MIAMI — Window seats are my favorite on a plane, especially when arriving in a new place. Getting to take in the “bird’s eye view” is always a great introduction. Looking out the window as my flight landed at Hazrat Shahjalal International Airport in Dhaka, Bangladesh last month I saw signs of progress.
The taxiways are under construction, with large chunks missing outright as they are retrofit and the airport facilities improved. It is a relatively small project but a significant one. And the parallels to the flag carrier Biman Bangladesh Airlines could not be more apparent. There are lots of changes afoot, some more visible than others; all are focused on bringing operations into the modern era.
Biman Bangladesh is something of a study in contrasts. Massive amounts of the work is still performed manually rather than via automated systems. The logs from the motor pool are maintained on paper, and revenue management is running via relatively simple algorithms with no dynamic capabilities. The carrier just retired the last of its DC-10 aircraft, part of an aging fleet which still has a couple Airbus A310 operating.
It was 2006 when the carrier pulled down operations significantly in the face of mounting losses and still rising operational costs. Biman still held a majority of market share to the 29 international destinations served but they were unable to produce profits. Operational reliability was, roughly speaking, abysmal and showed no signs of improving.
Something drastic had to be done. And so it was. The route map was slashed, with New York City, Tokyo and eight other destinations suspended. Market share dropped from more than 50% to 30%. The carrier had built its reputation for delays and cancellations, one which did not help in attracting passengers and the foreign guest worker programs, long a major source of passenger loads, are shrinking, further cutting Biman’s traditional customer market.
It was time to rebuild, something which Biman has finally started to do.
The changes were not all immediately visible. It took a few years for a new CEO to be appointed and for a new path to be charted. With that path now firmly in hand it is time to see if the company can do more than stabilize; it is expected to flourish. It will be judged based on the product it offers, the destinations it covers and, perhaps most importantly, whether it can become financially sound.
The DC-10s have been replaced with Boeing 777-300ER aircraft delivered new from Boeing. Additional 777-200s were also acquired and the company is looking at options to replace its A310s with another plane in the 250-280 passenger range.
Boeing 787 Dreamliners are on the horizon for the 2018 timeframe; a 767 might fill the gap in the interim.Starting with a collection of systems as out-of-date as those Biman runs means there is little direction to go other than forward. Biman has seized that opportunity and is making great strides very quickly.
Mohammad Shah Newaz, Biman’s Director Marketing & Sales, shared his views of the historical challenges and also the future potential which the company has:
Now we are getting the aircraft. By the end of this year  we will have a better fleet, a more efficient fleet.
…The question is, ‘Can we recover the passengers lost to the foreign carriers?’
An advanced revenue management solution is scheduled to come online in Q2 ’14. This will replace the very limited, manual approach currently in place. This should allow the carrier to better compete with the likes of the Middle East Big Three airlines who have been aggressively expanding in Dhaka. And the carrier knows this is a significant challenge.
One executive explained it quite frankly, “We are competing with Qatar Airways and reducing our [fares]. Ultimately the yield is going down but it only affects Biman.” And given Biman’s struggles to maintain both loads and yields such dynamic systems are an absolute necessity if they are to succeed in this turnaround effort.
Expand the Route Map
New York City is back on the route map, for example. Maybe. Biman is working to launch service to Birmingham, UK later this year in part thanks to the local airport waiving ground handling costs for the carrier. And the airline would love to tag on service to New York’s JFK airport from Birmingham, both for passenger and cargo traffic. Alas, regulatory and security issues stand in the way. On the security front, work is underway to make the necessary changes required by western authorities. Work orders have been issued and proposals are under review. They hope to implement some of the required changes in Q3 ’14. Other destinations are also being discussed include Sydney, Guangzhou, Kuala Lumpur and more. Frankfurt service has been added via Rome, another new market Biman hopes will thrive.
The company hopes to grow more than just passenger traffic. As a cargo operation Biman had no presence in the market just a decade ago. Today they are growing at a 10-15% year-over-year clip but carrying only 10-12% of the outbound cargo from Bangladesh. They expect those numbers to grow as the route map expands and the handling facilities upgrade their security and processing operations. As one executive explained:
The cargo market is good if we can handle it properly. As a handling carrier we have to increase security and reliability. As an [operating] carrier we need to increase capacity.
The existing fleet can support growth to roughly double the current market share. And with plans to further grow and modernize the fleet the additional cargo capacity will hopefully be filled with both perishable and dry good exports.
On the operations and security front major changes are afoot. The current cargo facilities are approximately 150,000 square feet, much of which is outdoor space. Work is underway to implement a modern security screening system for outbound cargo, an absolute necessity to expand their both their passenger and cargo operations.
The company expects the systems to be in place later in 2014 and hope that but the European and US regulators will recognize the improved security setup immediately upon its implementation. This hope is bolstered in part by the choice to contract out the initial build-out rather than doing everything in-house.
Diversify Income Streams
It is no secret that airlines make a decent profit on their in-flight duty-free sales operations. For Biman that has not recently been the case. The carrier pulled much of the duty-free inventory out of the planes during the downturn. In-flight sales resumed in November 2013 but the offerings they had were anemic, to say the least.
That has all changed now, however. Biman has partnered with King Power Traveler, a Hong Kong-based company, to revitalize their in-flight sales offerings. The new collection of products are much more typical of a traditional international airline but will also include products which reflect the local culture. Flight attendants will earn commission on sales made during the flight; they are being trained by King Power to help improve their product knowledge and sales techniques.
Biman’s website was relaunched in late 2013 with new features such as seat selection and meal choices available through the portal. Passengers will now have the opportunity to bid for upgrades on long-haul flights or an empty adjacent seat through a partnership with OptionTown. Advance payment of excess baggage fees will be available online in the near future as well. All of these are avenues to improve the passenger experience and increase ancillary revenue channels. That’s a win for both the carrier and the customer.
The Biman Flight Catering Center (BFCC) and Biman Poultry Complex (BPC) are two small operations relative to the airline operations of the parent company, but they are also profitable and represent some of the diversification which has been successful for Biman in the past several years. Catering is a great challenge in an area where sanitation and supply chains are hard to guarantee. By bringing those operations in-house the company is able to have tight controls over the process and the quality, ensuring that passengers receive the best levels of food quality. The company can also adjust the catering to meet the demands of their local market.
The BFCC/BPC combination does more than just provide meals to the airlines. The group is now producing a surplus of raw materials, allowing them to offer a public sales arm as well. Anyone can buy food raised/grown by the BPC from their retail operation.
And so now we wait and watch. The DC-10 is gone, the new systems are quickly coming online and the trajectory for the company looks solid. They’ll need to pick up more passengers, of course, and rebuild their reputation both within Bangladesh and internationally, but they’re moving in that direction.
Those plans hit a bit of a speed bump recently when the new CEO resigned unexpectedly, initially citing health reasons. With uncertainly at the top there is a very real chance that the new path charted could be altered, with the airline slipping back into its previous patterns. A more recent news piece (translated version here) suggests that things under the surface are far worse than the company has presented in the public view.
Accusations of corruption and misbehavior by senior management are neither new nor welcome. Making significant changes such as those Biman has started with requires a steady hand at the top and a long-term commitment to see them through. Is it possible that there is simply too much baggage holding the carrier back from making the adjustments and riding out the necessary period of change and uneasiness?
There are plenty of indications at the carrier pointing to success, though it will depend on passengers seeing these improvements through the lens of the past challenges and all employees embracing the new approach. Such attitudes and behaviors can be hard to change. It is an uphill battle but one Biman must win in order to survive and thrive.