Inside the Asian Wings, ANA Deal

By Kyaw Hsu Mon 3 September 2013

RANGOON — Burma’s Asian Wings Airways is selling a 49 percent stake to All Nippon Airways (ANA), Japan’s largest airline, for US$25 million. Asian Wings began flying domestically in 2011 and plans to begin international flights soon. The airline’s executive director, Lwin Moe, sat for an exclusive interview with The Irrawaddy this week to discuss the deal with ANA.

Question: When did you decide to work with ANA, and why?

Answer: We had plans last year—we were in discussions with All Nippon Airways for a year. The reason we are going to work with ANA is to prepare for the future Asean open skies policy with all 10 Asean countries in 2015. [The policy aims to boost regional connectivity by lifting restrictions on flights within the 10-nation economic bloc of the Association of Southeast Asian Nations, known as Asean.]

Q: Did you propose the collaboration?

A: Actually, we both learned about each other at that time. ANA was surveying which [airline] would be able to work with them, and we had several discussions. We expected that if we worked with them, we would benefit in 2015, with the open skies policy. We also studied which international airlines would be suitable for us, and finally we made a decision.

Q: I heard that ANA plans to buy 49 percent of your shares, leaving you 51 percent. How did you manage that agreement?

A: We are following government policy—that’s why we have 51 percent. According to law, local investment had to be 51 percent. [This is according to a former law. The new foreign investment law, which was passed earlier this year, allows 100 percent ownership of businesses in some sectors, and up to 80 percent ownership in certain sensitive sectors.]

Q: Can you speak in more detail about your plans with ANA?

A: We really need to have more detailed discussions with ANA, we need to write down detailed strategies, because so far we have only discussed the share equity and how much they are taking—we only spoke about running regional destination routes, as well as a five-year project plan. In 2018 we will run flights on 10 aircrafts to the most famous regional destinations. But we need to have more detailed discussions.

Q: Burma’s airline sector is opening up again, collaborating with international airlines, as the country transitions from military rule. What challenges have arisen between the government and international airlines?

A: We haven’t seen many difficulties between them, but as you know, we needed to negotiate with the relevant ministry, the Ministry of Transport. We had to submit our proposal for what we wanted to do, and we informed the Myanmar Investment Commission that we would work with All Nippon Airways. So we had to wait a little time for permission from the MIC, and we spoke to the chairman of the central bank, too.

Q: How much will Asian Wings invest in this project, if ANA will invest US$25 initially?

A: At this stage of investment, we will follow our rights in the agreement. ANA’s investment is $25 million, that’s the amount expected for the next five years, and we recognized that as 49 percent. We are not ready to tell the detailed amount right now.

Q: When will projects with ANA start?

A: We expect after the first quarter next year.

Q: What are the first international destinations that Asian Wings will service, starting next year?

A: The first will be Thailand’s Bangkok, and some prime areas, such as Malaysia and Singapore. Asean nations offer a good market.

Q: How will the Asean open skies policy benefit the local airline sector?

A: Actually, the [Burma] Department of Civil Aviation is the responsible department for this, so they know more details than we do. But as a local airline, we need to prepare to maintain our market share, after restrictions are eased for international airlines to work here. We will need to prepare and build a mutual understanding with each other, as they will bring many foreign passengers into the country.

There are two main points of the open skies policy. International airlines can bring many passengers to all entry points, so we—the domestic airlines—will have a chance to attract more passengers. That’s one benefit. But if these international airlines service local routes—as they probably will—our domestic market share could fall. It’s hard to say whether I have a positive or negative view on this issue.

Q: The Southeast Asian Games (SEA Games) later this year will be hosted in Burma, as will the Asean Summit next year. Do we have enough airline services here?

A: Regarding the SEA Games here, the government asked us to run the Yangon [Rangoon]-Naypyidaw route at that time. We prepared that, we are not hesitant to do that, we will do as much as we can. I heard Thai Airways is going to land directly in Naypyidaw, and MAI [Myanmar Airways International] also. But it is OK if they are going through Yangon to Naypyidaw.

Q: What is the new flight schedule this year?

A: We are going to run the charter flight to Chiang Mai [in north Thailand] and Bodh Gaya [in India], depending on the market. We are going to buy new ATR aircraft soon.

Q: I just want to confirm whether it is true that U Tay Za (one of Burma’s best-known tycoons) is behind the Asian Wings company. Is he a major shareholder?

A: I can say this company was established and is standing separately. We started as a venture between founder U Than Oo from Sunfar Travels and Tours Company and us, Asian Wings. U Than Oo had 40 percent ownership and we had 60 percent. That has been the situation until now. We plan to call a shareholders meeting after having a detailed meeting with ANA.