Golden Myanmar Airlines breaks jet fuel monopoly

Myanmar has opened the door to the first private company to operate an aviation fuel business, potentially ending a state-backed monopoly in the fuel distribution market.

Yangon-based Golden Myanmar Airlines Public Co received permission from the Myanmar Investment Commission (MIC) on April 5 to take part in the “importation, storage, distribution, transportation and into plane fueling of jet fuel”, according to the list of permitted enterprises from the Directorate of Investment and Company Administration (DICA).

FMR Research & Advisory research manager Chris Markey commented that the move should “alleviate some of the margin pressure faced by Myanmar’s domestic airlines” and bring competition to the jet fuel distribution market.

The new venture would be located at airports in Mandalay, Tachileik, Kawthaung, Nyaung Oo, Heho, Sittwe and Myitkyina, DICA’s announcement stated. It would also have a jetty terminal at Thilawa in southern Yangon. However, Yangon International Airport (YIA) is not included.

A spokesperson of YIA’s operator Yangon Aerodrome Co said they have not received an application from Golden Myanmar Airlines to provide jet fuel services, and that they will assess such applications if there are any.

Since YIA is the base for most domestic airlines, observers say there is yet to be a business case for distributing fuel in all but Yangon’s airports.

Myanmar Competition Commission member U Thuta Aung argued last month that the “lack of real competition in fuel provision at Yangon International Airport” is “the elephant in the room” for the aviation industry.

Until 2015, state-owned Myanma Petroleum Products Enterprise dominated the fuel market. At present, National Energy Puma Aviation Services (NEPAS), a joint venture formed by state-owned Myanma Petroleum Products Enterprise and Singapore’s Puma Energy in 2015, is the only aviation fuel supplier in the country. NEPAS operates at 11 airports, including YIA.

Golden Myanmar Airlines was founded in 2012 by a group of investors, including U Khin Maung Aye, chair of CB Bank and U Thein Tun, chair of Myanma Golden Star (U Thein Tun also owns Myanmar Consolidated Media, which publishes The Myanmar Times.) The Yangon-based carrier started operation in 2013 and is backed by CB Bank and Tun Commercial Bank (formerly Tun Foundation Bank). There are flights to 11 destinations and its current fleet consists of two ATR 72-600 aircrafts.

Local players are struggling because of overcompetition in such a small market as well as the fuel import cartel, some industry observers say. Five Myanmar airlines have folded during the past two years. Asian Wings Airways was suspended on January 1 after Air Mandalay, Air Bagan, Apex airline and FMI Air.

“Myanmar has the most expensive aviation fuel in the ASEAN region, according to U Hlaing Bwar, a long-time aircraft engineer. Since fuel is one of the key variable costs in providing airline services, for all the strength our domestic carriers may develop, they will not flourish if undermined by disproportionate fuel costs,” U Thuta Aung said in a Myanmar Times letter.

Mr Markey, who has produced market reports on Myanmar aviation industry, said a competitive fuel market would lower costs for the struggling companies.

“Domestic airlines have continually claimed jet fuel prices are high and exacerbate financial struggles faced by the airlines, which are already hampered by low passenger load factors and a number of other headwinds.”

There are currently five private and one state-owned carriers in Myanmar.

Source: Myannmar Times

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