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Saturday, January 14, 2012
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GMG to cut down flight operations

Plans to downsize workforce, close long routes as cost-cutting measure

The country's first private airlines GMG now plans to cut down its operations and lay off a significant number of workers even though it had earlier predicted business expansion.

As part of its cost-cutting measures, the airlines already closed some of its domestic and international routes, including the Dhaka-Jeddah route since December 16.

GMG's debt of Tk 45.93 crore to the Civil Aviation Authority of Bangladesh (Caab) and Tk 18 crore in travel tax to National Board of Revenue (NBR) as of July last year are a pointers to its poor financial health.

The airlines also delayed some staff salary payments in November last year. The airlines, however, claimed that the delay was due to fund rearrangement of its sister concerns.

A top GMG official requesting anonymity said they have already decided to suspend operation on most of the long-haul routes where Boeing 767-300 Extended Range planes were operating.

The official said GMG will be on more regional routes with new generation aircraft. It has decided to lease out its three Boeing 767 planes.

"We are now going through a transitional period. After realigning our business model, we will follow the proven path for maximising profit with low cost operations through efficient management," said the official, adding, "In the process if we need to cut jobs, we'll do that."

The airlines now has over 1,000 employees. The number was 1,150 earlier but employees started to switch to other airlines jobs fearing they would be axed soon.

“A captain of GMG called me recently and asked for a job,” a top executive of a private airlines, which is planning to start operation soon, told The Daily Star.

GMG earlier operated flights on six international routes but now it does on three, Dhaka-Kolkata, Dhaka-Dubai and Chittagong-Kolkata. Its domestic flights are between Dhaka and Chittagong only.

GMG's fleet has eight planes, three Boeing 767s, three McDonnell Douglas MD-80s and two Bombardier Dash-8s. One MD-80 and one Dash-8 have been grounded for a long time.

Asif Ahmed, director Marketing and Customer Experience, of GMG admitted that GMG is now going through an economic crisis due to rise in fuel cost in the recent months. He said since Biman, the national carrier and GMGs rival, is not imposing rational fuel surcharge on passengers, they cannot do it either.

Asif said they will announce new routes this month.

Asked about downsizing the workforce, he claimed that they were “right sizing” their manpower.

In 2009, Beximco Group got the lion's share of GMG Airlines, which has been operating since 1998. Soon after that, the company organised road shows to get GMG on the stockmarket.

Even though GMG did not go public, it collected around Tk 300 crore from the market in the name of placement of shares. After that GMG submitted prospectus to the Securities and Exchange Commission under bookbuilding method, a way of determining share prices, and Janata Capital and Investment was appointed as issue manager.

Soon after the debacle in the stockmarket in December 2010, the bookbuilding method came under fire, especially for overpricing of securities. Later, the regulator was forced to suspend the method on January 19, 2011. The regulator revived an amended bookbuilding method late last year.

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It is sad indeed but fuel price and landing fees are a big problem for all airlines. Only way out for Biman and GMG is to charge passengers extra for rise in fuel price and bring in fuel efficient aircrafts.

: Manzoor Ashraf

Thanks to the monopoly and corruption for not letting our aviation industry dream of doing a decent business and save millions in foreign exchange.

: zabi

Comments

  • Anonymous
    Saturday, January 14, 2012 01:57 AM GMT+06:00 (140 weeks ago)

    GMG is failing because Salman F Rahman has been stripping its assets off. In addition, it has appointed some Indian managers who probably have been bought by owners of rival Indian airliners. Its a very sad episode.

  • Monowara Begum
    Saturday, January 14, 2012 12:26 PM GMT+06:00 (140 weeks ago)

    GMG is in trouble from multiple fronts: contractual obligation do not allow them to return those 3 B767 which is commercially killing, they need to downsize their number of staff, they have huge burden of bills to CAAB, unpaid travel tax to NBR, huge unpaid bills to national oil company and all along unprofessional management team; all these amounted to huge failure of GMG today. How GMG management could get away not paying those travel tax collected from passengers, but not paying to national coffers is a crime by itself which literally can lock-up GMG management in prison. It is setting a very bad precedence in the country legally.

  • rob miah
    Saturday, January 14, 2012 08:15 AM GMT+06:00 (140 weeks ago)

    It is a wonder why the new owners of GMG (Beximco) allowed the old management that was under the old owners to continue when it is known to everyone that they were responsible for the downfall. The cash strap position of GMG is because of fuel being bought from expensive sources, unusually high salaries of expatriates and reckless introduction of flights without proper assessment of demand.

  • rch
    Saturday, January 14, 2012 01:31 AM GMT+06:00 (140 weeks ago)

    Did Salman F Rahman paid back the TK 300 Crore?

  • Sheikh Monirul Islam, Opee
    Saturday, January 14, 2012 01:39 AM GMT+06:00 (140 weeks ago)

    Initial leasing of a B747-300, buying those McDonald Douglas MD-90s and later, three (3) B767-300 without any logistic supports are prime causes of GMGs failure today; coupled with lack of management skill to run an airline and know how of marketing knowledge overburdened with over-confidence. Beximco takeover was flawed as I seriously doubted its intention. Its recent change of its top management was further detrimental. Recent decision to stop flying to Saudi Arabia proved to be the clear indication of not having skill to manage an airline. GMG has an established brand and if it is at all serious about its airline business, it has great future to look forward to; but for that management has to be patent and listen to people who knows the job best. It is not true that there are shortages of technical people in Bangladesh, but GMG all along lacked in proper strategy.

  • Anonymous
    Saturday, January 14, 2012 12:26 PM GMT+06:00 (140 weeks ago)

    GMG is in trouble from multiple fronts: contractual obligation do not allow them to return those 3 B767 which is commercially killing, they need to downsize their number of staff, they have huge burden of bills to CAAB, unpaid travel tax to NBR, huge unpaid bills to national oil company and all along unprofessional management team; all these amounted to huge failure of GMG today. How GMG management could get away not paying those travel tax collected from passengers, but not paying to national coffer is a crime by itself which literally can lock-up GMG management in prison. It is setting a very bad precedence in the country legally.

  • mad of aviation
    Saturday, January 14, 2012 03:51 PM GMT+06:00 (140 weeks ago)

    The condition of present GMG is just for the discrimination of the salary of the employee. Like. a sr. cabin crew gets average USD $300 whereas one HOD gets USD $10, 000. Do you have anything so say?


 

 


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