Myanmar Boom Wanes as Overcapacity Bites

When Myanmar opened to the world back in 2012, the country experienced a rapid expansion in air travel. Thirteen foreign airlines carried roughly 2 million international passengers. By 2014, the international market had jumped to 3.2 million passengers traveling with nine foreign airline groups, bringing the total number of international carriers to 22.

But now the initial boom seems to be tapering off. In the first half of 2015, the country’s three international airports–Yangon, Mandalay and Naypyitaw–handled about 1.7 million international passengers, representing an increase of just 10 percent from the same period in 2014. In October 2015, the latest month with preliminary data, the growth was only 4 percent and Myanmar’s three airports handled 300,365 international passengers.

While very few carriers increased capacity in 2015, two new foreign airlines entered the fray, bringing the total number of international carriers to 24. In October, Vietjet began operating non-stop services between Ho Chi Minh City and Yangon with a frequency of five return flights per week; while Novoair–Bangladesh’s second carrier to enter Myanmar–launched an inaugural flight from Dhaka to Yangon in early December.

Thai Airways formally transferred its Bangkok Suvarnabhumi-to-Mandalay route to its subsidiary Thai Smile. The low-budget carrier launched its inaugural flight from Bangkok to Mandalay in October and launched a second inaugural flight, to Yangon, in December. This month [February 2016], low-cost carrier Hong Kong Express has plans to launch flights to both Yangon and Mandalay, too.

With so many foreign airlines in the mix, Burmese carriers have seen their market share drop. The latest available data reveals that Myanmar-based carriers accounted for only 13 percent of the international market in 2014, compared to 15 percent in 2013 and 19 percent in 2012.

In May 2015, Golden Myanmar actually suspended its A320 services on two highly competitive routes, Yangon-Bangkok and Yangon-Singapore. Air Bagan only operates one international route, Yangon to Chiang Mai with two weekly ATR 72 flights, while Myanmar Airways International (MIA) ambitiously added two new routes in 2015, Taipei and Kunming, for a total of six international routes.

State Gain

Where Golden Myanmar failed, state-carrier Myanmar National Airlines (MNA) hopes to gain. In June 2015, MNA took delivery of the first of ten 737-800s as part of an extensive rebranding effort. The $960 million deal was the largest commercial sale by a U.S. company to Myanmar in decades and the largest single aircraft order in the country’s history.

In August, MNA made good on its promise and launched services from Yangon to Singapore, effectively ending its 22-year hiatus from international skies. On December 4, MNA added a second route, Yangon-Hong Kong, and it plans to include Chiang Mai by the end of 2015. Several new destinations are planned for 2016, including Taipei in January along with multiple airports in mainland China.

Despite MNA’s optimism, Burmese carriers are relatively unknown outside the domestic market, making international expansion tricky. Moreover, routes such as Yangon-Singapore are already suffering from overcapacity with the Singapore Airline Group accounting for roughly a 62 percent share of total seat capacity.

Myanmar’s domestic market is no better. While MNA is the largest domestic carrier, serving 27 destinations, it faces stiff competition from no fewer than nine other carriers, and has thus seen very little growth on its home turf.

In 2013, total annual domestic passenger traffic numbered 1.9 million, representing a 5.5 percent increase over 2012–whereas in 2014 the market grew by 16 percent to 2.2 million passengers.

Final growth figures for 2015 will likely be modest, too, although in the first half of the year Myanmar’s domestic market handled 1.2 passengers, up 10 percent when compared to the same period in 2014.

“The biggest problem facing Myanmar is that the market is way too fragmented. Ten domestic carriers in a market that size is crazy. If you add them all together they wouldn’t have enough aircraft to make up a small carrier,” said Ian Douglas, former advisor to Air Bagan. “There are airlines with two or three aircraft, and nobody has a fleet big enough to register on the radar anywhere else.”

Recognizing that most domestic routes suffer from overcapacity, start-up FMI Air is positioning itself as a premium brand carrier. The airline currently operates two Bombardier CRJ200 jets to three destinations, Yangon, Naypyitaw and Sittwe. Mark Turner, FMI’s director of customer experience, told AIN that the airline is evaluating adding an additional three destinations in 2016–Thandwe, Heho and Bagan, along with a third aircraft option. By 2017, FMI expects to have a fleet of five aircraft.

FMI has about a 36 percent share of capacity on the Yangon-Nay Pyi Taw route, but faces competition from MNA, Asian Wings, Air KBZ and Apex Airlines, which all operate on the same route.

“In the long term the outlook is interesting, but only if there is consolidation. In the short term it’s very tough,” said Douglas. “If you look at Indonesia, they don’t allow carriers that have fewer than 10 aircraft. Myanmar needs that kind of discipline in the market.”

 

Source: AIN Online

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