Despite years of isolation and despite being a relatively poor country, Myanmar has a surprisingly developed transportation network. It has 66 airports, eight airlines, more than 5500 km of rail and about 150,000 km of roads. Some of it is no doubt historic. The first railway line was installed in 1877 by the British and by the Japanese invasion in 1942, the system totalled over 3000 km. But Myanmar has also made significant progress on its own. After the Second World War, the country was left with only about 1000 km of working track. It recovered steadily, increasing total track length to more than 3000 km by 1988 and then continuing the expansion, adding another 2000-plus km during some of its most difficult economic times. The challenge now is to build off this strong base. The country needs to upgrade what it has, especially regarding rail and airports, and it needs to add to what is in place. Transportation is indeed vital to the country’s future. If tourism is going to develop, Myanmar needs more reliable connections to the outside world and to domestic points of interest. If commerce is going to flow smoothly and if the economy is going to grow, it needs a way to get people and goods to parts of the country distant from the capital. If Myanmar is going to take its place as a key Asian crossroads – where India meets China – it is going to have to build reliable surface links to the north and to the west. Most of all, if it is to be a unified nation after years of strife, it is crucial to develop easier, less expensive and safer transportation options for the people of the country. Next to attracting foreign investment, improving transportation is perhaps the most important task at hand for the nation if is going to move successfully from a slow-moving, isolated economy to a relatively fast-growing member of the Association of South-east Asian Nations (ASEAN) and the world community.
Commercial aviation is perhaps the most visible element of the transportation equation, and arguably the most important. It will be providing the connections for the business people and the tourists who are essential to the country’s future. U Htoo Thet Htwe, chairman of local carrier Air Bagan, told OBG, “Myanmar can learn a lot from neighbouring countries. If you look at Singapore in particular we can learn from the collaboration between airports, airlines, government, tourism boards and authorities, as well as their integrated management strategies. They leverage their traffic hub as a tourist destination.”
The commercial aviation industry is also of great interest to investors, as it offers the opportunity for quick and sizable returns. However, the sector is still in a relatively undeveloped state and the risks are many. Mishaps, however small, can cause severe reputational damage and have the potential to weaken airlines, deter travellers and frighten investors. Nevertheless, the sector is highly competitive and improving rapidly, with leaders at the corporate and government level well aware of weaknesses and looking for solutions. It has the potential to provide safe, comfortable and consistent service as well as interesting opportunities for financial investors and strategic partners.
At present the country has eight domestic airlines. One is state-run, two are joint ventures and five are private. The state airline and flag carrier is Myanma Airways, which was founded in 1948 upon the country’s independence as the Union of Burma (UBA) Airways. (Prior to the establishment of a domestic carrier, British Overseas Airways Corporation (BOAC) was responsible for civil aviation in what was then British Burma.) In its early days, UBA was a great success. It flew to 19 domestic destinations and added international routes in 1950 to Bangkok, Calcutta and Chittagong (Bangladesh). By 1955 it was flying to Penang and Singapore, and in 1969 it offered service to Phnom Penh and Hong Kong. Indeed, in 1950 Yangon (then known as Rangoon) claimed to be the busiest airport in the Far East, with 35 flights a day. The state carrier became the Burma Airways Corporation in 1972 and Myanma Airways in 1989. Currently it flies to 26 domestic destinations, from Kawthaung in the south to Putao in the north, using three Friendship F-28s, two ATR-72s, one ATR-42, three Xian MA-60s, two Beech aircraft and one Embraer 190 AR.
As a result of history, necessity and possibly culture, the route map of Myanma Airways is unique. The huband-spoke model, which is the international norm, is not followed. Rather, passengers hop from one city to the next to get to their destination. For example, a person going from Yangon to Putao would fly YangonMandalay-Myitkyina-Putao. The set up is reminiscent of how airlines would schedule their services in the days when Rangoon was a major aviation centre (for example, the 1955 Rangoon-Mergui-Penang-Singapore route). But civil aviation authorities in the country say it may have more to do with the lack of major hub facilities and the size of the available aircraft. They also suggest passengers prefer to hop from one small airport to the next rather than transiting at a major hub.
Myanma Airways has a number of joint ventures. Air Mandalay was formed in 1994 in cooperation with a Singapore company, which held 49% of the shares. It was the country’s first non-state airline and was started specifically to cater to the tourist market. The carrier currently flies to 11 destinations throughout the country, including Sittwe, Dawei and Tachileik, and also has one international destination, Chiang Mai, Thailand (commenced in 1995). Air Mandalay has three aircraft: one ATR-42 and two ATR-72s.
Myanma Airways is a partner in Myanmar Airways International (MAI), which was founded in 1993 as a joint venture with Singapore’s Highsonic Enterprises. Royal Brunei Airlines supported the venture, Singapore management was brought in, foreign crews were hired and Boeing aircraft were utilised. MAI served many destinations, including Singapore, Kuala Lumpur, Bangkok and Dhaka. The joint venture ended in 1998, and the company was then owned by the government. In 2001 Region Air of Hong Kong took at 49% stake, a local company took 11% and Myanma Airways was left with 40%. Then, in October 2013 Kanbawza Bank (KBZ) took control of the company and now owns 100%. Currently MAI flies to Kuala Lumpur, Siem Reap, Singapore, Bangkok, Phnom Penh, Guangzhou and Gaya, plus charter flights from Japan. The airline operates a total of nine aircraft: four Airbus A319s and five Airbus A320s.
Yangon Airways, which began in 1996 as a joint venture between Myanma Airways and a Thai company, currently has two aircraft and is now privately owned. It halted operations in 2010 but resumed scheduled flights in 2011. The airline operates two aircraft and serves 13 domestic destinations.
Meanwhile, Air Bagan, founded in 2004 as the first 100% locally owned private airline in the country, serves 13 domestic destinations and has one international route to Chiang Mai. It is a subsidiary of the Htoo Group, a holding company with interests in property development, resources, banking, manufacturing and tourism. Air Bagan currently has two ATR-42s and two ATR-72s.
There are also a number of new entrants. Air KBZ, owned by KBZ Bank and founded in 2011, has six ATR72s and flies to 16 destinations. Asian Wings Airways was founded in 2011 and has four ATR-72s and one Airbus 321 flying 13 domestic routes. Finally, Golden Myanmar Airlines was started in 2012 as a discount carrier and flies to Mandalay and Singapore utilising two A320s. Four new airlines have received air operator certificates: Yadanabon and Saga, to be based out of Mandalay, and Apex and FMI, to use Naypyidaw as a hub.
The market is growing rapidly, and it is expected that the growth will continue. OAG, the aviation intelligence company, forecasts total capacity will hit 4.65m seats in 2013, a record and up from 3.54m in 2012. Of the 2013 total, 2.14m seats are international and 2.51m domestic. While the international traffic in 2013 will be a record, domestic seats available are still below totals reached in both 2005 and 2006. According to June 2013 OAG data, Air KBZ has 40% of the domestic seats, while Air Mandalay has 23%; Asian Wings, 22%; and Air Bagan, 10%. There are many carriers competing in the market given the real size of the market and the actual demand for seats (see analysis).
Myanmar is also served by 21 foreign airlines, according to a January 2013 release from the Centre for Aviation. The largest are Thai Airways, AirAsia and Bangkok Air. Between April 2012 and January 2013, the number of seats available on international routes was up 64%. During that period, existing players increased their capacity and eight carriers entered the market: ANA, Condor, Asiana, EVA Air, Dragon Air, Qantas Airways, Qatar Airways, Korean Air and Singapore Airlines. Most international traffic (92%) still goes through Yangon, but connections to Mandalay are picking up fast, with the number of seats available to that city more than doubling between April 2012 and January 2013. Bangkok Airways, Thai AirAsia, Thai Smile and MAI are flying directly from Thailand to Mandalay. Thailand’s Nok Air has added Myanmar routes, but rather than contend with the major competitors flying out of Bangkok, the budget airline is flying from Mae Sot to Yangon and Mawlamyine. AirAsia, meanwhile, is planning direct Bangkok-Naypyidaw flights.
The challenges in aviation in Myanmar are many. Safety is one of the main concerns for airlines, investors, regulators and tourists. Given the years of isolation and the difficultly of acquiring parts and expertise from overseas, the country has struggled in the past to maintain its fleet and civil aviation infrastructure. According to government and airline officials, problems remain, especially in terms of the use and calibration of equipment and the maintenance of runways. For example, in the Air Bagan accident of December 25, 2012, when a Fokker 100 travelling from Mandalay to Heho struck a power line and landed in a field, the airport had no instrument landing system, which provides guidance to an aircraft approaching and landing on a runway. The concern is that outside of the main domestic routes between Yangon, Naypyidaw and Mandalay, the country’s infrastructure may be operating below international standards, and that this could constrain growth and investment and ultimately become a bottleneck for development throughout the country.
While airline executives and sector administrators readily discuss safety concerns, statistics suggest great improvements over the years. The Air Bagan crash, where two people died, was the first fatal air accident in the country in more than a decade. To be sure, Myanmar has faced a spate of mishaps in recent years – in most cases planes going off the end of runways – but this is a great improvement. In the 1970s, 1980s and 1990s, serious aviation accidents happened with some frequency. At the same time, the sector is reforming, and it is likely that foreign investors will be able to play a significant role in turning it around. According to Ministry of National Planning and Economic Development Notifications 1/2013 and 11/2013, both released in January 2013, international investors will be able to take full ownership of companies engaged in a wide variety of aviation-related activities (with the approval of government), including training, maintenance, ground support, inspection, fuelling services, spare parts sales, and the construction and operation of airports. In terms of airlines themselves, foreign investors are limited to joint ventures, but they can take up to 80% of the equity.
Myanmar’s main problem with respect to aviation has been one of funds. It has been very difficult for the airlines and the civil aviation authorities to make the proper investments. With foreign participation, capital should be much less of an issue. A good example is the building of a new airport for the capital city. Yangon International Airport was designed for 2.7m arrivals, but about 3m people went through the facility in 2012. It will be expanded, but the real solution is the construction of a new airport. This is not only important for Yangon, but for the entire network, as better facilities at the main hub will allow for smoother and safer operations throughout the country.
The new airport, Hanthawaddy International Airport, was started in 1993 but abandoned in 2004. The site is 80 km from Yangon and the facility, when completed in 2018, will be able to handle about 12m passengers a year. Negotiations with a consortium including Singapore’s Changi Airport Planners and Yongnam Holdings to build and operate the new airport are ongoing.
While the country already has significant installed trackage, running all the way from Myitkyina in the north to Thayetchaung in the south, most of it is in poor condition. The equipment is old, journeys are slow and some lines are simply shut down during the monsoon season. While the system has been expanded a great deal over the past few decades, according to the Asian Development Bank (ADB) insufficient investment has been made into maintenance, track and signalling systems over the years. A quarter of the locomotives are more than 40 years old, the 330-km run from Yangon to Naypyidaw takes nine hours – a car takes five hours – and on some of the more remote lines the trains run 16 km per hour.
However, rail is being developed rapidly. It is viewed as important to the people of the country, most of who live in rural areas, and a number of foreign investors see specific opportunities in running or improving track on key routes. Ultimately, the country will be a vital part of the Trans-Asian Railway Link. The link will connect Singapore to Istanbul, and the southern corridor, which connects India, China and South-east Asia, will run through Myanmar. China is a key player in rail. The country is funding a $20bn, 869-km high-speed line that will ultimately connect Kyaukphyu, on the Bay of Bengal, to Kunming. The development will be done on a build-operate-transfer basis, the agreement lasting 50 years, and the trains are expected to run 170 km per hour. Japan, meanwhile, has developed a feasibility study to modernise the 640-km route between Yangon and Mandalay – the cost of the project is expected to be $1.7bn – while India has proposed a 250-km line to link its rail network and Myanmar’s. Myanmar is also considering rebuilding the Thanbyuzayat to Three Pagodas Pass route to connect its rail system to Thailand’s.
Additionally, there are plans to redevelop the urban rail transport networks in Yangon. The city has gone very quickly from one with virtually no traffic to one much like other cities in South-east Asia.
While some of this is the result of the simultaneous construction of four flyovers, demographics are also weighing on the city, and will likely to continue to do so for the foreseeable future. The city’s population grew from around 1.3m in 1950 to 4.4m in 2010, according to the UN population division, and is expected to nearly double by 2050. The country is considering the construction of a Skytrain and a subway for the former capital.
The Japan International Cooperation Agency (JICA), which is developing a master plan for the city along with the Yangon City Development Committee, is focused on the circular railway. The 45.9-km, 39-station loop line carries about 130,000 passengers a day from the centre of Yangon to the outskirts and back. It takes a train about three hours to make a single loop. JICA’s plan calls for improving the line so the trains runs faster and more frequently, and building a transportation network around it that will handle approximately 30% of the local public transportation each day by 2040.
On The Grid
According to JICA, Yangon is one of the most promising cities in the region for developing train networks. Because the circular railway already exists, there will not be the problems of land acquisition found in places such as Jakarta.
Moreover, outside the circular railway, development should also be relatively easy. The British designed the city on a grid system with large boulevards. The layout is ideal for elevated trains or underground lines, which can be placed on top of or under existing roads. Unlike other South-east Asian cities, less land will have to be acquired and fewer buildings demolished. Nationally, the existing rail network also provides a platform on which to build a newer, faster system. “Yangon already has an advantage,” said Tanaka Masahiko, chief representative at JICA. “It has the advantage of the circular railway, and the main roads are big.”
A key concern at this point is whether these projects are feasible. The country remains one of the poorest in the region, with very low income and weak government finances. It will be challenging to build new lines and very difficult to pay for them. Also, the question remains whether a faster rail system is needed. Few people in the country have to get from one place to another quickly at this point. For most, the existing system, while slow, is good enough. Even on the major lines, the math does not always add up. While there has been a push for a high-speed rail on the main Yangon-Naypyidaw-Mandalay corridor, according to financial backers the traffic simply does not warrant such expensive development. The Chinese line, meanwhile, is being protested by locals who say that they have not been properly informed about the plans for the project and are calling for more transparency. An Indian line has gone nowhere for lack of funding (see analysis).
Other Means Of Transport
As with rail, the country has a long history of water transportation. The Irrawaddy Flotilla Company was formed in 1865 and at one time had the largest fleet of river boats in the world. It was nationalised in 1948 and is now known as Inland Water Transport (IWT) under the Ministry of Transport. Water transportation remains important in the country, with the 138 passenger boats carrying 27m passengers a year. Of the 5000 km of navigable waterways, about half are used regularly. The infrastructure and equipment are quite old and it is very difficult to fund improvements. According to the ADB, tariffs have been fixed by the government and set low, so IWT lacks the money necessary for reinvestment. In 2011 IWT began to increase ticket fares, more than doubling them in most cases, in order to begin to cover operating costs. In 2012 privatisation was discussed, as was the possibility of joint ventures for some services.
The roads are also in great need of investment. While the country has one of the lowest motor-vehicle densities in the region, it also has low road density, and only around 20% of its roads are paved. Improving the system is a great challenge, because of the topography and the fact that many areas have been under the control of insurgents and still have a degree of autonomy. However, road development is important for the country as it is needed for economic development and national unity. Still, efforts are being made. Foreign governments, including countries such as China and India, which have direct interests in Myanmar, are helping support the improvement and expansion of the system. The government is also awarding toll road concessions, with local conglomerate Asia World Group receiving three concessions in 2013.
While years of isolation left the country’s transportation infrastructure in poor condition, Myanmar is making efforts to improve the system, and it is likely that these efforts will pay off in the medium and long term. Gaps will remain for a number of years, as it will take time for some of the larger projects to get funded and finished. In the meantime, quick wins can be achieved by upgrading, maintaining and resurfacing, and by focusing on large but relatively simply projects. If priority areas are dealt with quickly and if major setbacks are avoided, the sector will improve steadily until the more complex investments, such as urban rail, can be completed. Myanmar can follow the course of Thailand and in a few years have an efficient air transport segment, good roads and good public transportation in the urban areas. Given the country’s strong transportation history, the existing infrastructure of its cities and the fact that it can utilise the expertise and experience of Thailand, it may be able to transform its transportation sector faster than others have in the past.