United Air: The unsettling allegations behind a grounded fleet
United Airways (BD) Ltd had ceased its brief operation in 2016. Yet seven years down the line the name still creates ripples because of its curious journey that began in 2007.
This time its name again resurfaced as its chief is now facing charges of loan scam and money laundering.
With nine aircraft of its fleet left for seven years to decay in an airport hangar, the private carrier's former managing director Tasbirul Ahmed Choudhury has been implicated in an embezzlement scheme that caused Tk1,138 crore loss to investors.
A joint inquiry of multiple authorities, initiated five years after the airlines ceased to operate, discovered five methods through which the illegal activities took place: inflated aircraft purchases, suspicious share allotment, fictitious spare parts purchases, unauthorised cash withdrawals and bank transfers, and illicit gains from share trading.
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Captain Tasbirul denied the allegations charged by the Bangladesh Securities and Exchange Commission (BSEC), saying he was the founder of the company and he would never want his airline to fail in any way.
"Since flight operations were closed from May 2016, I was restlessly trying my very best to arrange funding to restart the flights. Unfortunately, no cooperation was provided by the BSEC," he told The Business Standard in an email interview.
The inquiry committee formed by the BSEC, civil aviation authority and Dhaka Stock Exchange in its report detailed how Tk483.86 crore was laundered by falsely inflating the prices of aircraft and aircraft engines. It detected six counts of wrongdoings through a network of companies and individuals directly or indirectly associated with the airline's founding chief Tasbirul Ahmed, who used multiple bank accounts to withdraw and transfer funds through fictitious transactions.
Inflated aircraft purchases: The company claimed to have purchased 12 aircraft and eight engines worth Tk895.87 crore from Phoenix Aircraft Leasing Pte Ltd between 2010 and 2016, but only Tk412 crore was actually paid. The remaining amount was transferred to personal accounts in India and Dubai.
Suspicious share allotment: Tk140 crore was embezzled through the issuance of placement shares in the name of aircraft purchase and lease. The company raised Tk140.8 crore by issuing shares to non-existing shareholders, with three companies indirectly controlled by Tasbirul receiving substantial amounts. These companies' bank accounts were managed by Mazharul Haque, a close relative of Tasbirul.
Fictitious spare parts purchase: The company claimed to have spent Tk303.41 crore on spare parts for aircraft without providing any evidence of their utilisation. It appears that the recorded amount is fictitious, and Tasbirul misappropriated corporate resources by redirecting them to personal accounts and entities under his control.
Unauthorised cash withdrawals: Tasbirul illegally withdrew Tk139.99 crore in cash from corporate accounts, using signed cheques in violation of income tax laws through Islami Bank, IFIC Bank, and Standard Bank. Additionally, he transferred Tk2,287.4 crore from 11 bank accounts with five banks through fictitious transactions, with Tk38.16 crore being funnelled directly into his personal account.
Illicit gains from share trading: The investigation revealed that Tasbirul and other company directors unlawfully gained Tk32.15 crore through manipulative share trading. These transactions involved Tasbirul's wife Khandokar Taslima Choudhury, who gained Tk6.16 crore, and TAC Aviation, which gained Tk25.99 crore. The individuals conducted a series of transactions to manipulate share prices.
Tasbirul responded to allegations levelled against him by the inquiry committee and gave his own versions elaborately.
Aircraft were purchased only after a process of inspection, valuation and approval involving the civil aviation authority, the BSEC, the central bank and United Air board, he said, refuting the allegations of inflated costs and unauthorised transfer of funds.
"It's strange the BSEC has raised this issue after some of the aircraft were purchased some 14 years ago," he said.
All of the transactions of transfers were done by the accounts department, as demanded by the situation and all approved vouchers should be available with the office of the United Air management, Tasbirul said, distancing himself from the present board reconstructed by the regulators in 2021.
Refuting the allegations of illicit gains from share trading, he said, "Probably, I am the only director of United Air who didn't sell any of my shares till today. I have rather bought shares early; as of today I am the only person as the founder holding 2.5% shares against total paid up capital."
Rise and fall
United Airways was founded by Captain Tasbirul, a British-Bangladeshi businessman from Sylhet of Bangladesh, along with a few businesses and entrepreneurs in 2005. It raised Tk100 crore through an initial public offering (IPO) in 2010. It also issued rights shares in 2011.
The airline started operating domestic flights on Sylhet-Dhaka-Chattogram routes in 2007 with a Bombardier Dash 8-100. After a few months, it pressed flights into more domestic routes and by 2009 it launched international flights to Kolkata, London, Dubai, Kuala Lumpur and Kathmandu. By 2014, it spread its wings to Jeddah, Muscat, Doha, Bangkok and Singapore, while adding more domestic routes to its regular operations, with more aircraft like Airbus and McDonnell Douglas joining its fleet. The airline was scheduled to commence flights to Karachi.
In September 2014, the airline's officials through an emergency press conference announced an indefinite suspension of all domestic and international flights. Later, the company resumed its domestic flights on a limited scale but suspended all flights finally on 6 March 2016.
Meanwhile, investors have been suffering seriously by holding the company's shares for a decade as they are cheated by the company management.
Currently, its paid-up capital is Tk828 crore. Sponsors and directors jointly hold only 2.5% shares, while general investors hold 86.43% shares of the company.
As of that date, all nine of its aircraft were reportedly grounded for technical reasons at Shahjalal International Airport.
The Technical Assessment Report deemed the existing aircraft unfit for economic repair, with an approximate value of $10.6 million. The company's short-term bank loans amount to Tk131.97 crore. If all aircraft are sold according to the assessment report, the proceeds will go to the banks, leaving no assets for the company's operation.
Reviving operations will be challenging due to reputational damage and the reluctance of financial institutions to provide fresh funding. The company's offices and facilities are currently under lockdown by the Civil Aviation Authority of Bangladesh.
Supervisory roles failed
The inquiry report found that there was a significant deficiency in the supervisory roles played by the aviation authorities, as a result of which the United Air now has a huge liability of Tk733.69 crore with no assets for the resumption of operation. This has resulted in reputational damage, making it difficult to attract customers and fresh funding.
When BSEC stepped in
The BSEC decided to take action against the former board of directors of the airline years after it ceased operation. In a letter dated 28 February 2021, the commission suspended the previous board and appointed a new board of directors with eight independent directors in an effort to revive operations.
The new board took over the charges on 4 March 2021.
In June 2021, the company was delisted from the main board of stock exchanges and transferred to the over-the-counter (OTC) market due to weak fundamentals.
In his response to TBS email, Tasbirul blamed the new board for its failure to resume United Air's operation.
He also accused the regulators, including the BSEC and the CAAB, of "non-cooperation" dragging the airline to the point of collapse.
Dr Shaikh Shamsuddin Ahmed, acting chairman of the BSEC, said the commission did not avoid its responsibility, rather it is trying to resume the operation of the defunct airline.
"We have already restructured the board of directors and they are trying to restore the operations of the airline," he told TBS.
He also said the BSEC has decided to take legal action against the persons involved in the fund embezzlement.
The commission's current Chairman, Shibli Rubayat Ul Islam who is now travelling abroad, also told TBS a couple of weeks ago that the BSEC will take action against the persons responsible based on the enquiry report and as per laws.
On the resumption of United Air, a member of the airline's restructured board of directors said the airline has a huge liability, including dues to the CAAB and bank loans. If the CAAB waives the dues of the airline, there is a little chance that it may resume services again.
