Will Covid-19 prevent our airlines from returning to the runways? | The Daily Star
12:00 AM, May 19, 2020 / LAST MODIFIED: 01:57 AM, May 19, 2020

Will Covid-19 prevent our airlines from returning to the runways?

The fate of the 100 year old aviation industry now seems uncertain, with a global shutdown of flights owing to the impact of Covid-19. Consequently, people directly or indirectly engaged with this industry are facing great uncertainty in terms of job security. A latest report by the International Air Transport Association (IATA) states that global aviation supports 65.5 million jobs, once its wider supply chain is considered.

The Bangladesh aviation industry has experienced remarkable growth in the last decade, and now directly employs more than 10,000 personnel. The commercial airlines in Bangladesh operate nearly 50 aircraft including freighters of different types and make. Additionally, there are also a couple of helicopter operators and flying clubs. This growing industry of Bangladesh is being overwhelmed with acute cash flow crises due to the Covid-19 pandemic. The management of different airline companies are dealing with this problem in different ways—however, everyone has a common voice with regard to getting some stimulus measures from the government and the regulatory body, the Civil Aviation Authority of Bangladesh (CAAB). A point to be highlighted is that in the aviation industry because of extreme price wars, profit margins are generally so low that economic consequences of this magnitude cannot be handled by the airline companies alone.

Biman Bangladesh Airlines Limited, the national flag carrier, is perhaps the worst sufferer of the pandemic in Bangladesh, as it had to ground its entire fleet in March 2020. Within the last 20 months only, Biman had inducted six brand new Boeing 787 (Dreamliner) wide body aircraft for its long-haul flights, leased two 737-800 aircraft for medium haul operations and one Dash-8 Q400 primarily for domestic routes. Accordingly, it has nearly doubled its seat capacity to reach 4,476 seats in total. It would have received another three-brand new Dash 8 Q400s by the end of this year. Biman's own fleet is one of the youngest in the region, with only 3.5 years of average age. If we look at financials, after securing more than Tk 2000 million as profit after tax in the last fiscal year, Biman was heading for a record-breaking profit in 2019-2020. But the impact of Covid-19 has resulted in countless uncertainties in its profit-loss calculation. Nonetheless, the Biman management has taken a number of steps, including some thrifty measures to overcome this financial and operational turmoil. It has already secured a loan worth Tk 10,000 million from the government to help offset its negative cash flow. It is also operating chartered flights to and from different destinations. By doing so, the company of 6,000 staff is getting ready, not only to re-establish its existing connectivity but also to add more destinations as the situation improves. Without the support of the government and CAAB, this target will be extremely difficult to achieve.

US Bangla, the largest private airlines in Bangladesh, started its journey in 2013 with two Dash-8 aircraft, and now maintains a fleet of four Boeing 737-800s, six ATRs and three Dash-8s. Within a span of only seven years, US Bangla has secured about 800 percent growth in terms of seat capacity and has more than 1200 seats in total. Besides, it is expected to receive another two ATRs by September 2020. Due to Covid-19, US Bangla is flying only one flight per week to Guangzhou now, as well as special passenger flights and dedicated cargo flights. Nonetheless, it has also undertaken various cost-cutting measures across the organisation. This 1800-strong company is looking for necessary financial support from the government and the regulatory authority to tackle this unprecedented cash crunch. Another renowned private airline company, Novo Air, also started its journey in 2013 with only two 50-seater Embraer aircraft. Novo has experienced a seat capacity jump of 400 percent within only seven years of its operations by acquiring seven ATRs in phases. Importantly, it was due to induct two more aircraft of the same type in June 2020. This airline company, employing 875, is also counting the days to resume full-fledged operations with support from the government and CAAB. Regent Airway is the oldest operational private airlines and commenced its operation in 2010. This 600-strong airline has already sent nearly 100 of its employees on voluntary leave without pay and laid off another 150 personnel to endure the impact of Covid-19. It has also decided to suspend its flight operations till the end of June 2020. This airline, with three Boeing 737s in its inventory, is also looking for necessary financial support to remain afloat.

In the regional and global front, different measures have been taken by different airlines for their survival. Measures include, sending of aircraft, especially the wide bodies, to stores; awarding unpaid holidays to staff including pilots; deferring deliveries of new aircraft; freezing the hiring process; introduction of reduced work times and salary cuts at all levels of the workforce. However, despite all these measures, many airlines have collapsed, and many have declared themselves bankrupt. The collapse of Virgin Australia Holdings and Europe's largest regional airline Flybe sends clear signals that weak airlines (such as Afghan Airlines, which is already in trouble) have very little time to secure funds before they succumb to Covid-19.

In order for the airlines to take to the skies again, governments, regulatory authorities, lessors, financiers and other stakeholders, including individual passengers, have an important role to play. Many governments have already declared various stimulus measures, including offering easy-term loans, sovereign guarantee and other financial aid. By now, many civil aviation authorities have come forward with a bundle of supportive measures for airlines to withstand this grave crisis. For example, the Civil Aviation Authority of the Philippines has already decided to defer airline charges (take-off, landing, and parking fees) of local airlines. The Norwegian authority announced the cutting of aviation taxes. The Civil Aviation Administration of China has offered innovative financial incentives for airlines till June 30. Under this, for every available seat kilometre (ASK), Beijing will give USD 0.0025 for routes shared by more than one carrier and USD 0.0076 for routes operated by just one carrier. Thus, for a Dhaka-Guangzhou return flight with an aircraft of 300 seats, the Chinese government's support would be USD 10,615 per flight.

It is heartening to note that the Bangladesh government has also offered financial packages for this service sector. The most important decision of the government would perhaps be the waiving of various charges by the CAAB, which is said to be in the process of implementation. According to news media, this includes a complete waiver of aeronautical charges for domestic flights till December 2021 and 50 percent waiver of the same for international flights till December 2020. The non-aeronautical charges will also be waived for all airlines till December 2020. If such stimulus gets a final go-ahead from the government, Bangladeshi airlines will certainly get some breathing space to sustain themselves during the pandemic. Without this kind of support, some airline companies may not be able to come back to the runway for their next take off. 

 

Air Commodore Mahbub Jahan Khan, BPP, psc (Retd) is Director Planning at Biman Bangladesh Airlines.

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