Not only did the suspension of all flights bring down revenues to zero, it also caused the national carrier to face a significant refund pressure for tickets
Biman Bangladesh Airlines has sought Tk628 crore from the government to bear its operational costs for April as it has been suffering from a severe liquidity crisis following the grounding of its fleet amid the coronavirus pandemic.
The national carrier recently sent a letter to the Ministry of Civil Aviation and Tourism, mentioning its financial distress caused by a suspension of all flight operations, as well as that of other economic activities.
All flight operations of Biman were suspended from the last week of March.
In the letter, Biman said it experienced a 15 percent fall in passenger growth in January and a 58 percent fall in February on its international routes in Asia.
The carrier began to cut its flight frequency from February due to a significant fall in passenger growth – it cut 114 flights during the month. The coronavirus crisis intensified in March amid worldwide flight restrictions, compelling Biman to cut 698 flights on both domestic and international routes.
As a result, the carrier saw a capacity loss of 46 percent on its international routes alone.
Not only did the suspension of all flights bring down revenues to zero, but it also caused Biman to face a significant refund pressure regarding tickets from its sales agents.
Moreover, the suspension of 460 flights of other airlines and decline in cargo transportation in March affected the ground handling income for the national carrier.
Biman is the only organisation that provides ground handling services to other airlines at Dhaka airport.
Biman projected revenue losses of more than Tk400 crore as of March.
Despite not having any income, though, Biman will have to bear fixed operational costs, loan instalments for purchased aircraft, rent of leased aircraft and maintenance cost of airplanes.
The grounding of aircraft has also increased maintenance cost because aircraft require regular ground runs to keep their engines functional.
Biman has fallen into an acute financial crisis, the likes of which it has never experienced before.
Now it has become difficult for the carrier to bear operational costs, said the letter.
When contacted, Md Mohibul Haque, senior secretary of Civil Aviation and Tourism, said the ministry would seek financial assistance for Biman from the government.
Moreover, other facilities such as exemption from airport charges are being considered, he said.
On the other hand, the International Air Transport Association (IATA) recently in a letter to Prime Minister Sheikh Hasina sought financial assistance for Biman.
"Our member airline Biman and others are currently in grave and immediate danger of insolvency. A cessation of operations would trigger a host of serious consequences," said IATA in its letter to the premier.
The letter said the contributions that the airline industry makes to the economy of Bangladesh would be wiped out if the airline industry collapses.
Unless government action is taken now, the post-pandemic economic recovery in Bangladesh would be seriously impeded, said IATA.
Airlines are taking every measure possible to mitigate the impacts by cutting avoidable costs. However, the reality is that airlines have substantial fixed costs which cannot be reduced by cutting capacity.
In recent weeks, they have been paying out more in refunds than they have received in new booking revenues, meaning that their reserves are rapidly depleting. Airlines risk running out of cash in the very near future, warned IATA.
Biman's monthly fixed cost is Tk203 crore, loan instalment is Tk61 crore, lease rent Tk98 crore and aircraft maintenance cost is Tk266 crore.
In a drastic effort to stay afloat, Biman has already announced a 10 percent cut to basic salaries for employees from the rank of officers and above and slashed nine other benefits and allowances for all employees from March.
Now Biman is planning to go for job cuts amid this insolvency, according to Biman insiders.
The carrier also returned one of its leased engine as the aircraft has remained grounded.
The plan of purchasing two more Dash-8 aircraft from De Havilland of Canada is now uncertain.
At the beginning of March, Biman decided to purchase the new Dash-8 aircraft to expand its domestic flights.
Biman's fleet has increased manifold over the years, and the current fleet size is the largest in its history. Of its 18 aircraft, 12 are its own and the rest are on lease.
Another three Dash-8 aircraft will arrive by June this year, taking the total fleet size to 20.