Myanmar aviation sector enters a critical phase: CAPA sector report

About the Myanmar Aviation Outlook 2016

Over the last three years CAPA has published annual reports on the dynamic Myanmar market, which has undergone rapid transformation since Myanmar liberalised its market in early 2012.

In this 2016 report CAPA provides a comprehensive analysis of current conditions along with 50 charts and graphs highlighting how the market has grown and performed.

This new CAPA report is the latest and most comprehensive in a series of annual reports that CAPA has published since the Myanmar market opened up in 2012. The report is available free of charge to all current CAPA members by contacting your account manager. Non-members can purchase the report for USD295.

Purchase the full report: Myanmar Aviation Outlook 2016 (Note: Free for CAPA Members on request from your account manager)

Part 1: Rapid international growth but challenging conditions as Emirates enters

Myanmar's international market will experience another surge of additional capacity in 2H2016 as several new routes are launched. International passenger growth in Myanmar slowed significantly in 2015, following a period of very rapid growth, but could re-accelerate as the market again starts to capture attention.

After Qatar Airways, Emirates will become only the second airline with long haul services from Myanmar as it launches a new daily flight from Dubai to Yangon in Aug-2016. HK Express and Thai Lion Air are also planning to launch services to Myanmar over the next few months.

Myanmar is currently served by 24 foreign airlines, compared with only 13 four years ago. Myanmar's international market has more than doubled in size since 2011, but overcapacity has been a consistent problem and conditions are likely to remain challenging as more airlines enter.

Part 2: Myanmar Airways International & Myanmar National Airlines must rationalise

Myanmar's aviation industry is approaching a critical juncture as competition intensifies between Myanmar Airways International (MAI) and Myanmar National Airlines (MNA). The two former partners are now competing aggressively in an international market that likely can only support one local airline over the long term.

MAI, which was privatised in 2010, and MNA, which remains government owned, both now operate the Yangon to Bangkok and Singapore routes. More overlap is inevitable as both airlines are planning to expand their international networks.

Myanmar's new government may relook at the previous government's decision to fund ambitious international expansion for MNA, which previously only operated domestic services. A partnership or even merger between MNA and MAI would be sensible as the current situation seems unsustainable.

Part 3: Domestic growth slows but consolidation remains elusive

Myanmar's domestic market continues to struggle, dragged down by slow growth and unprofitability. Consolidation has been elusive, resulting in 10 players for a market of less than 3 million passengers.

Mergers and exits are inevitable. The current situation, with several airlines competing on relatively small trunk routes, is unsustainable. The new government could pursue reforms that shake up Myanmar's airline sector and improve profitability. However, change is hardly a certainty.

Part 4: Airport development enables growth but Yangon unlikely to regain hub status

Myanmar is on track to accommodate rapid aviation growth following major airport investments at Yangon. Expansion of the current Yangon airport and construction of a new airport support an initiative to grow Myanmar's promising tourism sector rapidly.

The upgraded Yangon Airport is also keen to take on a hub role, regaining a position it had several decades ago when it served as a stop for flights heading between Asia and Europe. A much larger local airline would be needed for Yangon to develop fully as a hub.

All Nippon Airways and a local partner are proposing a new joint venture international airline, Asian Blue, which could potentially support Yangon's hub aspirations. However, the business case for Asian Blue is not clear-cut, as the new airline will have to compete against Myanmar's two existing international airlines.

There will also be stiff competition from Southeast Asia's established network airlines and hubs.

Purchase the full report: Myanmar Aviation Outlook 2016 (Note: Free for CAPA Members on request from your account manager)

Table of Contents

• Myanmar Aviation Outlook: 2016
• Introduction
• Part 1: Rapid international growth but challenging conditions as Emirates enters.
• • Myanmar's international market grew by less than 8% in 2015.
  • Myanmar is currently served by 24 foreign airlines; three have withdrawn.
  • Thai airlines captured 42% of Myanmar's international market in 2015.
  • Singapore is second largest international market from Myanmar.
  • Intense competition has impacted load factors and yields.
  • Several new international routes are planned for 2016, including Dubai
  • Bangkok Airways seeks to add a fourth airport destination in Myanmar.
  • Myanmar market has huge potential, but remains relatively challenging.
• Part 2: Myanmar Airways International & Myanmar National Airlines must rationalise.
• • Myanmar National Airlines quickly closes the gap with Myanmar Airways International
  • Myanmar National Airlines plans more international expansion.
  • Myanmar Airways International impacted from MNA expansion.
  • MAI's market share has dropped from 19% to 9% over the last three years.
  • MAI has lost ground on the Bangkok and Singapore routes.
  • Myanmar Airways International struggles to find new routes.
  • MNA load factors on initial international routes have been very low.
  • MNA and MAI rely heavily on domestic connections.
  • Consolidation in Myanmar's international market seems inevitable.
• Part 3: Domestic growth slows but consolidation remains elusive.
• • Myanmar domestic market features a staggering 10 competitors.
  • Rate of aircraft deliveries and traffic growth slows.
  • Start-ups APEX and FMI have not been growing.
  • Air Mandalay cuts back again.
  • Myanmar has had six airline launches since 2011; none have yet exited.
  • Asian Wings and Golden Myanmar transition to all turboprop fleets.
  • Myanmar's domestic airline sector needs a shake-up.
• Part 4: Airport development enables growth but Yangon unlikely to regain hub status.
• • Yangon faces capacity constraints, while Mandalay and Nay Pyi Taw have ample capacity.
  • Myanmar privatises international airports and plans privatisation for domestic airports.
  • Heho and Nyuang-U have international potential
  • Yangon Airport expansion begins.
  • Construction soon to begin on new airport outside Yangon.
  • Myanmar ready to handle influx of visitors.
  • Myanmar keen to attract transit traffic.
  • Myanmar does not have a network airline - for now.
  • ANA makes second attempt at Myanmar investment.
  • ANA has a relatively small presence in Myanmar.
  • Myanmar aviation sector has huge potential but hub role is unlikely.
• Appendix - Supplementary Airport Growth Data.
• Appendix - Supplementary Market Performance Data.
• Appendix - Supplementary Tourism Data.

For media queries, please contact CAPA chief analyst and author of this report, Brendan Sobie, at bsobie@centreforaviation.com.

CAPA Executive Briefings

Executive briefings are also available on this and other topics.

For more information on CAPA Briefings please contact Brendan Sobie at bsobie@centreforaviation.com.