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FEASIBILITY ANALYSIS

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Feasibility Analysis
of Purchasing New Boeing 787 Dreamliner
For Biman Bangladesh Airlines

For
Jamal Uddin Ahmed
Chairman
Biman Bangladesh Airlines Ltd.
By
Sumit Shibib
Aerospace Engineering Department
Embry-Riddle Aeronautical University

December 1, 2014

FEASIBILITY ANALYSIS

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Table of Contents
Abstract ........................................................................................................................................................ iii
Introduction .................................................................................................................................................. 1
Key Factors In Deciding On Buying New Boeing 787 .................................................................................... 1
Necessity of New Planes for Biman Bangladesh ........................................................................................... 1
Current fleet of Biman .............................................................................................................................. 2
Passenger to seat ratio of existing aircrafts .............................................................................................. 2
Expansion of Biman Airlines...................................................................................................................... 2
Consumer Survey and Market Analysis ........................................................................................................ 3
Cabin and ticket preference of travelers .................................................................................................. 3
Factors that affect the purchase of a ticket .............................................................................................. 4
Cost of Purchase and Maintenance of Boeing 787 ....................................................................................... 5
Purchase costs of the 787 ......................................................................................................................... 5
Maintenance costs of the 787 .................................................................................................................. 5
Technical Issues with Boeing 787 ................................................................................................................. 6
Dangers of unstable battery in an aircraft ................................................................................................ 6
Battery failure and accidents in the 787 ................................................................................................... 7
Boeings fix and sustainability ................................................................................................................... 7
A Comparison with Alternative Aircrafts ...................................................................................................... 8
Conclusion ..................................................................................................................................................... 8
Feasibility Results and Interpretation ....................................................................................................... 8
Recommendations .................................................................................................................................... 9

Table of Figures
Table 1
Table 2
Table 3
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Figure 7
Figure 8
Figure 9

Biman Fleet Information................................................................................................................. 2


Price comparison of Boeing 787 with existing Biman aircrafts ...................................................... 5
Summary of Results ........................................................................................................................ 9
The necessity for new aircrafts for Biman ..................................................................................... 2
Cabin preference of air travelers ........4
Average money spent on each one way ticket .............................................................................. 3
Ticket purchasing factors ............................................................................................................... 4
Cost effectiveness of the 787 ......................................................................................................... 4
Comparing Labor Hours of Boeing 787 with similar aircrafts ....................................................... 5
Long run benefits of the Boeing 787 .............................................................................................. 6
Comparison of new and old batteries ........................................................................................... 7
Relative comparison of the 787 with similar aircrafts ................................................................... 8

FEASIBILITY ANALYSIS

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FEASIBILITY ANALYSIS

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Abstract
This report looks at the feasibility of purchasing new Boeing 787 for Biman airlines. As a part of
its airline renewal process, Biman is looking for aircrafts that will help it to grow. The report looks
at cost, demand and safety of the Boeing 787 for purchase by Biman. The report includes federal
and commercial data, public survey and an interview with Dr. Omer Farooq.
Several factors determine the feasibility of purchasing new Boeing 787s. The factors are,

Necessity
Consumer demand
Cost
Safety

Biman has a shortage of aircrafts to cope with existing demand. Biman also needs to decrease
ticket prices to attract more travelers. Boeing 787 is a competitively priced aircraft that can carry
large amounts of passengers with low operating costs. The Boeing 787 is a feasible option for
Biman for immediate purchase. The 787 has a low price, low maintenance costs and high
efficiency. The 787 is also a safe and reliable aircraft.
This report recommends Biman to purchase 787s and operate more flights. The cost efficient
aircraft will lower ticket prices. This will increase demand and popularity and help generate more
profit for Biman.

FEASIBILITY ANALYSIS

Introduction
The airline travel industry is a very competitive and demanding industry. Airlines have to be cost
effective, efficient and safe in order to gain a competitive edge over others. A very important
aspect of an airline is the fleet of aircraft it operates. Due to high costs related to air travel,
travelers expect the best comfort and safety standards from aircrafts.
Many airlines have gone out of business due to the inability to maintain proper service. The
causes include delay in flights, cancelled flights and technical issues with the aircraft. A large
proportion of these issues occur due to older aircrafts.
Biman Bangladesh Airlines operate regionally and internationally. Biman has a fleet of six Boeing
777, two Airbus A310 and two Boeing 737 (Biman, 2013). Except for Boeing 777s, the rest of the
aircrafts are old, inefficient and insufficient. According to an article published in Prothom Alo, a
leading newspaper in Bangladesh, Biman faced a loss of around 29 million USD in the first quarter
of 2014 (Sultan, 2014). Biman needs to find a way to cut losses and find profit, and one of the
way is to renew the airline by purchasing better aircrafts.
This report examines the feasibility of purchasing new Boeing 787 Dreamliner by Biman
Bangladesh. The report incorporates research, survey and interview in order to determine if
purchasing the 787s will increase demand and profit for Biman, cut down costs of operating each
flight and raise safety and overall reputation of the airline.
This research covers five major topics that determine whether Biman needs to buy the new 787s:
necessity of new aircrafts for Biman, cost of purchase and maintenance of the 787, consumer
demand for air travel, technical issues with the 787 and a comparison with other aircrafts. How
the Boeing 787 performs in each criteria determines the feasibility of purchase by Biman.

Key Factors In Deciding On Buying New Boeing 787


Before Biman can propose the purchase of new aircrafts, it has to look at some key factors for
the investment. This section looks at the aspects that determine if the purchase will be feasible.

Necessity of New Planes for Biman Bangladesh


The first major aspect of investing in new aircrafts, such as the Boeing 787 is whether Biman
actually needs them. Three major aspects that determine the necessity of purchasing new
aircrafts are:
1. Current Fleet: Does Biman already have enough good quality aircrafts to serve their
purpose?
2. Passenger to seat ratio: Is the current fleet adequate for passengers?
3. Expansion: Will Biman be able to expand into more destinations with more aircrafts?

FEASIBILITY ANALYSIS

Current Fleet of Biman. The following table extracted from Biman website summarizes their
current fleet.

Table 1 Biman Fleet


information
Source: Fleet Information
Biman Bangladesh Airlines
(2013)
http://www.biman airlines.com/about/fleet

Table 1 shows Biman has four Boeing 777s, two Airbus A310s and two Boeing 737s. Boeing 777300ER is a relatively modern aircraft. Its first commercial flight was in 2004 for Air France (2004).
However, Boeing 737-800 is 16 years old and Airbus A310 is 29 years old (Aviation Safety
Network, 2014). The aircrafts are old, require extensive maintenance, and are inefficient. Newer
model aircrafts, such as the Boeing 787 will modernize Biman and increase safety factors.
Passenger to seat ratio of existing aircrafts. According to the table, the total seating capacity of
all the aircrafts is 4,410 economy seats and 236 business seats. Budget Report of Bangladesh
(2013) revealed that Biman carried 3,150 passengers each day during 2012-2013. Accounting for
growth, the average stands to be around 5,000 passengers each day in 2014. In order to fulfil
demand, Biman has to operate multiple flights each day. It is technically difficult to operate
Bimans existing aging aircrafts like the A310 and 737 continuously to satisfy demand. Thus, the
current fleet is inadequate to meet demand and thus purchasing more aircrafts is a feasible
option for Biman.
Expansion of Biman Airlines. Biman flies to 29 destinations including 19 international
destinations (Center for Aviation, 2014). Biman operates in major destinations, such as New York,
London, Paris and Dubai. The airline has air service agreements with 43 countries. There are 24
destinations where Biman does not operate yet. Biman has scope of doubling their destinations,
as they are not operating at their full potential. More aircrafts will allow Biman to operate in
more destinations, which will increase revenue. Therefore, purchasing more aircrafts is a feasible
option for expansion.
The figure below summarizes why Biman needs more efficient and modern aircrafts, such as the
Boeing 787.
Current fleet inefficient
to maintain safe flights

Current fleet inadequate


to meet consumer
demand

Figure 1 The necessity for new aircrafts for Biman

Additional aircrafts will


open flights in more
destinations

FEASIBILITY ANALYSIS

Consumer Survey and Market Analysis


Another big factor in determining the feasibility of purchasing new aircrafts is whether it will be
profitable. This section includes a consumer survey I took in November 2014. Fifty random people
of different nationality and flight experiences took the survey. This feedback from consumers
help to determine how a decision by the airline will affect the tickets purchased by general
consumers. The survey looked at some main aspects of travelers, such as:
1. Cabin and ticket preference
2. Factors that affect the purchase of a ticket
52% of the survey takers were Asians, 38% were North Americans and the rest were Europeans
and South Americans. 40% of the people said they travelled 1-2 times per year and 36% said they
travelled 3-5 times per year. This diversity means that the statistics accurately represented the
viewpoints of actual airline travelers from different parts of the world.
Cabin and ticket preference of travelers. The pie charts below show the amount of money
travelers spend on each ticket and cabin preference from the survey data.
Average money spent

Cabin Preference
6% 4%

8%

6%6%
56%

24%

90%

Economy Class

Business Class

First Class

Figure 2 Cabin preference of air travelers

$250-$500

$500-$1000

$1500-$2000

$2000 or more

$1000-$1500

Figure 3 Average money spent on each one way ticket

From figure 2 we can see that most of the people (90%) chose economy class while flying. Figure
3 shows that the majority of the people (56%) spent from $250 to $500 for a one-way ticket on
average. From these statistics, we can see that consumers prefer to spend less money and
purchase economy class tickets. The data shows that Biman needs to focus on an aircraft than
can handle more economy seats with relatively higher comfort and lower costs.
Boeing 787 is a reasonable option when it comes to seating capacity and comfort levels. The
aircraft can seat 11% more than Bimans existing A310 and 46% more than the 737. In terms of
the requirements interpreted from the survey (more seating at lower costs), buying the 787 is a
feasible option for Biman.

FEASIBILITY ANALYSIS

Factors that affect the purchase of a ticket. The survey also analyzes the factors that travelers
considered while purchasing a ticket. These factors determine what the Boeing 787 has to
achieve in order to be a feasible investment.
Figure 4 below shows the factors that affected the survey takers when buying a ticket.

Factors that matter when buying an airline ticket


Rewards and Benefits from Airline
Loyalty To Airline Due To Frequent Flying
Service
Flight Time
Aircraft Type and Model
Reputation of Airlline
Cost of Ticket
0%

10%

20%

30%

40%

50%

60%

Figure 4 Ticket purchasing factors

56% people chose ticket prices to be number one determining factor when choosing an airline.
Hence, the investment in the 787 will only be feasible if it can carry passengers at a lower cost.
The cost of a ticket depends mostly on the cost to operate that flight. This includes fuel cost,
maintenance cost along with crew and pilot wages. We consider the wages of crew and pilot to
remain constant when determining the feasibility. According to the Wall Street Journal, fuel costs
take up most of the operating cost (McCartney, 2012). Fuel-efficient aircrafts mean lower ticket
prices and higher demands. Therefore, if Biman wants to satisfy the demand for lower ticket
prices it has to purchase more efficient aircrafts.
Boeing 787 is the worlds first commercial aircraft to be made of plastic and carbon fiber
composites, which increases efficiency by 20% (Bowler, 2014). Therefore, buying the 787 will be
feasible because of its fuel efficiency and low operating costs.
Figure 5 shows how purchasing the 787 will be feasible for Biman in terms of consumer demand.
787 can seat more
passengers

787 can operate at


lower costs

Figure 5 Cost effectiveness of the 787

787 satisfies the major


demand of travellers:
Lower ticket prices

FEASIBILITY ANALYSIS

Cost of Purchase and Maintenance of Boeing 787


A very important factor when determining feasibility of purchasing an aircraft is its cost and
maintenance expenditure. This section looks at the price and range of the 787 compared to
Bimans existing aircrafts. Analyzing expenditures will help determine how much money Biman
has to spend in buying and maintaining the Boeing 787.
The following table I created uses information from Boeing (2014) and Aviation Safety Network
(2013) to summarize the price, cost, seating and range of the current aircrafts of Biman along
with the new Boeing 787.
Table 2 Price comparison of Boeing 787 with existing Biman aircrafts
Aircraft

787-800
777-300 ER
A310-300
737-800

Price
Fuel Cost
(millions) (per Nautical Mile)
$218
$330
$116
$93

$24.53
$36.23
$22.25
$13.24

Seating

219
419
220
162

Cost
Range
(per seat per
(nautical miles)
nautical mile)
$0.11
8,200
$0.09
7,930
$0.10
4,350
$0.08
3,115

Purchase costs of the 787. This report considers cost of purchasing a plane a big factor when
determining feasibility. The table shows that the price of Boeing 787 is $112 million USD cheaper
than the Boeing 777. The fuel cost of the 787 is also cheaper than the 777 at $24.53 per nautical
mile. Finally, the 787 has a higher travelling range (8,200 NM) than the 777 (7,930 NM).
Among all the other aircrafts, Boeing 787 has the highest range and second highest seat capacity.
The cost per seat per nautical mile is also very low. Due to low purchasing costs but high travelling
range and seat capacity, the Boeing 787 is a very feasible option for purchase.
Maintenance costs of the 787. Boeing 787 cuts down maintenance costs by 35 percent (Hale,
2006). Furthermore, the 787 requires 56 percent less labor hours than the 767. Figure 6 shows
the comparison of scheduled labor hours with the 767 and the 777.

Figure 6 Comparing Labor Hours of


Boeing 787 with similar aircrafts
Source: Justin Hale 787
Maintainability (2008).PDF.

Design

for

FEASIBILITY ANALYSIS

Figure 6 shows that the Boeing 787 requires 56 percent less labor hours than the 767 and 35
percent less than the 777. An airline spends 3 billion dollars on maintenance on average (IATA,
2011). Therefore, 56 percent decrease in labor amount to an estimated 1.68 billion dollars
savings per year for Biman. Due to low maintenance costs and labor hours, the 787 will save
Biman billions of dollars over its lifetime and be a feasible purchase.
Figure 7 below summarizes why the Boeing 787 is a feasible option in terms of cost and
maintenance.
787 is cheaper than
Biman's existing 777

It requires very low


maintence hours

Less money required to


invest and maintain

Figure 7 Long run benefits of the Boeing 787

Technical Issues with Boeing 787


Technical issues with the Boeing 787 play a major role in deciding whether to purchase it. Federal
Air Aviation (FAA) grounded the Boeing 787 through January 2013 until May 2013 regarding
major battery problems (Brown, 2013). In recent years, there have been incidents of the batteries
catching flame multiple times. Since an aircraft transports many people, Biman has to consider
the battery problems before deciding to purchase the 787.
This section includes information I obtained through an interview with Dr. Mohammed Omer
Farooq on November 2014 regarding the various aspects of battery issues in the aircraft. This
analysis will help determine if the 787 is risk free to purchase for Biman.
Dangers of unstable battery in an aircraft. The battery is a crucial component of the aircraft.
According to Dr. Farooq, the battery powers the airplane systems, lights and engines (O. Farooq,
personal interview, November 11). A failure of the battery could mean disability to restart
engines, shutdown of the lights and certain electrical components and possible power failure if
the generators fail (Sinett, 2013).

The batteries can be a small bomb.


You do have a bomb on board.
-Dr. Farooq on unstable batteries
Unstable batteries could potentially blow up a significant area if it caught fire or exploded. A
battery on fire could damage nearby wires and components that are essential to fly the plane (O.
Farooq, personal interview, November 11). Even an explosion in a flying aircraft can lead to
severe consequences, such as loss of all lives. Therefore, if Biman wants a safe and risk free
investment, it has to analyze the issues regarding the battery in the 787.
The next section looks at the major problems regarding the battery and Boeings fix to determine
if it is safe to purchase the 787.

FEASIBILITY ANALYSIS

Battery Failure and Accidents in the 787. The 787 has two batteries; the main battery and the
auxiliary power unit (Sinett, 2013). Both of them are high tech Lithium-ion batteries. Dr. Farooq
mentioned that the lithium ion battery is capable of producing more power than conventional
batteries. He also mentions that there are risks associated with high voltage batteries such as
sparking (electricity in the air) and overheating (O. Farooq, personal interview, November 11). In
January 2013, one of the batteries in a 787 operated by Japan Airlines caught fire while on the
ground (NTSB, 2013). This and some similar incidents caused the FAA to ground the 787 until May
2013 (FAA, 2013). This shows that the battery problems were potentially dangerous, and Biman
has to be aware of the risks associated with the 787 before purchasing.
Boeings Fix and Sustainability. The ideal fix for the problem is to improve the structure of the
battery so that it does not catch fire or explode as easily, as well as prevent the explosion or fire
from spreading if it does (O. Farooq, personal interview, November 11). Boeing has taken both
measures. The engineers at Boeing have improved battery structure as well as installed a
protective casing to prevent any explosion or fire (Sinnett, 2013). The solution will remove the
risks associated with the older batteries and allow Biman to operate safe flights.
Figure 8 below, obtained from a technical report produced by Boeing, shows how the new
batteries compare to the previous ones.

Figure 8 Comparison
of new and old
batteries.
Source: Mike Sinnett
Certification of 787
Battery Solution
(2013). PDF.

The new batteries are able to withstand high voltages for longer times without heating up more
than 50 degrees where the old batteries reach temperatures up to 300 degrees. Figure 8 shows
how the new batteries (bottom) survive 5 hours in extreme conditions with minimal temperature
change. In contrast, the old batteries (top) fail within 2 hours undergoing massive temperature
changes. These shows the new batteries are safer and more reliable. Thus, purchasing the 787
for Biman will not carry any major technical risks anymore.

FEASIBILITY ANALYSIS

A Comparison with Alternative Aircrafts


The feasibility of purchasing the Boeing 787 majorly depends on how it can outshine competition.
This section looks at the alternative aircrafts for Boeing 787 that serve similar purposes. There
are three major alternatives to the 787. They are the Airbus A380, Airbus A350 and the Airbus
A330.
Figure 9 below shows a comparison of Boeing 787 with other competitors. The figure I created
uses selective data obtained from Boeing (2014), Airbus (2014) and Aviation Safety Network
(2013).

Boeing 787 Compared to Alternative Aircrafts


3.00
2.50
2.00
1.50
1.00
0.50
0.00
(per Nautical
Mile)
Price (millions)

Fuel Cost

(per seat per


nautical mile)

(nautical miles)

Cost

Range

Seating

787-800

A380-800

A350-8

A330

Figure 9 Relative comparison of the 787 with similar aircrafts

From the figure we can see the cost per seat per nautical mile of the 787 is the same as the A380
and higher than the A350. However, if we look at the price Biman has to pay upfront, the 787
costs the lowest. Due to the low cost, the 787 is a better option for immediate purchase and
renewal of the airline.
The fuel cost of A380 is almost 2.5 times more than the 787. The A350 has a lower range per tank
of fuel, so it cannot cover all destinations the 787 can. Therefore, the 787 is a more feasible option
than the A380, A330 and A350 for immediate investment due to its low price, low fuel costs and
high cruising range.

Conclusion
Feasibility Results and Interpretation
This report analyzed some key factors when determining the feasibility of purchasing 787 by
Biman Bangladesh Airlines. Table 3 shows the summary of the analysis and how the Boeing 787
performs for each factor.

FEASIBILITY ANALYSIS

Table 3 Summary of Results

Factor
Necessity of New Aircrafts

Analysis
Bimans current fleet is inadequate.
Need modern aircrafts

Boeing 787

Consumer Survey and Market Aircraft needs to be bigger and more


Analysis
efficient to decrease ticket price

Cost and Maintenance

Aircraft needs to be low priced and


have low maintenance costs

Technical Issues

Aircraft needs to be safe

Comparison

Aircraft needs to be better than


alternatives in term of cost, efficiency
and reliability.

Table 3 shows that the 787 satisfies all the requirements for being a feasible choice for Biman.
The Boeing 787 is a high capacity, efficient and modern aircraft. The 787 is the perfect aircraft to
carry huge volumes of passengers in transatlantic flights with low costs and high reliability. Due
to the low cost and the low maintenance hours required, it will save Biman thousands of dollars
each flight.
Although the 787 had technical issues like the battery problems, Boeing was quick to provide a
sustainable fix. The FAA has approved the 787 safe after rigorous tests (Brown, 2013).
Furthermore, the 787 outperforms similar aircrafts in terms of cost, efficiency and range.
This report concludes that the Boeing 787 Dreamliner is a feasible option for Biman Airlines to
purchase. Boeing 787 will reduce flight costs and enable Biman to carry more passengers
efficiently to more routes. Biman will be able to operate more flights, decrease costs and increase
sales if they purchase the 787.

Recommendations
In this competitive market of airlines, Biman needs to lower costs to avoid consecutive loss.
Lowering costs will increase consumer demand and revenue. It can do so by renting out its old
aircrafts (Airbus A310 and Boeing 737) to smaller regional airlines and renewing their current
fleet.
Biman should purchase several Boeing 787s to modernize their fleet. The combination of existing
Boeing 777 and new Boeing 787 will allow Biman to operate longer and more popular routes like
from Dhaka to New York. The fuel efficient 787 will also allow Biman to decrease ticket prices.
The cheaper tickets will attract much more travelers and increase revenue. The reliability and
low maintenance guarantee of the 787 means Biman can continue to enjoy larger sales for many
years to come.

FEASIBILITY ANALYSIS

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References
Air France. (2004). New Boeing 777-300er Joins Air France Fleet. Retrieved from
http://corporate.airfrance.com
Airbus Corp. (2014). Airbus Aircraft 2014 Average List Prices. Retrieved from http://www.airbus.com
Aviation Safety Network. (2013). Airbus A310 specs. Retrieved from
http://aviationsafety.net/database/types/Airbus-A310/index
Biman Bangladesh Airlines. (2013). Fleet Information. Retrieved from http://www.biman-airlines.com
Boeing Corp. (n.d). Commercial Airplanes Jet Prices. Retrieved from http://www.boeing.com
Bowler, T. (2014, January 27). Carbon fiber planes: Lighter and stronger by design. BBC Business News.
Retrieved from http://www.bbc.com/news
Center for Aviation. (2014). Biman Bangladesh nears completion of dramatic fleet renewal, but its
outlook remains challenging. Retrieved from http://centreforaviation.com
Federal Air Aviation. (2013, January 2013). FAA Statement [Press Release]. Retrieved from Federal Air
Aviation Website: http://www.faa.gov
Federal Air Aviation. (2013, January 2013). FAA Approves Boeing 787 Battery System Design Changes
[Press Release]. Retrieved from Federal Air Aviation Website: http://www.faa.gov
Hale, J. (2006). Boeing 787 from the Ground Up. Aero Quarterly, Qtr 4.
http://www.boeing.com/commercial/aeromagazine/articles/qtr_4_06/AERO_Q406_article4.pdf
Hale, J. (2008). 787 Design for Maintainability. Building the Dream. Retrieved from
http://www.vaughn.edu
International Air Transport Association. (2011). Airline Maintenance Cost Executive Commentary.
Retrieved from http://www.iata.org
Ministry Of Finance, Government of the Peoples Republic of Bangladesh. (2013). Year End Report on
Fiscal Position. Retrieved from http://www.mof.gov.bd

FEASIBILITY ANALYSIS
McCarney, S. (2012). How Airlines Spend Your Airfare. The Wall Street Journal. Retrieved from
http://online.wsj.com
National Transport Safety Board (NTSB). (2013). Boeing 787 Battery Fire. Retrieved from
http://www.ntsb.gov
Sinnet, M. (2013). Certification of 787 Battery Solution. Retrieved from http://www.boeing.com
Sinnet, M. (2013). Electrical System and Batteries. Retrieved from http://www.boeing.com
Sultan, T. (2014, April 20). Bimans nosedive into loss. Prothom Alo, pg 2-3.

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