Biman bleeds on bad lease deal

After long efforts of two years, the Biman Bangladesh Airlines is finally going to return one of the two Boeing 777-200ER aircraft to leaser EgyptAir on Tuesday with a payment of around Tk35 crore in compensation.

The planes, which were taken on lease from EgyptAir for five years in 2014, remained grounded for four years of this five-year period, causing massive losses to the national flag carrier.

Biman has been counting a loss of Tk11 crore every month for the two aircraft that remained grounded since 2017 when Biman scrapped the agreement with EgyptAir.

After taking lease, Biman paid over Tk700 crore to EgyptAir till February this year.  

The aircraft, which is set to be returned, has been at the Vietnam Airlines Engineering Company (VAECO) since February last year for a C-Check before redelivery to the leaser.

A C-Check is an extensive engineering inspection required before redelivery of an aircraft according to the lease condition.

A team, led by officials from the Ministry of Civil Aviation, recently visited Egypt to settle the redelivery issue to save Biman from incurring a loss of Tk5 crore for each grounded aircraft every month.

The other aircraft, which is also undergoing servicing at VAECO, will be redelivered with the same amount of compensation after a successful test flight, confirmed a Biman source.

The engines of the aircraft had broken down on several occasions from the second year of the lease.

Consequentially, the national flag carrier terminated the lease agreement in August 2017, and the planes have since remained grounded.

When the disabled engines were sent to the United Airlines for repair the company found most parts unrepairable. The parts had to be replaced at high costs.

EgyptAir agreed to share the spare parts replacement cost, which reflects the leaser’s recognition that they had given faulty engines.

The total repairing cost of the engines was around Tk2,400 crore, of which 87 percent was paid by Biman and the rest by EgyptAir.

According to a review report on the lease agreement prepared by Biman, the whole lease process was full of flaws, and at a high cost to Biman.

All conditions in the lease agreement was against Biman’s interest.

The age of an aircraft, for instance, is the most significant factor when it comes to taking aircraft on lease.

In this case, the Biman authorities compromised with this significant factor by taking 18 years old aircraft. As a result, the engines of both the planes got disabled within a year.

Biman did not even manage to get spare parts for the engines in the market as the model of the engines was pretty old.

As a result, Biman has been unable to return the aircraft in the same condition as they had been at the time of delivery as per the lease condition.

The redelivery condition requires the aircraft to be returned as they were at the time of delivery.

The model of the engines used in the two aircraft was not found with the United Airlines, EgyptAir, even with the engine production company Pratt and Whitney.

As required spare parts were not found, Biman is going to return the plane with compensation.

Kevin John Steel, the then managing director of Biman, was keen to take the lease of the two old-aged aircraft on the logic that it would reduce flight operation costs.

But his logic did not work and the lease caused Biman huge losses.

Air Marshal (retd) Jamal Uddin Ahmed was the then chairman of Biman’s board.

Captain Ishrat Ahmed, director of Biman’s flight operation, led the team that inspected the two aircraft before taking lease and reported their condition to be satisfactory.

Though Biman paid a high price for taking lease of the two aircraft, no investigation has been conducted to identify the persons responsible.