Former CEO questions future as Air Mandalay service is grounded

The recently departed chief executive officer of Air Mandalay says there is “zero chance” the struggling domestic airline can return to the skies at the end of January as its management has claimed, and even cast doubt on the future of the company.

However, new CEO U Sai Kham Park Hpa insisted last week that the company was not in danger of ceasing operations permanently and would have three aircraft operating by February.

“Air Mandalay’s suspension of operations is not related to our financial position. All of our crews are working except for pilots and air stewards,” he said.

“We will resume operations with one ATR 72-212 and two [Embraer] ERJ 145 aircraft, which will arrive in Myanmar near the end of January 2015. So we will be officially flying again no later than February.”

Air Mandalay announced earlier this month that it was halting flights from December 10 through to at least the end of January, after a planned aircraft leasing deal for two ERJ 145s fell through “due to unforeseen circumstances”. According to flight schedules released by the airline last month, the aircraft were due to come into service on November 17.

U Sai Kham Park Hpa said the planes had failed to arrive because the taxes levied by the government were prohibitively high. Air Mandalay is negotiating to “adjust” the import taxes on the aircraft, he said.

“We won’t be able to compete if the taxes are too high because we will have to set our ticket prices higher than other airlines,” he said.

However, former CEO Gary Villiard, who resigned on November 14 due to conflict with the airline’s shareholders, said he did not believe it would be possible for the airline to resume services at the end of January.

He said it was the third aircraft leasing deal to fall through in the past year and questioned whether Air Mandalay had the financing and corporate affairs skills needed to turn the airline around.

Negotiations with a potential new investor had recently broken down, he said, while Air Mandalay is also engaged in a dispute with the Ministry of Transport over the sale of the government’s one-third stake in the carrier.

“I drew on every connection I had to save the airline,” said Mr Villiard. “At every board meeting shareholders promised to make financial commitments but those commitments were never kept.

“It’s a crying shame because the Air Mandalay brand is so powerful. I couldn’t believe when I got here how strong the brand is. But to underfund it or refuse to take on equity partners … is going to leave 386 people on the street with no place to go.”

The company also has a “considerable list” of vendors who are yet to be paid, including some who have been waiting more than 18 months, Mr Villiard said.

He said refusal of the shareholders to pay these vendors was a major factor in his resignation.

“I’ve spend 40 years maintaining my integrity and I was unwilling to let Air Mandalay sacrifice it.”

Mr Villiard confirmed the details of complaints from several vendors with which The Myanmar Times has been in contact with. In one case, an IT management company had done “considerable work” for Air Mandalay fixing its online booking system, he said – including visiting the company four times at its own expense – but was never paid because Air Mandalay’s shareholders objected to paying a US$2000 administration fee.

The suspension has caused few disruptions for the travel industry, agents said, as Air Mandalay has been operating on a reduced schedule for months due to most of its ageing fleet being out of service.

In 2010, the airline was also forced to stop flying for several months because of maintenance problems with its aircraft, which include two ATR 72s and an ATR 42.

Two of these – one ATR 72 and the ATR 42 – can no longer be operated in Myanmar because the Department of Civil Aviation Law prohibits the use of aircraft that are more than 25 years old.

Nice Fare ticketing agency supervisor Ko Chu Maung Maung said his company had been refunding money to those who had purchased tickets or placing them on other carriers.

“Passengers accepted these choices so we have not had many problems,” he said.

Myanmar Voyages managing director U Thet Lwin Toh said his company rarely used Air Mandalay but he expected the airline to make a return next year.

“They signed a deal this year to replace their planes with Boeing aircraft in 2015 so I think they suspended because they are training their crews,” he said.

It comes just a month after Air Mandalay inked a memorandum of collaboration with Boeing that would see the two companies cooperate on procuring Boeing 737 airplanes through leasing channels to support Air Mandalay’s expansion.

Boeing refused to discuss the deal last week, with a spokesperson saying its “official response is that we do not comment about our customer activities”.

But U Sai Kham Park Hpa said the deal was related to a planned international expansion and was not linked to securing aircraft for domestic routes.

Earlier this year Air Mandalay said it had placed an order with Mitsubishi Aircraft Corporation for six MRJ90 aircraft, becoming the first Asian carrier outside to Japan to order the jet, which is being jointly developed with Toyota.

The deal, which also gave Air Mandalay a purchase option for an additional four MRJ90, was signed on the sidelines of the Farnborough Airshow in Britain in July.

The planes, which are expected to have a capacity of 86 to 96 seats, are scheduled for delivery in the second quarter of 2018.

Air Mandalay was launched in 1994 as Myanmar’s first privately owned domestic carrier. According to its website, the current shareholders are Air Mandalay Holdings Pte Ltd of Singapore, Premier Airlines Pte Ltd of Malaysia and state-run Myanma Airways, which recently rebranded as Myanmar National Airlines.


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