Airbus Refuses to Back Down, Tables Fresh Offer for Bangladesh

Despite Biman's $45 billion (approx. Tk 45,000 crore) deal with Boeing, the European consortium Airbus has not given up. They are unwilling to cede their position in the global arena surrounding Bangladesh's skies. They have a much lower-priced offer in their bag.  

Airbus is knocking on the door once again. They have returned to Dhaka with attractive discounts and strategic conditions. After calculating their market capture strategy, they are back at the negotiation table. Political strategy and economic equations will ultimately determine the final decision.

However, Biman currently does not have an immediate need to add new aircraft to its fleet. The airline is not even able to fully utilize the capacity of its existing aircraft, including the Dreamliners. Despite this, the US-based company Boeing has managed to secure an order for 14 new aircraft. It can be said that they pressured the government, leveraging their political influence to finalize the deal. But officials at the Ministry of Civil Aviation and Tourism believe, "The European Union's influence is also significant. They are equally desperate and cannot be bypassed. Airbus is a consortium of multiple countries, including France and Germany. Their political influence is substantial."

Right before the Eid holiday, Airbus sent a follow-up letter to the Ministry of Civil Aviation and Tourism. It stated that they want to meet with the government officials sometime this month. They wish to sign a Memorandum of Understanding (MoU). Their target is to sell A350-900 and A321neo model aircraft.

In the letter, Airbus's representative in Bangladesh, Rafael Gomez Noa, mentioned that the company wants to finalize discussions by early July, ensuring competitive commercial terms. They are eager to move forward with discussions based on their previous proposal for Biman.

Analysis of Airbus's sales proposal reveals that their initial plan is to sell four long-range A350-900 aircraft. The aircraft will be delivered in phases between 2034 and 2035. The first between January-June 2034, the second between July-December of the same year, the third between January-June 2035, and the fourth between July-December 2035. The financial breakdown of the document states that the baseline price for one A350-900 aircraft is set at $429.07615 million.

However, various sectors include a total of $263.5156 million in purchase incentives or discounts. The discount categories include: Standard Credit ($185 million), New Operator Credit ($44 million), Exceptional Credit ($20 million), Customization Credit ($6.7156 million), Additional Credit ($5.8 million), and Flight Operations Credit ($2 million). After combining all discounts, the potential net price per aircraft stands at $165.08555 million (approximately Tk 1,981 crore).

An important condition in the proposal is that Biman Bangladesh Airlines must refrain from negotiating with any other manufacturer regarding the purchase of similar aircraft until a specified deadline. This condition is designed to ensure uninterrupted and exclusive negotiations. A phased payment structure has also been established.

Payment Terms and Conditions

Under the proposal, 17 percent of the total price must be paid in advance installments before aircraft delivery. The remaining 83 percent is to be paid in a lump sum at the time of delivery. The proposal also includes a provision for forfeiting the advance payment if the final contract is not signed within the stipulated timeframe.

The proposal also includes a substantial training package for pilots and engineers. For the four aircraft, 40 pilots will receive type rating and ancillary training abroad. Additionally, 180 days of flying supervision in Dhaka will be provided after the delivery of the first aircraft. For engineers, 1,000 trainee-days have been allocated. Furthermore, while some other training facilities can be availed in advance, there is a condition requiring reimbursement of those costs if the contract is cancelled.

Future inflation has also been factored into the pricing. If the annual price increase falls between 3.25 and 6 percent, both parties will bear the additional cost. However, even if the index decreases, the price will not fall below the base price.

During a visit to Dhaka by French President Emmanuel Macron in 2023, an in-principle decision was made to purchase 10 Airbus aircraft. After the fall of Sheikh Hasina's government in the mass uprising and under strategic pressure to narrow the trade deficit with the United States, the interim government made a final decision in favor of Boeing. On April 30, Biman signed a deal to purchase 14 new aircraft from Boeing. The purchase includes eight Boeing 787-10 Dreamliners, two Boeing 787-9 Dreamliners, and four Boeing 737-8 MAX jets. The estimated market value is approximately $3.7 billion, or about Tk 45,000 crore in Bangladeshi currency. On average, each aircraft costs Tk 3,214 crore.

Meanwhile, aviation experts are questioning the necessity of purchasing new aircraft given the existing contract with Boeing.

Aviation expert Kazi Wahidul Alam said, "Investing without ensuring maximum utilization of the current fleet could create financial pressure in the future. Risks remain, especially with such long delivery timelines."

In his view, the global competition between Airbus and Boeing has always been intense, and this is reflected more actively in a promising market like Bangladesh. "Airbus coming forward with a new proposal is part of that competition. However, the final decision will depend on which proposal is more economically profitable and operationally sustainable. At the same time, a large part of Biman Bangladesh Airlines' existing fleet will be reaching its age limit in the coming years, making fleet renewal inevitable. Whether it comes from Airbus or Boeing, the decision should be based on a full commercial and technical evaluation," Wahidul Alam added.

A senior official of Biman Bangladesh Airlines said that all international proposals for fleet expansion are being carefully scrutinized. "The final decision will be made considering economic realities, route expansion, and long-term business plans. The biggest challenge here is balancing future demand and capacity rather than immediate needs," he stated.

Civil Aviation and Tourism Ministry Echoes Similar Cautious Stance

The Ministry of Civil Aviation and Tourism has also indicated a similar cautious position. Officials stated that the government will make its next decision after analyzing all aspects. The final decision will be taken by prioritizing national interest to the highest degree.

When trying to reach the Chairman of the Civil Aviation Authority of Bangladesh, Md. Mostafa Mahmud Siddique, for comment on this matter, Agami Samoy (the media outlet) was informed after sending a message that he would speak later. However, subsequent calls to his mobile phone went unanswered. An official from the authority did mention that in terms of adding new aircraft, safety, operational capability, and airport infrastructure preparedness are all equally important.

Even after the in-principle decision in July last year to purchase aircraft from Boeing, the European Union (EU) and countries like France, Germany, and the United Kingdom continued strong diplomatic pressure on the Bangladesh government to buy Airbus aircraft. European diplomats warned that if Airbus were not purchased, it could negatively impact Bangladesh's GSP Plus benefits in the European market and overall bilateral trade relations.

At that time, diplomats from four European countries, including the German and French ambassadors in Dhaka, met directly with the then Chief Adviser of the interim government to urge support for the Airbus purchase proposal. In their view, not buying Airbus could negatively affect the 'climate' of commercial and partnership relations with Europe. German and other European diplomats repeatedly reminded that Bangladesh is one of Europe's largest trading partners. If a major investment like Airbus does not come from Europe, it could also have implications for receiving GSP Plus benefits in the future.

Last year, German Ambassador to Dhaka, Dr. Rüdiger Lotz, directly warned at an event in Dhaka that if Airbus is not purchased, Bangladesh-EU relations could be affected. He gave this warning on November 26 last year at a 'Dicab Talk' event organized by DICAB at the National Press Club. That day, the German Ambassador said, "We are Bangladesh's most important business partner and hope this relationship continues. Bilateral economic decisions influence the environment for various issues, such as GSP Plus negotiations. Major decisions like purchasing Airbus also set the mood for negotiations."

The Ambassador further stated, "Of course, it is Bangladesh's sovereign decision. But like in personal or business life, every decision has an impact on the overall environment."

Just a few days before that, in a joint statement at the French Embassy in Dhaka, the ambassadors of the United Kingdom, France, Germany, and the European Union also expressed their expectation that Airbus would be 'reasonably' considered in the aircraft purchase negotiations.