Visitor growth to Myanmar slows to 2% this year

Growth in passenger numbers in the aviation sector stalls this year, as the humanitarian crisis in northern Rakhine has “discouraged potential visitors”, according to a Singapore-based aviation industry consultancy.

The report “Myanmar international aviation: overcapacity as tourism growth slows” was produced by Centre for Aviation (CAPA) last month. Visitor numbers from Western Europe fell by more than a quarter in the first half of this year, including a 28pc decline from France, 22pc drop from the UK and 32pc drop from Germany. In the same period, numbers from North America and Oceania decreased by 15pc and 17pc respectively.

The publication highlighted that the slowing down of visitor growth results in “overcapacity on virtually every international route and low hotel occupancy rates”. The average international load factor in Myanmar was only 60pc in 2017. The two largest routes, Yangon to Bangkok and Singapore, had load factors of 65pc while Myanmar’s only two long-haul routes, Yangon to Doha and Dubai, had load factors well below 50pc.

International passenger traffic has continued to increase, but capacity has grown faster as airlines were expecting continued double digit visitor growth. At the moment, there are almost 30 foreign airlines, making it an intensely competitive market.

Visitor numbers to the country declined by 2pc in 2016, grew to 7pc in 2017 to 1.36 million but inched up by only 2pc in the first half of this year to 682,000.

The Myanmar Times spoke to Brendan Sobie, chief analyst at CAPA, about his report.

Consolidation “sensible”

The author cautioned the government against allowing more new entrants.

“For several years Myanmar had an open door policy which led to several airlines launching and the total playing field reaching 11 airlines, which was clearly unsustainable,” he said.

At its peak, Myanmar had 11 airlines, including state-owned Myanmar National Airlines and 10 privately-owned airlines – Myanmar Airways International (MAI) and the nine privately owned domestic airlines. But players struggle to stay afloat.

On September 4, Air Mandalay became the fourth domestic airline to be suspended after Air Bagan, Apex airline and FMI Air, while six domestic private businesses remain.

Mr Sobie called Nay Pyi Taw’s comments advocating consolidation “sensible”, adding that the current number of airlines is still a very high figure given the small size of the market.

“However, I do think the government needs to be open about enabling foreign investment in the existing airlines which would allow these airlines to better compete. I would advocate an open policy encouraging competition between the remaining airlines as well as allowing foreign investors,” the report’s author explained. Ultimately, Myanmar would end up with a smaller number of stronger airlines which would be a more sustainable scenario.

Meanwhile, securing foreign investment will not be easy. “I don’t think the business case is there for AirAsia to invest in a Myanmar airline, regardless of what the government policy is,” he went on.

Another CAPA report released earlier this year argued that Myanmar’s market is not ready to support a low-cost carrier (LCC) model. Only three airports in the country can accommodate A320s while the domestic market is predominantly served with turboprops, meaning a potential JV for AirAsia – which was said to be adamant about sticking with A320 family aircraft – would not be able to benefit from the synergies enjoyed by other JVs.

Subsiding MNA

For the international market, Myanmar has been open for several years to new services from foreign airlines. The analyst said this is “a sound policy” and makes the market competitive, benefiting the tourism sector. However, this does make it hard for local airlines to compete in the international market.

But Mr Sobie is critical of the government policy backing and “essentially subsidising international expansion at MNA”.

“This distorted the playing field, making it harder for the private airlines and was unnecessary given there is sufficient service from foreign airlines on all of MNA’s international routes,” he continued. Myanmar should allow any of its local carriers to fly internationally if they wish but the fact is domestic carriers are better off focusing on the local market given the stiff competition from foreign airlines, which enjoy the economies of scale and stronger brand.

Source: Myanmar Times

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