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Biman set to take on private airlines with 49pc stake sale

Sohel Parvez
*** “The offer, and subsequent listing in the country's stock exchanges, will Help the beleaguered State-owned airline improve its cash flows substantially and take on private carriers” ***
The government plans to sell 49 percent of its shareholding in Biman Bangladesh Airlines Ltd this year through stock markets, the offer, and subsequent listing in the country's stock exchanges, will help the beleaguered state-owned airline improve its cash flows substantially and take on pri-vate carriers, a top government functionary said yesterday.
“We will off-load 49 per cent of Biman 's shares to raise funds and improve the cash flow. The public offer will also create a remarkable impact on the stock markets," Mahbub Jamil, special assistant to Fakhruddin Ahmed, Chief Adviser, in-charge of the Civil Aviation and Tourism Ministry, told The Daily Star, on the sidelines of a discussion organised by Metropolitan Chamber of Commerce and Industry. Biman has an authorised capi-
tal ofTk 15,000 crore.
The stake-sale announcement comes two weeks after Biman Bangladesh Airlines sealed a deal with US-based Boeing to purchase eight new aircraft for $1,265 billion. The airline currently has a fleet of dozen aircraft, including four F 28s and three A 310-300S. With an expanded fleet, it hopes to take off and give domestic private carriers serious competition, besides cutting down its own losses, estimated at $ 100 million during 2006-07.
Jamil, who also chairs Biman board, said the shares will be off-loaded through a direct listing process. "We will try our best to offload the shares within this year," he said. In fact, he expects the carrier to break-even in the current financial year itself. The government had corporatised Biman in July 2007, which has now enabled the divestment plan. This will be the first
such listing of an airline in the country. In the last one year, as many as three new domestic private airlines have commenced operations.
The national carrier, which incurred a loss of Tk 455 crore in the fiscal year 2005-06, has narrowed the loss margin by over half to Tk 272 crore last fiscal.
Analysts, however, were not
sure if the minority stake sale will help Biman since it continued to be majority owned by the government. Imran Asif, an aviation industry consultant, said, "This will not help Biman sustain its business in the long run. The management control must go to the private sector if Biman is to be profitable and sustainable,’’ he said, adding that only a sale of 51 percenter
more will help Biman in the longrun.
The national carrier now flies to 18 international destinations, competing with over 20 local and foreign and local airlines, which together dominate the airs. Saudia, Emirates, Singapore, Thai and Gulf airlines are the global players in the Bangladesh aviation market. Domestic firm GMG too is
spreading fast with flights to the Middle-East and South-East Asia. The country's total air traffic is estimated to be growing at over 7.5 per cent a year.
Losses and crew shortages had, in several earlier occasions, forced Biman to suspend flights to eight international destinations. The Biman chairman said the national carrier had paid of all its liabilities to Bangladesh Petroleum
Corporation. “We are now buying fuel in cash. We have paid over Tk 580 crore to BPC since April last year,” said MA Momen, chief executive of Biman Bangladesh Airlines’ The airline will go for an independent valuation of its assets once it pays dues to the tune of Tk 573 crore to civil aviation authority.
Momen said the listing would help the airline improve its accountability and also strengthen its financial health.
Yaw er Sayeed, Chief Executive of asset management firm, AIMS, which manages funds of over Tk 100 crore, said the market had the capacity to absorb such a big issue. "Whether the listing will benefit the market and investors will depend on correct valuation and pricing. There must be a transparent and competitive book building process,” he said.