Southeast Asian Airlines to profit as Myanmar opens

(Reuters) – Southeast Asian carriers are set to profit from the expected surge in the number of leisure and business travellers to Myanmar as it re-emerges from political isolation, but poor infrastructure is likely to slow development.
The former Burma, one of the most isolated countries in Asia, is being welcomed back into the international fold after two decades of sanctions, thanks to democratic reforms including the release of political prisoners by President Thein Sein.
Thai Airways International PCL THAI.BK, SilkAir, AirAsia Bhd (AIRA.KL), and JetStar, have flown to Myanmar’s capital Yangon for a number of years and are seen as the main beneficiaries from the political shift in the country.
“This is a huge country which will provide new growth for airlines, especially the low cost carriers,” Standard and Poor’s analyst Shukor Yusof said, adding that the yields that carriers are enjoying on Yangon routes have been good.
With its pristine beaches and unspoilt cultural sites, Myanmar is an attractive destination for travellers jaded by the rapid development seen elsewhere in Southeast Asia, and tourist numbers are already rising rapidly with potential for much more growth.
During the 2010-2011 (April-March) fiscal year, 424,000 people visited Myanmar, according to official data. That compares with 19 million tourists that its neighbouring Thailand attracts each year.
The Thai affiliate of Malaysian budget carrier AirAsia, Thai AirAsia, said it was looking to add new routes into the country’s inland cultural centres. AirAsia flies to Yangon from Bangkok and Kuala Lumpur.
“We are considering opening more flights and destinations in Myanmar. We’re only operating to Yangon at the moment, but we’re currently looking at Mandalay and Bagan,” Thai AirAsia CEO Tassapon Bijleveld told Reuters.
Silk Air, the regional carrier of Singapore Airlines Ltd (SIAL.SI), and JetStar, a subsidiary of Qantas Airways Ltd (QAN.AX), said they have no current plans to add flights to Myanmar but will monitor any opportunities to expand.
John Rachmat, Singapore-based airline analyst at RBS, said the thawing diplomatic climate would not necessarily translate into new routes being opened in the short term, as airlines would want to make sure that there would be any reversal in the political stance of Myanmar.
“Opening of a new route is quite an investment for an airline and for them to do this they want to make sure that the risk are manageable,” Rachmat said.
INFRASTRUCTURE CONSTRAINT
Political risks aside, analysts said boosting the capacity to Myanmar would not be easy due to various infrastructure problems in the country.
Years of economic mismanagement by the military, coupled with U.S. and European sanctions imposed due to the regime’s human rights abuses, have left Myanmar in poverty. A third of its estimated 60 million people live on a dollar a day.
Currently there are only three airports that can accommodate single aisle commercial aircraft like Airbus (EAD.PA) A320 or Boeing (BA.N) 737, a popular choice of among airlines to start a new route, none near the country’s nascent beach centres such as Thandwe.
Standard & Poor’s Yusof said this could provide an opportunity for Changi Airport Group, the operator of Singapore’s Changi Airport, to engage in management contract to improve the airports in Myanmar.
Analysts said the benefit could also be extended to other supporting business such as aircraft maintenance and passenger support services.
Some major hotel operators, including Starwood Hotels & Resorts (HOT.N) — which runs chains such as Westin, Sheraton and Le Meridien — and Marriott International (MAR.N) had said they wanted to start running hotels in Myanmar.
(Additional reporting by Sinsiri Tiwutanond in Bangkok and Mark Tay in Singapore; Editing by Alex Richardson)