Mna AirAIair Mna
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As Myanmar National Airlines begins its courageous global growth with Singapore, it faces a number of challenging times.
In August 2015, Myanmar National Airlines (MNA) is planning to start operating flights on the extremely competitively priced Yangon-Singapore service, starting with the implementation of an aggressive global growth strategy. In June 2015, the recently established state-owned airline took over the first of 10 737-800 aircraft and is planning to serve five intercontinental destinations by early 2016, while expanding its new narrow-body population.
However, the carrier faces major hurdles as it is operating outside its home markets for the first fortnight. Myanmar airlines are already suffering from over-capacity in the Yangon-Singapore region and are struggling with their Singapore rivals, resulting in cuts at Myanmar Airways International (MAI) and the exit of Golden Myanmar Airways.
In Singapore, MNA will necessarily face the same challenge as other Burma airlines, especially as its trademark is not known on the global marketplace. Northern Asia, into which MNA intends to become involved in the next few month, will also be a demanding one. It is part 2 of a set of Myanmar reporting on the Myanmar local markets.
In its first review, the Commission examined the fiercely contested national air transport sector, which now faces ten competition following the creation of APEX Airlines and FMI Air and the restart of Air Mandalay's operation. MNA is Myanmar's biggest local airlines, as CAPA pointed out in its first survey, operating a 12 plane charter to nearly 30 targets.
Session 3: Myanmar's global air transport industry Session 3: A sharp downturn in economic activity. There are currently only three Myanmar Airways companies, Myanmar Airways Internation (MAI), Air Bagan and Golden Myanmar. The MAI is exclusively an global carrier, while Air Bagan and Golden Myanmar currently serve only one global destination - in both cases Yangon to Chiang Mai in Thailand.
At the beginning of 2014, when it was still known as Myanma Airways, MNA chose to grow into the global air transport marketplace. It last flew internationally in 1993, when MAI was founded as an intercontinental company, and MNA was handed over to the local airlines. MNA' s ability to re-enter the global air transport markets began largely in 2013, when the Chinese authorities disposed of their remainder of MAI to Myanmar's KBZ, which also has one of Myanmar's ten national airlines.
GECAS leased 10 737 aircrafts in February 2014, six of them of the latest and four of them 737 MAX 8. In the last 17 month the company has restructured and prepared for global operation with the assistance of GECAS-AviaSolutions. MNA' s re-branding was finalized at the end of 2014 with the goal of introducing a trademark that is better suited to the global marketplace.
MNA announced the first 737-800s to be delivered on 15 June 2015, declaring that the plane will be used for overseas growth, beginning with the Yangon-Singapore flight in August 2015. The MNA has not yet established a precise start date and timetable for Singapore or approved other global goals. These are among the eight biggest Myanmar global stores alongside Singapore.
Singapore is currently Myanmar's second biggest after Thailand. Currently there are 40 returning flight per week between Singapore and Myanmar, which, according to CAPA and OAG, offer about 15,000 passengers per week. According to CAPA and OAG, overall capacities between Myanmar and Singapore have risen by about 50% in the last three years.
Myanmar DCA reports that 620,000 people traveled between Myanmar and Singapore in 2014, 53% more than in 2012. CAPA has already pointed out that the main driver of the increase was the Singapore Airlines Group's investment, as both SIA Maintenance and LCC-owned Tigerair have made inroads. Singapore Airlines (SIA) Group currently has a 62% lead in overall seating and serves 23 of the 40 week' s services in the Myanmar-Singapore region, of which nine are operated by SilkAir, seven by SIA Maintenance and seven by Tigerair.
In the last two years Jetstar Asia, which has also increased its Yangon base, currently operates 10 week-long services and has a 24% stake in the Myanmar-Singapore airport network. MAY has seven monthly departures and has a 14% stake in the total flight throughput. Singapore's may appear to be an appealing place for MNA given the fast pace of expansion the country has experienced and the very low percentage of Burma's airlines.
The MNA could also see a possible gap in the overall passenger traffic that Golden Myanmar Airlines will leave when it discontinued flights to Singapore in the second half of 2014. Whilst overall capacities in the industry have grown significantly in recent years, capacities have fallen by around 15% since July 2014 due to the exit of Golden Myanmar.
However, Golden Myanmar fought on the itinerary and MNA faced similarly. In the Singapore capex markets MAI has also had problems over the last two years and reduced capacities. Singapore airlines have a great benefit as they can provide services beyond Singapore. Much of the passenger traffic from Myanmar-Singapore travels beyond Singapore.
Despite the sharp increase in the number of visitors, Myanmar still has restricted non-stop services. There are currently no non-stop flights to Australia, Europe or Indonesia, all of which are very well serviced from the Singapore hub. Singapore airlines also have powerful and much better known names in the world.
MAY is relying on this, and Golden Myanmar is relying primarily on outgoing transportation, which includes the workers who go to work in Singapore. It is a relatively small sector of the economy and is not expanding as quickly as other sectors. Golden Myanmar, according to Myanmar DCA, transported nearly 60,000 people on the Myanmar-Singapore airport in 2014 with 572 services, representing an annual occupancy rate of only 58%.
That was an increase over 2013, when Golden Myanmar handled just over 40,000 people and operated 536 routes with an avarage seat occupancy rate of 43%. However, capacity utilization and revenues remain unsustainable, so that Golden Myanmar had little prospect that the itinerary could be sustainable in the long term. In Apr-2013, Golden Myanmar started flying to Singapore.
Consequently, MAI transport to and from Singapore has fallen by an impressive 36% in the last two years. Over the same time frame, the total growth of the overall brand was 53%. MAI's MAI has therefore fallen from 30% in 2012 to only 12% in 2014. In the last two years Jetstar Asia has boosted its Yangon air travel by 115%, as its quota has risen from 16% in 2012 to 22% in 2014, while Tigerair has quickly reached 13%.
SilkAir's Myanmar flight decreased by 41%, but this was compensated by a large increase in SIA Maintenanceline, as one of SilkAir's services to Yangon-Singapore was switched to SIA in October 2012. Overall, the SIA Group has increased transport on the Myanmar-Singapore region by 57% in the last two years, of which 30% in 2013 and 21% in 2014.
Most of the increase in the Myanmar-Singapore region, which includes most of the SIA Group's increase, was driven by strong demand from LCC'. The LCC represented 45% of the total number of passengers in 2014, against only 16% in 2012. The Jetstar is well known in Myanmar and became the first LCC to service the Myanmar region in 2005.
Jetstar's capacity utilization on the Yangon-Singapore line averaged 85% in 2014 as the company benefited from a strong rise in the number of through-passagers. Tigerair's capacity utilization was significantly lower at 67%, but Tigerair only came onto the scene in October 2013 and is only beginning to track flights beyond Singapore, which includes flights with its long-haul low-cost affiliate Scoot.
Competition with SIA and SilkAir will also be very challenging given the links the SIA Group offers beyond Singapore and its powerful business footprint. Finally, MNA will focus on MAI, a dilemma Golden Myanmar has also encountered on the Singapore SAR markets in the past year and a half.
Sadly, this is practically a zero-sum gamble for Myanmar's airlines, as this end of the fair has not grown. In 2014, MAI and Golden Myanmar together transported only slightly more people to and from Singapore than MAI alone in 2012. The MNA could expand the size of the network by providing links beyond Singapore.
However, forging a partnership will not be simple, as MNA is entirely new to the global arena and is not yet IOSA-accredited. The majority of Singapore's carriers are already connected to the SIA Group or Jetstar. The MNA is expected to face similar issues in the coming few month and continue to pursue its plans for globalization.
In almost every prospective MNA network there is an intrinsic benefit for overseas airlines as they can provide connectivity beyond their hub. Burma is also primarily an entry point and foreigners usually tend to travel with their home airlines or a overseas airline with a well-known name. In particular, this applies to North Asia, a part of the MNA's global capability.
The MNA is also likely to service Bangkok as it is by far the biggest of Myanmar's destinations internationally. However, as in Singapore, MNA will have to depend on the relatively small and unprofitable ethical sectors, as competition with the four Thai airlines operating the Yangon-Bangkok service will be difficult for other modes of transport.
Myanmar has recently discontinued flights to Bangkok to highlight the challenge facing Myanmar-based airlines in this large but highly-competitive market. MNA also finds Korea and Japan appealing as Myanmar's authorities seek to tap sources in Northern Asia and boost tourist activity. In October 2014, MAI began operations in Osaka, Japan and Seoul, South Korea, as CAPA analyzed in an early review.
MAI's new lines were seen as an effort to expand the company's operations internationally prior to the expected growth of MNA. Like Golden Myanmar's retreat from Singapore and Bangkok, MNA could see MAI's set-back in Japan and South Korea as an option. However, the real situation is that every airline in Myanmar will face tough competition in these and most other Northern Asia as well.
Myanmar's administration is taking a big risk by making significant investments in the global advance and growth of MNA. Maybe the goverment is willing to step up the airline's subsidy in the hope that MNA will encourage travel and help make Myanmar more world-famous. However, there are good reasons why the Myanmar domestic airline companies and those from abroad that have been pursuing the Myanmar airlines' growth are confused.
MNA' s aggressive growth could skew the pitch in several countries, beginning with the important Myanmar-Singapore trade lane.