ANALYSIS: ANA’s Myanmar foray paves way for more foreign investment

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Japan's All Nippon Airways (ANA) has become the first foreign carrier to invest in Myanmar's airline industry and is likely to open the way for others to follow.

Subject to approvals, ANA will pay $25 million to take a 49% stake in privately-owned domestic carrier Asian Wings Airways, which was established in 2011 and recorded revenue of $17.8 million for the fiscal year ending March 2013.

With ANA at its side, Asian Wings has much bigger plans ahead. In its statement on the acquisition, the Japanese company says that the carrier plans to expand its fleet from one Airbus A321 and two ATR 72s presently to 10 A320s by 2018.

Asian Wings also plans to launch international services from October this year, making it the third local carrier to do so. ANA adds that it will also increase its services to Yangon from three times a week to daily from the end of September.

Significantly, ANA's move comes less than two weeks after the Myanmar's civil aviation department granted provisional air operator's certificates to four startup carriers. That is on top of nine existing carriers, including Myanma Airways, Myanmar Airways International and Golden Myanmar Airlines.

None of the existing airlines have any significant scale to their operations. Flightglobal Ascend data shows that the country's total fleet of commercial airliners is comprised of 24 turboprops and 11 commercial jets. Government-owned Myanma Airways is the largest carrier by fleet size, albeit with only eight aircraft in its fleet, including two recently delivered Embraer 190s.

Nevertheless, the market has been growing strongly, even before the reforms that have opened up the country since 2011. Flightglobal's Capstats database shows that seat capacity from Myanmar has been on an upward trend since 2009, while over the same period, ASKs have more than doubled.

Most of that growth, however, has come from overseas carriers adding services to Yangon. FlightMaps Analytics data shows that on the biggest international routes from Myanmar - such as Yangon to Bangkok, Singapore and Kuala Lumpur - home carriers play a much smaller role compared to the likes of AirAsia, Singapore Airlines and Thai Airways.

Source: FlightMaps Analytics

Source: FlightMaps Analytics

Source: FlightMaps Analytics

That will likely give Asian Wings and the other Myanmar carriers room to expand in the market. However, the other carriers are also likely to call on foreign airline investors to assist with capital and expertise to grow their operations.

VietJet Air's chairwoman Nguyen Thanh Ha recently said that the airline "is establishing many joint ventures in many countries", and is said to be looking closely at potential investments in the Indochina region.

Given the strong political and economic ties between China and Myanmar, carriers such as China Southern Airlines may also be in the position to invest in the market.

So far, Myanmar's government has indicated that it welcomes foreign investment in the broader aviation industry. It has been quick to seek foreign participation in a number of airport projects, and recently selected a consortium led by Korea's Incheon Airport group to develop and operate a new international airport at Hanthawaddy.

Other tenders for the redevelopment of Mandalay and Yangon International airports are still under evaluation. Nevertheless, they have attracted responses from airport operators in Singapore, France and even Germany, who are keen to tap into the country's growth potential.

No doubt other airlines are watching ANA's move keenly and may soon announce their own plays for a slice of the Myanmar market.