Mon 31 Mar 2014
Filed under: Business / Trade,News
With Burma’s eighth domestic airline taking to the skies last month and another three set to follow suit, the country’s civil aviation sector is overcrowded, and on the whole, unprofitable. However some suggest that increased competition will precipitate a shake-up of the sector, which still has much to be desired in terms of its safety record and infrastructure.
“Frankly, there are too many airlines. That’s what everybody is saying,” said Kyaw Myo, the CEO of the newest arrival in Burmese skies, Mann Yatanarpon.
It seems that 2014 will be a decisive year in determining the winners and losers of the civil aviation sector, and that this will necessarily shift the focus onto boosting low expectations among Burma’s regular passengers.
“I’ve flown pretty much all the carriers and they are basically all the same. The on-board food is a bit funny at times, but all in all, so long as it stays in the sky, I’m a happy man,” said Australian engineer Peter Lloyd.
In October last year, Win Swe Tun, deputy director of the Department of Civil Aviation (DCA), told Reuters that Burma’s accident rate is “nine times higher” than the global average.
“Any airline, whether international or domestic, tends to become complacent after establishing a reputation,” Kyaw Myo told DVB, before adding: “[Mann Yatanarpon] will offer better service … both on the ground and in-flight.”
However as it stands now, the vast majority of domestic airlines remain unprofitable. Air KBZ is one of the few exceptions, and it wasn’t until recently that things began to turn around for the airline. Air KBZ is owned by Kanbawza Bank, which has the largest capital base in the country.
“In our first and second years we were losing money,” Myat Thu, Air KBZ’s general manager told DVB. He said that when Air KBZ upped its fleet to six aircraft – more than any other – that operational costs began to drop and schedules became more convenient for customers, as it was able to offer more direct flights than its rivals.
Air KBZ also benefitted from introducing a computerised reservation system (CRS) to issue e-tickets.
“Thanks to CRS I can block out the seats booked on various routes – there’s no human error. For two years we were doing it manually, using paper and pen. It was lots of work and there were lots of mistakes,” Myat Thu said.
Air KBZ currently has a 30 percent market share and sold nearly 240,000 seats during the previous financial year.
An ongoing inconvenience for passengers is the inability to purchase flights online from domestic airlines – however Myat Thu said that KBZ is “working on it”.
And surprisingly, despite wide consumer choice – including two low cost carriers, Air Asia and Golden Myanmar Airlines – discounted fares are rare.
“We’re starting with a promotional period of three months but instead of offering promotional fares, we’re giving passengers souvenirs, such as t-shirts or coffee mugs,” said Kyaw Myo of Mann Yatanarpon.
Standard airlines offer comparable fares and while KBZ’s are on the whole slightly more expensive, it was only recently that the airline introduced an alternative to the flat fare.
Those who book six months in advance have “a chance of getting a cheaper flight – maybe 5 percent,” said Myat Thu.
“If we get involved in a price war, we won’t make money,” Myat Thu said, before explaining that discounts won’t be available during the high season because the demand for tickets simply wouldn’t justify it.
“There are lots of tourists coming in,” he added.
According to figures from the Ministry of Tourism, more than two million tourists visited Myanmar in 2013 – a two-fold increase on 2012.
“Although Myanmar has a population of around 60 million, even by a conservative estimate I’d say that that no more than 20 million would actually be able to afford a flight,” said Myat Thu.
However despite the fact that each of the domestic airlines operates a route between the commercial capital of Rangoon and the administrative capital of Naypyidaw, FMI’s charter flight, which uses Air KBZ’s fleet, costs a whopping US$160 for the one-hour journey.
Yet according to Myat Thu, the plane is “full every time”.
Kyaw Myo, who is also an advisor to the Department of Civil Aviation, said that all new airlines must be based at either Mandalay or Naypyidaw due to existing congestion at Yangon International Airport.
Plans are underway to build a state of the art international airport in Pegu [Bago] Region, which is 80 km from Rangoon, and it is slated for completion in 2018.
In the 1950s, prior to the military regime’s takeover in 1962, Burma was considered an Asian aviation hub: however restoring that former position will be no easy task, if at all possible, having long ago been overtaken by Bangkok and Singapore.
“It will be very hard to regain our position. It certainly won’t happen in five years’ time. If the [political] situation in Bangkok were to continue … then maybe. But then there’s Singapore’s Changi,” said Myat Thu.
“It would be very difficult to compete with Bangkok. Myanmar could become a secondary hub, perhaps in 15 years from now,” said Kyaw Myo.
Although Myat Thu described Burma’s civil aviation sector as “really booming”, Kyaw Myo stressed that the government will be instrumental in determining its measure of success.
“The future of the industry depends a lot on the air transport policy of the Department of Civil Aviation (DCA) and the Ministry of Transport. It could make [the sector] more sustainable.”
On the opening of the three-day Myanmar Civil Aviation Development Conference on Monday, DCA’s director-general Tin Naing Tun gave a press conference about Burma’s aviation “master plan” for 2014. Details were scarce, but included helping local airlines to become more competitive regionally, liberalising the sector’s regulations and creating direct flights to countries outside Southeast Asia, such as Europe and America. How this will be achieved, however, remains to be seen.
“Whether you say it’s our expectation or our dream, we will put infrastructure and strategic plans in place to get our position as an aviation hub back in 2030,” said Tin Naing Tun.