Of accounting and accountability

Sarcasm apart, I wonder when we will see an end to all these repulsively misleading statements from being given. The cumulative current market value of all of Biman's own aircraft (4 McDonnell Douglas DC-10-30s, 2 Airbus A310-300s, and 4 Fokker F-28s) would be around 550 crore taka, which means even if Biman sold off all its aircraft at best available prices in the market, it would still be 550 crore taka short to settle the due fuel bills with BPC. With such figures in the pocket, it is nothing short of outrageously insane to post profit figures at the parliament.

During the calendar week 25, the State Minister spoke to at least two private television channels about Biman's future plans. He mentioned Biman's executive committee's suggestion of purchasing 10 new widebody aircraft from Boeing and Airbus, plus a 'few' small-to-medium sized aircraft for the domestic operations. The value of such a purchase would be exceeding US$ 1.2 billion, and he was expecting an approval from the government in this regard.

The Prime Minister just reminded the on-strike primary school teachers about the scarcity of resources with the government to meet the demands of the teachers, so I will presume Biman will not get US$ 1.2 billion in cash handed outright by the government to go shopping. The only other 1/3 alternative would then be the Finance Ministry agreeing to issue a 'sovereign guarantee' by the government in favour of Biman's purchase plans. Well, with the country's foreign exchange reserves around a mere 3 billion US Dollars, even issuing the guarantee by the government would be a tough task, because for obvious reasons the IMF and the World Bank would not be too merry about it if the government wanted to do that.

Yes, Biman does need to replace its ageing aircraft and get newer ones that would need lesser of the ever-so-expensive fuel, thus contributing to save operating costs significantly. But why does Biman need to 'purchase' aircraft when even the largest of the world's airlines are seeking to lease whenever possible? Leasing not only reduces immediate capital requirement but also allows an airline to have flexibility in capacity which means that the airline can scale-up or scale-down available seat capacity to offer according to the market trends. This is an extremely important advantage and airlines worldwide have learnt from the post 9/11 and SARS incidents which saw air traveling take a dive, and the airlines had just too much capacity to fill to break-even. The State Minister mentioned that the executive committee at Biman after extensive evaluation had agreed to purchase four Boeing 777 and six Airbus A330 aircraft for mid and long haul operations, and another type of aircraft for the domestic operations. Seemingly, the committee overlooked a couple of important facts:

1. Both the Boeing 777 and the Airbus A330 are over 15-years old in design. Both manufacturers are designing new generation aircraft that will replace most of their Boeing 777 and A330 family of airplanes. Boeing is offering the 787 which will replace the 777-200/200ER/300 and Airbus is designing the A370 which will replace the A330-200/300 and A340-300/500/600.

2. Both the Boeing 777 and the Airbus A330 are available in the lease market, and major leasing companies foresee more to become available as early operators replace their B777/A330 fleets.

It is also a fact that Biman cannot afford to order and wait for the B787 or the A370, as production slots for both aircraft are sold out for the next few years. But then, why would Biman want to purchase the B777 and the A330 when they are available on lease? Moreover, having a total of 10 widebody aircraft split between B777 and A330 would unnecessarily duplicate costs related to operations, maintenance, training and spares inventory that would be required for two different aircraft types. The economic advantages of the B777 and A330 over each other would be completely negated by these additional costs over such a small fleet.

It is only logical that Biman should lease either B777s or A330s to keep the initial capital and operating costs down, and operate the aircraft until it can afford to lease newer aircraft in about 4-6 years time. For domestic operations, turboprop aircraft with fewer than 100 seats would well suffice because Biman's domestic and short regional routes do not require the range of small jet aircraft, and with fuel getting costlier by the day, turboprop aircraft would save precious money for Biman every minute in the air.

But then, if the inherent intention is to spend government money allegedly to load a few heavy pockets even heavier, then the outright purchase plan is simply wonderful and keeps up with the tradition really well.

The Finance Minister in a recent interview with a private television channel said that “the people of Bangladesh have this sickening mentality of not wanting to pay their due taxes to the government”. Mark his words, he really used the word 'sickening' in that statement. If not wanting to pay taxes is sickening, how is it any less sickening to see taxpayers' money being spent irrationally only to make a handful number of people wealthier? How do the taxpayers hold the government accountable for what it spends their money on?

Biman has serious issues such as overstaffing, pathetic management of operations, highly questionable spare-sourcing, opaque purchase decisions, among others. So long Biman remains stateowned and continues to seek government funds to sustain operations, it ought to be transparent in regards to why and how it wants to spend the taxpayers' money. Without management and operational problems solved, buying new airplanes worth billions of dollars will only sink Biman to a point of no return.

Imran Asif, currently an aviation industry consultant, has previously worked on projects with The Boeing Company, Honeywell Aerospace, and FAA's Operational Evolution Plan (OEP) in 2004-2005.