Biman seeks Tk1,500 crore loan under stimulus package

Biman Bangladesh Airlines, that is hard-hit by the coronavirus pandemic has sought a working capital of Tk1,500 crore from state-run Sonali Bank under the government-announced stimulus package for affected industries. 

The national carrier has made the loan proposal to bear its operational costs for three months from April to June amid a severe liquidity crisis.

On April 12, the Bangladesh Bank issued a guideline for distributing loans under the Tk30,000 crore stimulus package. 

According to that guideline, industries that already have loans with banks will get a maximum of 30 percent of their existing approved loan limit. 

The lending rate will be 9 percent, of which 4.5 percent will be subsidised by the government and the rest will be paid by the borrowers.  

According to the central bank conditions, Biman can avail a maximum of Tk450 crore from a single bank under the stimulus package. 

When contacted, Md Mohibul Haque, senior secretary of the Ministry of Civil Aviation and Tourism said Biman needs the amount to run it for three months. 

If Sonali Bank cannot cover the full amount, the remaining portion of the required sum will be arranged from other banks, he said. 

He pointed out that Biman has to repay the loans it has taken out from foreign banks in regular instalments even during the prevailing coronavirus crisis because of sovereign guarantee. 

Biman has already implemented various cost-cutting measures including a 10-percent salary cut to minimise its operational costs, he added. 

Md Ataur Rahman Prodhan, managing director of Sonali Bank, said his bank would not be able to provide the full amount of what Biman has sought because of the single borrower exposure limit set by the Bangladesh Bank. 

He, however, said the full amount can be given to Biman beyond the single borrower exposure limit if the Bangladesh Bank takes this into special consideration. 

Biman currently has a total debt of around Tk10,000 crore with different banks. The loans were taken for purchasing 10 new aircraft which joined its fleet in phases last year. 

The state-owned aviation company of Bangladesh had been expecting to reduce its operational costs using the newly-purchased fuel-efficient aircraft but the coronavirus pandemic hit the company on the eve of its potentially lucrative business venture. 

Biman's monthly fixed cost is Tk203 crore. It has to spend another Tk61 crore in loan instalments, Tk98 crore as lease rents, and Tk266 crore as aircraft maintenance cost every month. 

The size of loan installments will double in the coming months. 

In a drastic effort to stay afloat, Biman has already announced a 10 percent cut to basic salaries for employees from the rank of officers and above and slashed nine other benefits and allowances for all employees from March.

The carrier has also returned one of its leased engines as the aircraft has remained grounded.

The national carrier recently sent a letter to the Ministry of Civil Aviation and Tourism, mentioning its financial distress caused by the suspension of all flight operations from the last week of March, as well as that of other economic activities.

However, it has been running charter flights on demand from various countries to evacuate their citizens from Bangladesh amid the coronavirus crisis. 

In the letter, Biman said it had experienced a 15 percent fall in passenger growth in January and a 58 percent fall in the following month on its international routes in Asia.

The carrier began to cut its flight frequency from February due to a significant fall in passenger growth – it cut 114 flights that month. The coronavirus crisis intensified in March amid worldwide flight restrictions, compelling Biman to cut 698 flights on both domestic and international routes.

As a result, the carrier saw a capacity loss of 46 percent on its international routes alone.

Not only did the suspension of all flights bring down Biman's revenues to zero, but it also caused the company to face a significant refund pressure regarding tickets from its sales agents.

Moreover, the suspension of 460 flights of other airlines and the decline in cargo transportation in March affected the ground handling income for the national carrier.

Biman is the only organisation that provides ground handling services to other airlines at Dhaka airport.

Biman projected revenue losses of more than Tk400 crore as of March.

Despite not having any income, Biman will have to bear fixed operational costs, loan instalments for purchased aircraft, rent of leased aircraft and maintenance cost of airplanes.

The grounding of aircraft has also increased maintenance costs because aircraft require regular ground runs to keep engines functional.

Biman has fallen into an unprecedented acute financial crisis.

Now it has become difficult for the carrier to bear operational costs, the company said in its letter sent to the aviation ministry.