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Myanmar aviation sector expected to become profitable, but more pain ahead first

Myanmar’s aviation industry is betting on a more profitable future with the number of airlines now reduced to half compared to 2017 and demand for domestic air travel expected to catch up with supply. However, they will have to swallow more losses in the short term before things get better.

There are currently five airlines in Myanmar, down from ten three years ago. But even though there are fewer players now in the market, the volume of passengers flying domestic remains below three million, according to government data.

At those levels, demand is not sufficient to cover the industry’s losses, U Kyaw Nyein, CEO of Golden Myanmar Airlines (GMA), told The Myanmar Times in a recent interview.

But profitability is possible in the years ahead, making it a good time for the remaining airlines to accelerate their plans for expansion to capitalise on future demand, according to a 2019 report by the Centre for Asia Pacific Aviation.

Last year, GMA took delivery of a new aircraft, taking its current fleet of ATR-72s to three. “With the additional seats, we can now fly daily compared to alternate days before. We will also extend our destinations to include more flights to Dawei and Kaw Thaung, which could be potential tourist attractions in the future,” U Kyaw Nyein.

Air KBZ has also been expanding. Last year, it upgraded its fleet of planes and announced new destinations to Dawei , Kaw Thaung , Myeik, Sittwe, Kyaingtong, Hkamti and Loikaw. its sister airline, Myanmar Airways International, added a new Airbus A319 to its fleet, expanding its capacity by 144 passengers.

Tanes Kumar, commercial director for Air KBZ, said even though the new routes are not yet profitable, the main aim of adding new destinations is to expand the airline’s network and connectivity. “This gives passengers more options and allows employees to learn new skills for more expansion in the future,” he said.

Tourism growth

But how much longer must the industry continue to sustain losses? Insiders said that while margins have started to improve, tourism must pick up further to sustain the industry. At current levels, the local airlines are still unable to cover the costs of a full flight and operate on a two-tier ticket pricing system where foreigners pay more than locals. Foreigners must also pay in US dollars.

“We still see flights that are half-full and it is rare for tickets to be sold out. We need to develop tourism more in order to see more passengers on our routes. We’re still unprofitable because there are still many empty seats,” U Kyaw Nyein said.

In Myanmar, people are more accustomed to traveling by bus for a fraction of the cost. As the domestic passenger market is limited, foreign tourists are the industry’s main source of revenue.

U Thet Lwin Toe, a local tour operator, said not every foreigner is willing to pay more. “The average fare to Bagan from Yangon is US$80. Not every foreign tourist will pay that amount. Some go by car instead. It’s hard for the airlines to make money,” he said.

More consolidation ahead

Mr Kumar reckons there’ll have to be more consolidation and cooperation in the Myanmar aviation sector before the industry picks up further.

“Consolidation will put the local airlines in a better position. Instead of competing with each other, we can then compete with the regional airlines by extending our overseas routes. Currently, there are too many airlines from neighbouring countries coming into Myanmar and taking away our passengers. We cannot stop them as we are too fragmented now,’’ he said.

The authorities should permit more joint ventures between local and foreign airlines to drive growth. In recent years, joint venture applications between local airlines and Japan’s All Nippon Airways and Malaysia’s Air Asia were rejected by the Department of Civil Aviation even though the Ministry of Transportation and Communication allows joint ventures with foreign companies under the Foreign Investment law.

U Than Zin Maung, Minister of Transportation and Communication, has also urged local airlines to merge or consolidate for better chances of survival. A formal policy and strategy to develop the aviation sector and make it more profitable is now in the works.

The proliferation of airlines in Myanmar first began in 2011, when licences were first made available to the industry. Currently, airlines that stop operations for 90 days will have their Air Operator’s Certificate seized by the government. New airlines must also have a minimum of three aircraft to qualify for operation.

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Source : Myanmar Times

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