-By Raquib Siddiqi
Biman Bangladesh Airlines Limited has gained significantly higher Available Seat Kilometre (ASK). This is expected to usher in a new era with prospect of profitable operation with efficient utilisation of the capacity. Poor utilisation instead will put the airline in grave financial danger.
At a function on February 11, at VVIP terminal of Hazrat Shahjalal International Airport, Dhaka Biman inducted its third B777-300ER to the fleet and bade farewell to DC-10-30, the last such aircraft in schedule passenger service in the global airline industry. On 27 March Biman inducted the 4th B777- 300ER, purchased from Boeing and one B777-200ER leased from Egypt Air.
Capacity hike: Before induction of the 4th B777-300ERs and one B777-200ER Biman had three B777-300ERs, two Airbus 310s and two B737s in the fleet with ASK of 2,236.
Another B777-200ER, leased from Egypt Air is scheduled to join fleet this month (April) and two turboprop aircraft, by this month. With the addition of these aircraft the ASK of Biman will be increased to 3,084—a hike of 30 per cent over the existing ASK.
It may be noted that ASK or Available Seat Kilometers is a measure of an airline flight’s passenger carrying capacity. It is equal to the number of seats available multiplied by the number of Kilometers or miles flown. An available seat mile is the fundamental unit of production for a passenger-carrying airline. A unit in this case is one seat, available for sale, flown one Kilometer.
Proper utilization a must
The significant enhancement—30 per cent—of traditionally capacity starved Biman’s ASK is certainly a good and welcome news. What is most urgent now is proper use of the capacity. Otherwise, with burden of huge loan re-payment, Biman will be in grave financial danger. The airline is simply not in a position to keep part of its capacity idle or poor utilization.
Capacity utilization plays an important role in determining the financial performance, cost competitiveness, and the market share of any business. This is especially true in case of airlines across the globe, especially when many of them are facing financial problems resulting from a stiff competition.
In the present business environment, many airlines in the world are facing financial problems due to their poor capacity utilization resulting from the poor planning. In view of uncertainty about future demand, it is not easy for airlines to adjust their capacity accordingly.
An airline may benefit financially by ensuring utilization of capacity in accordance with short-run requirement even if capacity adjustment from long-run perspective is difficult.
When future demand can be predicted on the basis of the past trends, capacity requirement of an airline can easily be found out. This requires finding the capacity utilisation that minimizes the long run average cost. However, if there are some disturbances in the demand trend, and uncertainty prevails over the future, capacity planning becomes rather difficult.
An airline in this situation should rather first attempt having a capacity that ensures optimum capacity utilization from short run perspective. This way, besides rationalizing the unit cost, the airlines also get closer to the optimum capacity requirement and can move to it when situation permits. This would be a better alternative than the two extreme situations of either involving large shedding of capacity in an attempt to reach the long run average cost curve point or suffer a low degree of capacity utilization in the hope of a better future demand.
Biman’s utilization effort
Biman has drawn up a programme to utilize the capacity that Biman is going to gain with induction of two more B777-300ERs, two leased Egypt Air B777-200ERs and two turboprop aircraft. The main feature of the programme is adjustment to its network through increase of frequency and deployment of higher capacity aircraft.
Frequency to Jeddah will be increased from present five to seven B777-300ER flights a week. Riyadh will be served by point to point four B777-300ER flights a week. Dammam will be no more extension of Riyadh flight and will get three B777-200ER flights a week. Muscat will have five flights a week –three by Airbus 310, two by B-737-800 and one by B777-300ER.
Other major deployment of B777-300ER will be on proposed twice weekly Dhaka-Rome-Frankfort-Rome-Dhaka service. Three flights to Dhaka- London and two flights to Kuala Lumpur will also be by B777-300ER.
The proposed new routes to Kunming will be served by two B737-800; Guangzhou by two A310 and Guwahati by Turboprop.
Frequency to Kathmandu will be increased from present four flights a week to seven A310 flights. Kolkata will be served by daily B737-800 flights.
Efforts to resume Dhaka-New York operation via Birmingham using wet leased aircraft are also there.
Not enough
Kevin Steele, Managing Director and Chief Executive Officer of Biman feels that capacity increase that Biman will gain with the induction of six aircraft—two B777-300Ers, two B777-200ER and two turboprop—will not be enough to push for big expansion of operation. The expansion programme that has been drawn are “lot more” that permitted by capacity increase, Kevin said.
In reply to my query, Kevin Steele, informed that “there is a lot happening on Biman aircraft inventory. In early November, Biman had eight aircraft – two B777-300ER, two B737-800, two A310, two DC10. This enabled us to fly seven aircraft, and have one aircraft on standby, to ensure high standards of punctuality”.
“By 1 April 2014, with the last DC10 leaving on 20 Feb 2014, Biman will have a total of 10 aircraft – four B777-300ER, two B777-200ER (from Egyptair), two A310, and two B737-800. With one aircraft on standby, this means that we will have nine aircraft flying (versus seven in early November 2013). So we need to ensure we have enough extra flying for two more aircraft”:
1) We are adding several new destinations this summer – Frankfurt, Birmingham/New York (two thirds of one aircraft for this alone), Guangzhou and Kunming.
2) We are then looking to add frequency. One example is moving from 5 per week to Jeddah, to 7 per week. There are many others.
3) The above are a lot more than 2 aircraft’s worth of flying.
“So in answer to your question, even with these 4 aircraft coming in to the fleet, Biman still does not have enough capacity. So we may possibly induct 2 more widebody aircraft this summer, and more to follow in 2015. In my presentation to the Honorable Prime Minister, I mentioned about reaching 16 aircraft by summer 2015” Kevin concluded.
(Former Acting Editor of now-defunct The Bangladesh Times, Raquib Siddiqui is a veteran journalist with specialisation in aviation and tourism)
