Biman moves again to convert its debt liabilities into equity

FT ONLINE

Biman Bangladesh Airlines (BBA) has moved again to convert its entire debt liabilities worth over Tk 6.69 billion into government equity to have a healthy balance sheet, officials and aviation experts said.

The national flag carrier, which has been facing acute liquidity crisis due to regular repayment of a large quantity of debt, requested the Ministry of Civil Aviation and Tourism (MoCAT) to allow it to do the conversion, officials concerned said.

The ministry put forward the proposal to the finance ministry to take necessary action in this regard on October 01, they said.

Aviation experts, however, opposed the move saying that the state-run airliner failed to make proper use of the opportunities that it enjoyed in the past. As a result, the BBA is going through financial crisis.

The amount of entire debt stood at some Tk 4.47 billion under a voluntary redundancy scheme (VRS) initiated in 2007. The loan includes a principal amount of over Tk 2.91 billion and interest worth over Tk 1.43 billion as of June, 2017.

Besides, Tk over 2.21 billion had been taken from different foreign banks for purchasing DC-10-30 aircraft in 1984.

According to the cabinet division's instructions in 2007, Biman took restructuring plan eleven years ago to turn it into a public limited company. It was asked to downsize its manpower from 6,883 to 3,400 to make it a profitable agency.

The restructuring plan did not yield any visible outcomes as Biman has been performing poorly after it turned into a limited company.

As per the move, a total of 1,876 Biman employees retired and their pension or gratuity was paid from the loan received from the finance ministry.

The loan was given by the government in two instalments at an annual interest rate of 5.0 per cent.

When contacted, Managing Director and CEO of Biman Bangladesh Airlines (BBA) A M Mosaddique Ahmed declined to make comment in this regard.

He, however, said the balance sheet of the company is not healthy due to outstanding debt. The financial statement would look good if the total debt is converted into equity.

Biman started its journey as a company on July 23, 2007. It made profit in fiscal years (FYs) 2007-08 and 2008-09, but it turned into a loss-making concern from FYs 2009-10 to 2013-14, according to official documents. But Biman again made profits in three consecutive FYs -- 2014-15, 2015-16 and 2016-17.

A senior official said the national flag carrier could not provide outstanding dues to the government due to lack of cash capital at the initial stage of the company.

Currently, Biman is facing liquidity crisis due to regular repayment of a large loan it took for purchasing six new generation aircraft.

Aviation expert Kazi Wahidul Alam said Biman owed to the Civil Aviation Authority of Bangladesh (CAAB) in form of different arrear fees and charges. Besides, a hefty volume of outstanding jet fuel charges was unpaid with state-run Padma Oil Company Ltd (POCL) before 2007.

The amount of liabilities was nearly Tk 17 billion when the government converted Biman into a public limited company in 2007. The government wrote off the debt, he added.

"The government again and again injects cash and provides different opportunities to Biman. But it has failed to perform well."