Myanmar’s local airlines face difficulties to expand due to expensive petrol and high tax rate (airline companies and stakeholders in the tourism industry)

12 กรกฎาคม 2560

Expensive petrol and high tax rate limit the expansion of local airlines and development of the aviation industry, according to the Department of Civil Aviation (DCA), airline companies and stakeholders in the tourism industry.

In Myanmar, there are 10 domestic airlines and 58 planes in total which are serving local and international passengers.

Compared with the rest of ASEAN, flights are rather costly, according to local airlines and the Union of Myanmar Travel Association (UMTA).

“During rainy season, only three out of 10 airlines can run. The main problem for local airlines is that they can’t reduce their air ticket fares. And the operation cost is also expensive. Airlines are used to say that they are losing their profit margins.

In fact, it also depend on petrol price,” said U Thet Lwin Toe, UMTA chair.

“As far as I know, provision or supply of petrol for airlines is controlled by one or two companies.

“I want an international petrol distribution company to come to Myanmar, so the price will be fairer,” he added.

Aircrafts from other countries which have landed in Yangon International Airport carried their own petrol because prices in Myanmar are expensive. Hence, at present, petrol demand is low but supply is high.

In Thailand, there were 30 to 40 million travellers visiting per year but Thailand only has six airlines and hundreds of aircrafts, according to U Thet Lwin Toe.

“In Myanmar, there were 10 airlines but not enough aircrafts. It is crazy.

“The DCA should set a principle and businessmen should cooperate in the interest of our citizens. But they are stubborn and it deters the process,” said U Thet Lwin Toe.

The DCA has rules and regulations in place for airlines. The department also has the authority to quash or suspend the Air Operation Certificate.

“In my opinion, airlines should take a step back to think thoroughly why they did not manage to make a profit after three years of operations, and they should consider cooperating with another airline. 

“If not, the DCA should take away their Air Operation Certificate. Some companies owned by famous tycoons don’t care about their loss, although they didn’t turn a profit because the businessmen only cared about their dignity and continuous operation.

“Some airlines grounded their aircrafts and fired some staff. It shows that they are weak in collaboration and partnership,” he added.

But the DCA has always encouraged the airlines to cooperate and form partnerships, said U Ye Hut Aung, deputy director general of the DCA.

“We had planned to add more aircrafts for some airlines. The Ministry of Transport and Communication, Department of Civil Aviation [DCA] encourages the airlines to cooperate with each other. For now, no new airline has applied to us,” said U Ye Htut Aung.

As there are a large number of airlines, competition is intense among local airlines to carve out market shares.  

“In our Mann Yadanarpon Airlines, we have ATR-72-600 aircrafts which were made in France and cover 13 townships around the country.

“We have intense market competition among airlines. We want the government to reduce the petrol price and upgrade the airport infrastructure and facilities, making them in line with international standards,” said Daw Witt Ye Maw, marketing manager of Mann Yadanarpon Airlines.

In Myanmar, only three airports can land airbuses and the rest of the airports still need to be upgraded by the government in order to do so.

“The new government has only been in office for one year, so they need time to work on airport development.

“An airbus can carry 100 to 200 passengers but an ATR can carry about 70 passengers. So we have difficulties during the high season of visitors. Air KBZ is running eight brand new ATR aircrafts, said assistant general manager Ma Aye Mra Tha from Air KBZ.

Now, it is the low season for local airlines. The airlines often hand out promotions and discounts in order to attract more domestic and international visitors and cover maintenance costs.

Aircraft maintenance, such as purchasing spare parts, costs a lot and is done with transactions in US dollars – the more the maintenance, the higher the cost.

“I can’t accept the view that airlines have to take all the blame for the lack of travellers to and within Myanmar.

“Some critics said that travellers are deterred from travelling or flying because of the high flight fares. That is not entirely accuate.

 “It is no easy task to lower the ticket price but the rate depends on petrol,” Ma Aye Mra Tha said.

“If Myanmar develops and more people come to Myanmar, we are able to maintain flight services the whole year round.

For now, the number of both domestic and international visitors is not enough to sustain the services during the low season,” she added.

Local airlines have many challenges during the rainy season every year because tourists tend to avoid the rainy season. Thus, airlines are used to operate via a code-sharing agreement with other airlines.

A code-sharing areement is an aviation commercial arrangement where two or more airlines to list certain flights in a reservation system under each other’s names.

“As there are very few travellers during the season, we are used to operate with a code-sharing agreement. But this year, the number of visitors has increased,” Daw Witt Ye Maw explained.

Using a code sharing system is more convenient for passengers and airlines.

“Currently, we are giving promotions for air tickets estimated up to 50 percent off. Trips to Mandalay, Nyung-Oo and Heho trip are business as usual.

“But for southern Myanmar destinations such as Dawei and Myeik, we reduce the number of flights.

“For example, we used to fly every day for those trips over high season but we reduce the days and flight times in this season,” said Ma Aye Mra Tha.

“Flying via code-sharing agreement has not been difficult. For international flights, that is very common. It is a win-win situation.

“But some airlines don’t want to discuss it, so staff and crew members are in trouble,” U Thet Lwin Toe added.

To solve this problem, the government is arranging an initiative – “green season” – to promote local airlines and attract tourists who want to come to Myanmar during the rainy season.

“Rainy season is good to travel and every part of nature is green. Tourists can see Myanmar from a different point of view.

“In rainy season, some regions are nice to visit because there isn’t much rain in. We and Myanmar Airways International are in cooperation and have so many agents in other countries selling tickets and promoting Myanmar as a travel destination,” said Ma Aye Mara Tha.

But even with airlines having promotions, at times the number of tourists does not increase much, she added.

“All the local airline do not enjoy a huge profit margin.

“But we prioritise safety over profits. To cover costs, we must attract tourists to take our airline whenever they travel,” she added.

But in high season, tourists are using airlines and sometimes local airlines can’t accept all the books and fulfil the market demand.

U Ye Htut Aung said that higher tax and expensive petrol are the main difficulties for local airlines.

Compared to 2015, the number of tourists using local airlines increased in 2016. In 2015, there were a total of 2,079,474 tourists, and 7 percent out of which who used local airlines. In 2016, there were 2,401,876 tourists, and, out of which, 16pc who used local airlines, according to the DCA. 

(The Myanmar Times: http://www.mmtimes.com/index.php/business/26734-local-airlines-squeezed-by-expensive-petrol-and-taxation.html )