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Domestic airlines need mergers, partnerships to sustain

There is a need for domestic airlines to merge or form partnerships with foreign airlines in order to sustain themselves in the longer-term.

Stakeholders believe that the way forward for domestic airlines, which continue to be loss-making due to lower number of passengers and higher costs, would be to either merge their operations or form partnerships with foreign airlines.

There has been a proliferation of domestic airlines ever since the country granted more licenses in 2011, with competition becoming more intense. At the same time, forming partnerships with foreign airlines have not been easy.

Ticket prices remain high despite the larger number of domestic airlines and the more intense competition, putting off air travelers. Tour operators noted that domestic air tickets were far higher when compared to other countries, making it an obstacle for tourism.

Minister for Hotels and Tourism U Ohn Maung told the media recently that domestic airlines must be able to operate in a level playing field with foreign airlines.

He had previously suggested that domestic airlines should look for partnerships among themselves if they wanted to sustain their business and cut costs.

Meanwhile, Myanmar Tourism Federation chair U Thet Lwin Toe observed that joint ventures could be the way to survive with cost-sharing on fuel and being able to fill the seats.

According to a May 2018 report by the Centre for Asia Pacific Aviation, many domestic airlines in Myanmar were running on volume of less than three million passengers.

The report noted that the intense competition have affected the finances of a number of airlines, leading to a several of them deciding to suspend services or leave the market.

Asian Wings suspended operations on January 1 while over the past year, FMI Air, Air Mandalay, Air Bagan and Apex Airlines have all grounded operations.

An official said fewer passengers make it harder to sustain a route, even for foreign airlines with partnerships with domestic airlines. He noted that domestic airlines cannot rely on the local market, especially during an economic downturn.

Despite foreign airlines being able to enter joint ventures with domestic airlines to operate local routes, the lack of business has not made it commercially viable.

Directorate of Hotel and Tourism deputy director general Daw Khin Than Win said although Myanmar and Cambodia signed a MoU for a direct flight between Bagan and Angkor, the route has not started operating as there were few passengers and unprofitable.

As for foreign airlines wanting to partner with domestic airlines, there have already been several unsuccessful attempts, notably by All Nippon Airways and Air Asia. The law allows for the foreign partner to hold a 49pc stake.

Ministry of Transport and Communications assistant secretary U Aung Ye Tun said there were no restrictions on such partnerships.

“The current issue is only state-owned lines and national-owned lines are present in domestic market. If there is market demand and any proposal, we will allow it,” he said.

SOURCE: MYANMAR TIMES

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