Vol. 5 Num 479 Fri. September 30, 2005  
Front Page

Purchase of 3 Aircraft
Biman tender stalled for 8 months by a lobby

A powerful business lobby, who wants Biman to purchase three airplanes for $20 million more than a competitor, has forced the national flag carrier to shelve a tender process for eight months.

To purchase three medium-sized airplanes for its domestic route operation, Biman Bangladesh Airlines floated three rounds of tenders beginning in July 2003. The last two tenders generated lucrative offers, but Biman refrained from proceeding with the deal since February.

Meanwhile, Biman continues to use its wide-bodied airplanes on some of the vital domestic routes, swallowing heavy losses.

The state owned airline, which incurred Tk 250 crore loss in the last fiscal year, is incurring more losses in a rapidly growing aviation market due to lack of aircraft, among other issues, the sources said.

Since Biman has increased the frequency and number of domestic flights, it floated a tender to purchase or lease three French ATR or Canadian Bombardier Aerospace aircraft. This purchase included a trade-in of four old F28 aircraft or two ATP and three F28 planes.

Although both the companies participated in the tender closing on July 3, 2003, the tender rule demanded at least three offers in the first time tender. So Biman re-tendered the scheme.

On August 21, 2003, a tender was participated in by both ATR and Bombardier. ATR offered a price of $47.8 million for three ATR 72-500 planes, each with the capacity to carry 70 passengers, while Bombardier offered $67.98 million for three Dash 8-Q400 planes, each with passenger capacities of 78.

Biman's tender evaluation committee favoured the ATR 72-500 aircrafts as the price is cheaper and the operating cost lower than Dash planes, and also because ATR offered 100 percent credit financing against the 85 percent credit financing offer of Bombardier.

However, Biman also pointed out some deficiencies in ATRs. For instance, to accommodate a coffin, the number of seats of each aircraft will go down to 66. At this point, the deal became stalled.

After a year on November 27, 2004, Biman's committee of executive directors recommended purchasing the Dash8-Q400 aircraft on the grounds that they will be more profitable, even though they are costlier than the ATR plane by $20 million.

But on December 12, the Biman Board decided to cancel the tender and float a fresh tender. This time Biman's revised tender schedule was forwarded to the Implementation Monitoring and Evaluation Division (IMED) of the finance ministry.

The IMED omitted the coffin accommodation from the tender terms on the grounds that coffins, being carried very few times a year, can not justify spending $20 million dollars extra. The IMED also dropped another option in the tender that allowed a trade-in of Biman's old F 28 airplanes, saying these can go for an auction.

The IMED then accordingly forwarded the tender schedule to Biman, but the national flag carrier ignored the revision and went ahead with the old terms and conditions, seeking bids by January 24, 2005. Later it extended the closing date on February 7.

The ATR offered a price of $49.2 million for three planesthis time accommodating the coffin without sacrificing any seats - while Bombardier offered $69.74 million for three planes.

The evaluation again showed ATR to be the lowest bidder, this time with better terms - including 100 percent credit financing and low operating costs.

As Biman's tilt to ATR became obvious, the business lobby then influenced the government to stall the purchase process, the sources said.

Other than domestic routes, Biman intended to operate the medium sized aircraft in Kolkata, Kathmandu and Yangoon, the sources added.

However, Biman's acting Managing Director, Mahmudur Rahman, terms the suspension of this tender strategicdenying that is resulted from anyone's pressure.

"Right now our prime priority is purchasing aircraft like the DC-10 and Airbus for international routes where Biman's operations are suffering the most," Rahman told The Daily Star Tuesday.

"We have not cancelled the bid (for ATR/Dash planes). But procuring both types of planes for domestic and international routes makes it a heavy financial burden. That is why we are consciously delaying the purchase of the planes for domestic routes and prioritising the wide-bodied aircraft purchase," he added.

When The Daily Star pointed out that the bid for ATR/Dash planes remains suspended from Februaryseveral months before Biman decided to prioritise purchase of wide-bodied aircrafts, Rahman replied, "We have finished the evaluation of ATR/Dash planes. But it will be a heavy financial burden to finish the scheme right now."

"There is no doubt that we will have to replace all our F28s (used in domestic routes) as soon as possible," he added.

Ironically, state minister for civil aviation, Mir Mohammad Nasir, earlier this year purchased for Biman two very old F28-4000 aircraft from an Indonesian company at a cost of $2.97 million. Both the aircraft are performing poorly and added to a fleet of decades old second-hand planes, making Biman's health suffer further.

Poor tender response

Arbitrary handling of aircraft purchases in recent years has affected Biman's reputation among airplane manufacturers and suppliers so much that now the airline is failing to attract a single bidder in its attempt to purchase or lease wide-bodied aircrafts, sources said.

Following the DC-10 disaster in Chittagong on July 1, Biman sought lease of one or two DC10-30 aircraft in a tender that closed on July 14. But none participated in it. Sources said that DC-10 aircraft have now become so obsolete that there is a lack of suppliers.

Similarly, Biman's tender closing on September 15 to purchase or lease three Airbus A320 family or Boeing B737 family airplanes also failed to draw a single bid. Biman rescheduled the bid with the date closing yesterday. It could not be known if any bidder turned up in the last minute.

"The unofficial price of doing business with Biman is pretty high. Besides, when there is someone politically very powerful wanting to bag illogical and unauthorised commissions, no airline manufacturer wants to put their necks in Biman deals," quips a competent Biman source.

However, Biman chief Mahmudur Rahman says it is too early to conclude that no one will bid for Airbus A320 planes. "It's true that DC-10 aircraft are obsolete now. We are not looking for DC-10 now. Airbus is not obsolete and let's see if we can get offers in the present bid," he pointed out.

In recent years, Biman has suffered a number of accidents while its fleet of 10 aircraft has become nearly obsolete.