U Si Thu, Managing Director, Myanmar Airways International: Interview

Interview: U Si Thu

As the launch of the ASEAN Economic Community (AEC) approaches, how will local airline operators be affected by the open skies policy?

U SI THU: There are several points to bear in mind regarding the open skies policy. First, as a result of decades of sanctions, most local airlines have not been exposed to international competition until recently. It is important that local industry should have some degree of protection from the government, to give local airlines time to grow so that they can compete on a regional scale.

As it stands, Myanmar has about a dozen airlines in the country, with a limited number of aircraft. You can easily notice that none of our airlines have economies of scale. This makes it hard for local operators to compete against international airlines.

Secondly, however, if you look at international arrivals, it is plain to see that we have already opened up the aviation sector, and the number of passengers and seat capacity keep on increasing. Regulators and policymakers should understand the benefits of liberalisation, while taking into consideration the maturity of our airlines and adequacy of our infrastructure.

On balance, I believe the open skies policy is a good thing, the reality of future. But there must be certain restrictions, and we should liberalise gradually as our aviation industry develops and matures. Even Singapore does not allow Air Asia to enter Changi; throughout the region, low-cost carriers are allowed to operate only in and out of secondary airports and designated terminals. It is important that the Department of Civil Aviation recognise the difficulties faced by local carriers as well as the nature of competition.

Another drawback for our industry is the cost of fuel in Myanmar, which is higher than in neighbouring countries. This is counterproductive to airline business, as it makes it more of a challenge for local operators to compete with international ones. However, from a broader perspective, we can see more and more airlines are coming in and customers having more choice to go to more destinations, even at this early stage of the open skies policy. So all these outcomes from the policy contribute to faster integration in the AEC, as our leaders envisioned for the development of the region as a whole. But frankly speaking, our airline operators are still looking for protections and privileges from the government as they did in earlier times.

What investment opportunities exist in aviation?

U SI THU: Although competition has risen in recent years, as is apparent from the increase in operators, there is still room for investment in many areas, such as airport development, freighter services, general aviation, and cargo and maintenance facilities – specifically, maintenance and repair organisations (MRO).

We need foreign expertise and investment in these areas. Myanmar has an abundance of local operators with many types of aircraft but no proper MRO and a lack of parking areas at Yangon International Airport. So it is urgent that parking areas be expanded and passenger terminals extended with new construction. We need investment in infrastructure – new aircraft hangers and other facilities – and more importantly, capacity building to have qualified professionals in aviation.

In all of these areas, investment is needed. Lack of investment, inadequate infrastructure, lack of proper training and maintenance facilities – these are the contributing factors that lead to unsafe operations in any emerging market. Even at present there are many interested parties, but we do not have enough space to build at Yangon airport so another one at Hanthawaddy is being built – a huge project for Myanmar.

There may be a dilemma for investors, who are unwilling to take the risk of investing in facilities in the existing international airport, as this is set to move to Hanthawaddy in few years. There needs to be more clarification from the government about the future plan, showing what will happen and when, so that investors will have strong confidence in their projects and funds can be channelled in the right direction so as to develop the whole aviation industry in Myanmar.

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The Report: Myanmar 2015

Transport chapter from The Report: Myanmar 2015

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