The New Nation - Internet Edition

Staff Reporter

Biman Bangladesh Airlines Limited yesterday signed a memorandum of understanding (MoU) with Boeing, a US manufacturer of jetliners, to buy eight Boeing aircraft at a cost of US$1.26 billion.

Biman Managing Director Dr MA Momen and Boeing Regional Director Glen A Green signed the MoU on behalf of their respective organisations at Biman's head office Balaka Bhaban in the city.

Chief Adviser's Special Assistant for the Ministry of Civil Aviation and Tourism Mahbub Jamil and US Charge d' Affaires Geeta Pasi were, among others, present on the occasion.

Civil Aviation Secretary Syed Muhammad Zubayer and members of the Biman's Board of Directors were present.

This is for the first time that Biman is going to purchase aircraft from a manufacturing company directly using its own funds.

After the signing of the MoU, Mahbub Jamil told reporters: "This is a memorable event in the history of Biman. The signing of the MoU will significantly contribute to attract foreign investment to Bangladesh."

US Charge d'Affaires Geeta Pasi also termed the signing the MoU as an important event, saying there was a demand for aviation services in Bangladesh.

Of the eight aircraft, the first consignment of four aircraft will arrive in Bangladesh by July 2013 while the second consignment of another four aircraft by 2017. The first Boeing 777-300ER aircraft will cost US$ 182.17 million, while the three others US$ 182.51 million, US$ 183.20 million and US$184.01 million. The initial selling price of this kind of aircraft is US$272 million.

The first Boeing 787 aircraft will cost US$ 132.83 million, while the other three will cost US$ 133.08 million, US$ 133.53 million and US$ 133.81 million. The initial selling price of these planes are US$ 167 million.

Once procured, the eight aircraft will bring Biman Bangladesh Airlines Limited's fleet size to 20 from 12. Biman fleet currently includes four DC-10s, three Airbuses and three F-28 aircraft.

On March 9, Biman's board decided to purchase eight aircraft from Boeing at a cost of $ 1.265 billion, analysing the offers made by the US aircraft manufacturer and its European rival, Airbus of France. The board found the Seattle giant's offer 'more favourable,' to the offer made by Toulouse-based aircraft manufacturer.

Initially, Biman will provide a booking fee of US$1.64 million to Boeing for purchasing the aircraft from its own fund. The money is refundable in case Biman decides to back out of the deal, officials of Biman told The New Nation.

They said the latest energy-efficient Boeing planes will help reduce Biman's losses, making it a commercially viable entity.

The US-based Exim Bank will provide 85 per cent of the total cost for purchasing the aircraft, while the remaining 15 per cent of the funds will be taken from a syndicate of local banks.

Repayable in 12 years, the interest rate on Exim Bank's loans will be nearly 6.0 per cent. However, the Biman officials said the interest rate might go down to 5.0 per cent after Bangladesh becomes a signatory to the Cape Town Convention.

If ratified, the international treaty will allow Biman to obtain low-cost financing from global lenders, while also enabling international financiers to buy-back aircraft in case of default in loan repayment by the Bangladeshi carrier.

Officials said Boeing will not only deliver aircraft, but also provide technical and financial supports for staff training, route planning, upgradation of the airport, and preparation of a marketing strategy for the carrier.

Before the delivery of the passenger planes, Boeing will lease Biman four used 777-300ER in 2009 and 2010 and four used 787-8 in 2011-12 to help the national flag carrier cope with a surging passengers' growth.

The cash-strapped Biman, which incurred losses of US$100 million in the fiscal 2007 after a record loss of $120 million in the year before, has moved to buy new aircraft to replace and replenish its aging fleet.

Biman officials said nearly 70 per cent of the carrier's losses can be attributed to the fuel-guzzling fleet, most of which are aged between 19 and 27 years.

The financial woes forced the carrier, which became a public company last year, to retrench as many as 2,000 jobs and cut eight non-viable international flights and four domestic routes.

Meanwhile, in order to pacify Airbus, Biman officials said the airlines will initiate talks with the Airbus next month for procuring short-haul aircraft.