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Biman faces increasing financial risks

  • Published at 10:42 pm May 22nd, 2018
A Biman Bangladesh Airlines airplane Syed Zakir Hossain/Dhaka Tribune

National flag carrier Biman Bangladesh Airlines is at risk of facing an abnormal level of financial crisis because of its increasing debt-to-equity ratio.

According to sources from Biman Bangladesh, the airline’s debt-equity ratio has already increased to 4:1 from the average 1.5:1 ratio. There is speculation that the gap might increase further in the future.

Explaining this issue, General Manager (Public Relations) Shakil Meraj said: “Biman Bangladesh is set to receive four state-of-the-art Dreamliner aircrafts from Boeing in the US. Since Biman took a huge bank loan to cover the costs, this is major cause behind the debt-equity abnormality.”

He added: “Currently, Biman has a loan of Tk4,000 crore, which will reach the Tk9,000 crore mark to pay the costs of buying the Boeing aircrafts.”

Biman is supposed to receive the first Dreamliner by August of this year, and the rest of the three Dreamliners by next year.

The airlines made a deal to purchase 10 new aircrafts from Boeing at a cost of Tk20,000 crore after it became a public limited company in 2007.

Jet fuel prices and lack of government support leading to monetary crisis

Other causes behind the looming financial crisis are the increasing price of jet fuel, and lack of financial support from the government, according to Biman Bangladesh sources.  

Shakil complained that the airlines buys jet fuel at a 30% higher rate compared to other national flag carriers in the world.

“Not only that, jet fuel cost has been raised by 29% compared to the previous year,” he added.

Despite being a state carrier, Biman has to pay an equal rate of landing permit charges for using airports like other airlines to the Civil Aviation Authority Bangladesh (CAAB).

“In many countries, the national flag carriers get financial advantage from civil aviation authorities,” said Shakil. “Biman is deprived of such privileges here.”

On the other hand, Deputy General Manager (Pricing and RMS) of Biman Bangladesh Md Salauddin said: “Biman recently went through a loss of Tk1 crore due to the depreciation of taka against US dollars.”

‘Only government facilitation can reduce debt to equity gap’

Biman Bangladesh airlines officials have claimed that if the government does not provide it with more financial support, the airlines will not be able to lower its debt-equity ratio.

“Despite being a state-owned carrier, the government has never allocated anything for the airlines in the national budget,” said Shakil. “It is unbelievable that Biman has only been getting Tk150 crore as cash incentive from the government since 1972.”

Shakil demanded a fixed allocation from the government treasury to minimize its debt to equity ratio.