growth, said Lezama.
Given the sizeable Bangladeshi diaspora in the UK, Italy, the US, Australia, and Canada, acquiring new aircraft is essential to tap into these markets, according to Lezama.
Aviation expert Wahidul drew attention to the substantial passenger capacity of Airbus aircraft, such as the A350, which can accommodate nearly 400 passengers. Currently, there are no regular routes that can fully utilise this capacity, except during the Hajj season.
Wahidul noted that it's insufficient to use these planes solely for the Hajj season and stressed the need for year-round utilisation.
"To make this work, Biman must expand its route network, reach new destinations, and establish partnerships with other airlines."
He warned that bringing large aircraft to Bangladesh without expanding the network could result in inefficient usage, potentially leading to their use on shorter routes and reducing their operational lifespan.
Instead, Wahidul suggested that Biman consider medium-range aircraft like the Airbus A320neo, which is versatile enough to serve both short and long-distance flights.
According to him, aircraft with a capacity of 200 to 230 passengers would be more suitable for Biman's current capabilities. Opting for larger planes might be challenging, as the airline could struggle to fill seats due to limited marketing skills and networks.
He underlined the importance of Biman expanding its route network to facilitate passenger travel from the Middle East to Europe, America, and other destinations. To thrive as the national flag carrier, Biman must develop a broader network and collaborate with other airlines.
Wahidul acknowledged that the airline may lack the expertise to navigate international aviation issues.
AIRBUS'S VISION FOR BANGLADESH
Airbus officials expressed their commitment not only to supplying aircraft to Bangladesh but also to contributing to the development of skilled manpower, including pilots and mechanics, and the creation of new routes.
"Our aim is to help Bangladesh create skilled manpower in this sector, including pilots and mechanics. We are partnering with Bangabandhu Sheikh Mujib Aerospace University in this regard," said Morad Bourouffala, Airbus's representative in Bangladesh.
"We try our best to expand the business of customer airlines. We have discussed this with the airline. We are also trying to support US Bangla and Bismillah Airlines, who are buying A321 cargo aircraft from us."
Airbus, across its three companies -- Airbus, Airbus Defense and Aerospace, and Airbus Helicopters -- currently holds orders worth $449 billion. This amount is equivalent to Bangladesh's GDP. In 2022, Airbus generated $59 billion in revenue.
Airbus's track record includes the sale of 22,802 aircraft to more than 400 buyers worldwide. Of these, Airbus has already delivered 14,843 aircraft, while the remaining orders are in various stages of construction.
[Writing in English by Syed Mahmud Onindo and Arshi Fatiha Quazi; editing by Turaj Ahmad]
