As the US lifts sanctions on the isolated southeast Asian Myanmar, industry analysts have taken the first step to predict how Burmese aviation industry is poised to be the next big thing in Asia. Wonder if there have been any strategic considerations by our Indian government regarding the same; especially to tap the now growing Indo-Burmese relations in softer spheres. _________________________________________________________________________________________________ Myanmar to be the next big market in Aviation in Asia Myanmarâ€™s aviation market is poised to enter a major period of growth as the country begins to open up following landmark elections earlier this month that were won by Aung San Suu Kyiâ€™s National League for Democracy. The election was seen as a turning point for Myanmar, formerly known as Burma, and the start of a more favourable business environment, including for aviation. Several Asian carriers and airport operators have identified near-term opportunities in Myanmar. The opportunities for all types of carriers â€“ local and foreign, domestic and international, low-cost and full service â€“ face no limitations in the medium term as the Myanmar market is now the most underserved market in ASEAN and perhaps all of Asia. Myanmarâ€™s two existing international airports, at Rangoon and Mandalay, are to be partially privatised while a recently opened new airport at the new capital of Naypyitaw will soon start to handle international flights. There are also plans for upgrading several domestic airports, many of which lack basic infrastructure. Major international airport operators tell CAPA they are eager to participate in expected tenders for the management and expansion of the airports at Yangon, Mandalay and Naypyitaw. International airport operators also expect Myanmar will eventually seek a foreign company to help operate the countryâ€™s approximately 30 domestic airports, some of which could be upgraded to international facilities. The old capital Yangon has by far the largest airport in Myanmar. Last year Yangon accommodated 2.5 million passengers, including almost exactly 1 million domestic passengers and almost 1.5 million international passengers, according to Myanmar Department of Civil Aviation data. Myanmarâ€™s second international airport at the popular tourist destination of Mandalay last year accommodated just under 500,000 passengers, including only about 50,000 international passengers. Mandalay currently only has one scheduled international service, to Kunming in China, but several new international destinations are expected to be added in the coming months, starting with Bangkok. Myanmarâ€™s domestic and international markets have both shown rapid growth since 2008 with international passenger numbers nearly doubling at the main gateway Yangon over the last three years. But the rate of growth is expected to accelerate significantly, starting this year as several carriers have unveiled plans to add capacity at Yangon and to a lesser extent Mandalay and Naypyidaw. Given the huge potential size of the Myanmar market, the recent growth represents just the tip of the iceberg. Myanmar is the now the eighth largest market in ASEAN with only Brunei and Laos smaller, but it is the fifth most populated. Malaysia has 20 million fewer people than Myanmar but has an aviation market which is nearly 20 times larger. According to Innovata data, there are now almost 50,000 international seats per week to/from and within Myanmar. Government-owned flag carrier Myanmar Airways International (MAI) accounts for about one quarter of these seats, while a relatively small group of 13 foreign carriers accounts for the other three-quarters. MAI is one of Asiaâ€™s smallest flag carriers, operating according to Innovata a fleet of five Airbus A320 family aircraft from Yangon to six regional international destinations: Bangkok, Guangzhou, Kuala Lumpur, Phnom Penh, Siem Reap and Singapore. But the carrier has been expanding, with the Guangzhou and Siem Reap routes only added last year. More rapid growth is likely in the near to medium term including potential international services from Mandalay and Naypyitaw. Air Mandalay and Air Bagan are the main domestic carriers, each operating to about 10 domestic destinations with a fleet of less than 10 aircraft. Both carriers are privately owned and primarily operate ATR 42/72 turboprops, although Air Bagan also has two Fokker 100 jets. There are also some smaller domestic operators, including Myanma Airways, Yangon Airways and two privately-owned start-up carriers: Air Kanbawza and Asian Wings. Air Kanbawza launched last year with ATR 42s while Asian Wings launched early this year with ATR 72s. Thailand, Singapore, Malaysia and China are where most of the international capacity to and from Myanmar is deployed. Bangkok is by far the largest international destination and accounts for over two-fifths of all international seats. Singapore is the second largest destination, followed by Kuala Lumpur and Kunming. As Myanmar opens up, all three of these markets will likely see large influxes of additional capacity. All three Thai carriers now serving Myanmar â€“ Bangkok Airways, Thai AirAsia, Thai Airways International â€“ are already planning to add flights to Myanmar in the near term. Thai Airways is now the largest foreign carrier serving Myanmar while Thai AirAsia is the second largest and Bangkok Airways is the third largest. All three now serve Yangon with two daily flights and are planning to add a third daily flight later this year. Thai Airways currently serves Yangon with A330s while Thai AirAsia uses A320s and Bangkok Airways A319s. Singapore Airlines regional subsidiary SilkAir is now the third largest foreign carrier serving Myanmar. SilkAir operates three daily flights to Yangon with A319s/A320s while LCC Jetstar Asia also offers four weekly flights on the Singapore-Yangon route. On the Kuala Lumpur-Yangon route, both AirAsia and Malaysia Airlines now offer one daily frequency. Myanmar Airways International also serves Bangkok, Kuala Lumpur and Singapore. Bangkok, Kuala Lumpur and Singapore have until now been also been the main gateways for long-haul traffic coming into and out of Myanmar. As Myanmar opens up, a large influx of business and leisure long-haul traffic is expected with these three hubs being the main beneficiaries, although some new point-to-point long-haul routes will also be launched. Local traffic from these three countries is also expected to grow significantly given the close economic ties that already exist between these countries and Myanmar. Some new direct long-haul services are in the works but will only account for a small fraction of total capacity in and out of Myanmar. Qatar Airways has unveiled plans to open in Oct-2012 a thrice weekly service from Doha to Yangon. The service will initially be operated with A319s. Qatar Airways typically uses A319 equipment to test out new medium-haul markets and later upgrades to widebodies if the market proves to have sufficient demand. Qatar Airways appears to be hoping its decision to become the first airline from outside Asia in Myanmar will position the carrier to cash in as countryâ€™s tourism and business sectors grow. Qatar Airways will be able to provide the fastest connections from Myanmar to several destinations in the Middle East, Europe and the Americas. Japanâ€™s All Nippon Airways (ANA) also disclosed last week that it intends to launch services to Yangon. ANA, which has not yet set a launch date or frequency for its planned service to Yangon, would offer the first direct link between Japan and Myanmar. ANA expects an influx of interest from Japanese tourists as Myanmar opens up. Both ANA and Qatar previously served Myanmar, with ANA pulling out 12 years ago and Qatar dropping its Yangon service just over four years ago. German leisure carrier Condor is also planning to enter the Yangon market in Nov-2012 with one weekly Boeing 767-300ER flight from Frankfurt that will continue onto Phuket in Thailand. This service recognises the huge potential of Myanmarâ€™s tourism industry as the country emerges as an up and coming tourist destination. But industry sources warn that a lack of hotel rooms in Myanmar poses a potential bottleneck to growth. As a result, airlines could be forced to be modest in their capacity expansion into the Myanmar market until the hospitality industry catches up with more hotels built and tourism infrastructure expanded. Widebody capacity from Europe or other long-haul markets in particular could prove difficult to sustain until there are sufficient hotel rooms. Exceptions would be smaller widebody aircraft such as 767s or 787s, particularly when used on routes which are less than daily. As Tokyo would not be within narrowbody range of Yangon, ANA will likely initially operate into Yangon on a less than daily basis with a 767-sized aircraft. The Myanmar market is currently only served with narrowbody aircraft and more narrowboday capacity, primarily from foreign carriers which are already serving Yangoon, will likely drive most of the upcoming capacity growth in the Myanmar market. Carriers already present in the market have an advantage over new carriers in that they have existing relationships with Myanmar authorities and have established a presence in the local market. Myanmarâ€™s domestic carriers will also benefit as tourist arrivals spike. Traffic on the core tourist routes connecting Yangon with Bagan and Mandalay route is particularly likely to grow. Other domestic markets may also see growth as other destinations in Myanmar open to tourism and new business opportunities. As foreign investment starts to pour into Myanmar, income levels should rise, leading to more travel among locals. Myanmar now has one of the lowest GDP per capita in Asia but economic growth typically leads to a larger middle class, as has been the case with other Asian frontier markets such as Vietnam. The recent launch of Asian Wings and Air Kanbawaza has left Myanmarâ€™s domestic market relatively fragmented but increased interest in Myanmar could lead to even more start-up activity in the country. Carriers which are well funded and are in position to expand rapidly could have an advantage as the market continues to open up. All of Myanmarâ€™s domestic carriers are now examining expansion opportunities domestically as well as on regional international routes. Opportunities in the Myanmar domestic market could entice a LCC joint venture, which would stimulate local demand through low fares. AirAsia would be seen as the most logical partner to an existing or new Myanmar carrier, although Jetstar and Tiger would also likely be interested in exploring JV opportunities in the Myanmar market. Such a JV would give an Asian LCC group access to Myanmarâ€™s domestic market, which has huge potential given it is a relatively big country with about 30 commercial airports, as well as the opportunity to open more international routes in Myanmar. Myanmar's LCC penetration rate is currently only 12%, which is much lower than most other ASEAN countries. Within Southeast Asia, LCCs now account for over 50% of total capacity. LCCs will likely account for a large chunk of the growth in Myanmar in the coming years and push up the countryâ€™s LCC penetration rate closer to the Southeast Asian average. But full service airline groups such as Singapore Airlines, Malaysia Airlines and Thai Airways will also likely expand their Myanmar operations as part of strategies to tap growth markets and boost feed to the their long-haul operations. As international flights at Yangon and Mandalay increase, airport expansion plans could be accelerated. Yangon is now in the process of being expanded but the current project is rather modest and will only result in an increase in capacity from 2.3 million to 3.3 million passengers p/a. Yangon Airport will likely approach the 3 million passenger figure this year and therefore will almost certainly require a bigger expansion project in the near term. International airport operators from countries with strong ties to Myanmar, such as France and Singapore, are the most likely to become involved in airport projects as Myanmar opens up. The Myanmar Government is now focussing on expanding and partially privatising its three designated international airports. Upgrades at some domestic-only airports are also underway but limited in scope to items such as navigation aides. Industry sources say the countryâ€™s domestic airports are very basic, with several airports unable to support e-ticketing due to lack of electricity. Several of the airports lack lights, limiting operations to daytime flights, and cannot accommodate jets. Fuel is also not generally available at the smaller domestic airports. The private sector may eventually become involved in managing and expanding Myanmarâ€™s secondary airports, some of which have big long-term potential, but for now the Government is instead enlisting help from agencies such as the Japan International Cooperation Agency (JICA). While the growth opportunities in Myanmar are exciting, it will take time for the potential of the countryâ€™s aviation sector to be fully realised. Infrastructure, including new airport terminals and hotels, cannot be built overnight. Myanmar has the ingredients to become Asiaâ€™s next hottest tourist destination but this cannot be achieved without infrastructure. Overseas investment will also come, spurring demand for air travel, but it will take time for business ventures to be forged and implemented. If foreign carriers are too aggressive, there could be a period of overcapacity. But over the medium to long term, Myanmar is undeniably a market which will be able to support a huge increase in capacity from a wide mix of carriers.