The fourth domestic airline has wind up as aviation businesses struggle to turn a profit in an industry overcrowded with competitors, amid high fuel price, lacklustre demand and lack of government support.

Air Mandalay, which had been in service for 24 years, has stopped all flight schedules and charter services in order to restructure the whole business, starting from September 4, the airline’s spokesperson Daw May Thandar Win told The Myanmar Times yesterday. Air Mandalay is the fourth domestic airline to be suspended after Air Bagan, Apex airline and FMI Air, while six domestic businesses remain.

Daw May Thandar Win did not name a date for resuming the operation. “We intended to reform our airlines, similar to FMI Air, so it is difficult to give an exact date [to resume],” she said, adding that resumption is subject to market conditions.

The company stated in a press release that it “has been extremely difficult” to operate in the country and the situation has worsened since 2011, when “a number of new airline licenses were approved to operate in the country resulting in too many domestic carriers, oversupply of seats and intense competition, with airlines suffering heavy losses.”

U Thein Sein’s administration since 2011 allowed a maximum of 10 airline operators. However,  the level of competition in a small market has made business extremely difficult. “The main three challenges we faced in the market are overcapacity due to so many domestic airlines in the country, expensive operational costs and intense competition resulting in heavy losses for the airlines,” Daw May Thandar Win explained.

Other challenges Air Mandalay faced in 2014-15 were being unable to operate for more than one year due to the delay in issuance of import permit for its two (2) Embraer ERJ145 jet aircraft and a 9-month delay in 2017-18, which was due to waiting for approval to import and register aircraft for public air transport services. Air Mandalay Limited is a foreign private joint venture airline with the government formed under the Special Company Act 1950. The company was incorporated on October 6, 1994. Before it shut down, Air Mandalay’s routes covered Yangon, Myitkyina in Kachin, Sittwe in Rakhine and Tachileik in Shan.

Myanmar authorities continue to block any attempts to run domestic flights in order to protect the local players, having rejected two joint venture proposals. This includes Japan’s largest airline ANA Holdings’ Asian Blue JV with Golden Sky World, owned by local conglomerate Shwe Than Lwin, and AirAsia’s JV with FMI Air. FMI Air shut down on July 20, after more than five years in operation.

However, domestic players are still struggling because of the fuel import cartel and the staggering number of airlines given the small market size.

Fewer choices

While consolidation is inevitable in the country’s aviation business due to the disproportionate number of players, closure of airlines should not mean impeding connectivity, Pietro Borsano, lecturer at Mandalay International University, warned.

“Consolidation should not mean giving fewer choices to consumers in terms of flight schedules, destinations and pricing. This is particularly important for Myanmar, because – unlike countries with a well-developed rail system – travelling by train to Mandalay or other regions is not an option for most tourists and investors,” he explained.

Connectivity is vital to trade, tourism and inward investments for Myanmar, the academic added. The Myanmar government should incentivise airlines to expand their routes to otherwise commercially unsustainable destinations in order to boost tourism and businesses, but the ultimate goal should be for private players to flourish on their own.

Mr Borsano suggested that, for example, Bangkok Airways now has more direct flights to Mandalay than before, and this has drawn a considerable number of Thai and regional investors to the city.

On top of the high fuel price and lack of profitability for the sector, overcharging poses another problem. Flights within the country, which charge foreigners more, end up more costly than regional flights. This has severely hampered the market demand.

Domestic airlines are not the only ones with lacklustre performance.

Despite rapid growth in passenger traffic over the last six years, Myanmar has fallen short of expectations, according to a study from aviation industry consultancy CAPA-Centre for Aviation seen by The Myanmar Times, released in late August. This has affected the expanding international routes in the country.

“Myanmar at one point projected that it would attract 7.5 million visitors by 2020. Given the recent growth rates, Myanmar will not even reach 2 million visitors in 2020,” the report observed.

All but one of the foreign airlines serving Myanmar operate from Yangon. China’s Donghai Airlines is the sole exception, having started services from Shenzhen to Mandalay in July. Mandalay is being served by seven international airlines, while Nay Pyi Taw is served only by Bangkok Airways and China Eastern.

For more detail; https://www.mmtimes.com/news/extremely-difficult-air-mandalay-shuts-down-amid-overcapacity.html