Airlines business and procurement of aircraft

Operating an airline is not just a business or a service; it also represents a country as its flag carrier. Over the past several years, Bangladesh has seen significant growth in air traffic, exports and per capita income, which is now close to $3,000. Non-resident Bangladeshi passengers account for a significant share of this traffic. Many reputed international airlines operate successfully in Bangladesh, some with more than one daily flight, alongside cargo services.

The airline business is highly technical, risky, complex and globally competitive. It is capital-intensive, with many factors, including fuel prices and airport charges in different countries, beyond an airline’s control. Many airlines worldwide operate at a loss, and bankruptcies are common among private operators. Some rely on government subsidies because air services are integral to economic activity. Passenger and cargo operations require different strategies, while reputation and efficiency are vital to attracting passengers and cargo customers.

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A feasibility study, a realistic business plan, proper technical assessment, risk evaluation, sound financing, good governance and competent management are essential for aircraft procurement.

Much of the business that Bangladesh could capture goes to others because of our weaknesses. Given its geographical and strategic advantages, Bangladesh could become an airline hub, following the examples of Singapore, Dubai and Turkey, and generate additional revenue.

A feasibility study and a realistic business plan are essential for any business, and airlines are no exception. Fleet size is a crucial factor in an airline’s viability. Usually, 20 percent to 25 percent of aircraft remain out of operation for regular maintenance. Since fixed costs, including overheads, remain constant, determining the number, capacity and quality of aircraft requires careful consideration. Ultimately, a sizeable fleet is necessary to minimise operational disruptions and manage crises before they damage passenger confidence and the airline’s reputation.

Aircraft selection, particularly in terms of capacity and category, is equally important. It should reflect country-specific requirements, including routes, passenger mix, demand and funding availability. Risks associated with aircraft must also be properly assessed and mitigated. Contractual terms, including post-delivery services, require careful evaluation to ensure aircraft can operate smoothly throughout their estimated useful lives, if not longer.

Financing under a well-designed business plan is fundamental, particularly in a country facing challenges in managing funds, financing and the payment and repayment of foreign loans, where applicable.

Public concern and frustration cannot be overlooked. Bangladesh has witnessed the siphoning off of huge sums of money from public procurement, particularly in mega projects, under the previous government. White papers on the matter were published in 2024. Past experience points to a lack of transparency and good governance, inefficient deal-making and decisions sometimes driven by ulterior motives rather than professional scepticism. Public procurement rules must be followed without compromise. All transactions must be conducted at arm’s length, with full transparency, accountability and compliance, leaving no scope for corruption.

There is no doubt that Bangladesh needs to procure more aircraft to give Biman a sizeable fleet. At the same time, it must ensure satisfactory due diligence, a convincing feasibility study, a realistic business plan, proper technical assessments, risk evaluation, funding that matches inward remittances and domestic resources, an effective marketing and branding strategy, good governance and competent management.

Modernising airports, improving immigration procedures, speeding up passenger and baggage transfers, providing spacious lounges across classes, expanding food options and duty-free shopping, and ensuring efficient overall management are prerequisites for establishing Bangladesh as an aviation hub in South Asia. With these measures in place, the country could enter a new era of aviation and fulfil its ambition.

The writer is a senior partner of Hoda Vasi Chowdhury & Co and past president of ICAB