ch-aviation interview: MIAT Mongolian Airlines

MIAT Mongolian Airlines is the flag-carrier of Mongolia and is based in the capital Ulanbaatar. Though it officially launched in 1956, the carrier can trace it roots back to the early 1920s when the country’s Air Force was founded. This year, the airline is celebrating sixty years of service.

As a Soviet satellite and for the duration of the Cold War, MIAT operated a variety of Soviet-made aircraft including Antonov An-2s, An-24s and 26s, Ilyushin Il-14s, and later Tupolev Tu-154s. It was not until the collapse of the USSR and the advent of multi-party democracy that MIAT received its first Western-manufactured narrowbody aircraft, a B727, in 1992 and its first widebody aircraft, an A310, in 1998.

Though it was originally mandated to operate domestic flights, MIAT has transitioned into a regional and international carrier with its last local service operating in 2009. Since then, it has focused on foreign markets employing a relatively modern fleet of Boeing 737NextGens and B767s.

ch-aviation’s Niels Trubbach had the opportunity to meet with MIAT‘s CEO Tamir Tumurbaatar, its vice president (Operations) Ganbold Namsraijav, and Andreas Christodoulides from Cypriot brokerage firm ZELA Aviation, appointed GSA of MIAT on ACMI, in Prague where he discussed MIAT’s status quo and its future plans.

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Tell us about MIAT’s agreement to lease its B737-800 to Czech ACMI/charter operator, Travel Service. This isn’t exactly something you hear about every day!

We have been working with Travel Service since 2015. This year is the second summer we will be operating in Europe and the overall intention is to deploy a part of our capacity on global ACMI contracts on a year-round basis. But even though we have yet to sign an ACMI contract for the upcoming winter season, we can always ferry the aircraft back to Mongolia and use it there.

So in order to build up our ACMI business, we have signed a co-operation agreement as GSA with Zela Aviation from Cyprus which has been supporting us. We see great potential in the leasing sector in terms of increased revenues and profits.

Aside from our core business as a scheduled operator, our ambition is to make Mongolian Airlines a known and respected brand in this particular market segment.

Were you faced with any major challenges when starting operations in Europe?

A big advantage for us as Mongolian Airlines is that we are an IOSA-certified carrier. Furthermore, few of our aircrafts are registered in the European Union. So those two factors together made it relatively uncomplicated to start operations from the Czech Republic.

What makes Mongolian Airlines a great ACMI partner?

We are a very experienced airline and are used to operating in tough conditions. We are therefore a good choice for airlines seeking a reliable capacity provider with excellent quality and safety performance. Furthermore, we are a relatively flexible carrier. In terms of cost, there are cheaper operators but we can still offer very competitive pricing. All things considered, you can say that we offer very good value for money.

Looking at recent media reports, the Mongolian aviation market appears to be in crisis at the moment. What are your thoughts on this?

Passenger demand and the overall development of the airline market is always directly related to a country’s economic growth. Mongolia, like other mining-dependent countries, has been hit hard by very low mineral prices that have rocked the market since 2012. So naturally, this has led to a decline in demand. But, on the other hand, tourism is picking up and that has made up for some of the decline in business traffic.

One of your competitors, Hunnu Air, has now switched to domestic operations. How would you characterize the rise and fall of Hunnu Air?

Currently, there are three scheduled carriers active in the Mongolian market: MIAT; Aero Mongolia; and Hunnu Air. While they may be different companies, we have no intention of competing with them, preferring instead to cooperate.

We are not really sure about what Hunnu Air was aiming for when they started international flights. We competed with them on some routes, but in 2014 they withdrew from that market segment, returned their A319s to their lessors. They are no longer a competitor.

But, during the brief period when they did fly internationally, they obviously lost a lot of money. They were about to fly to Paris with an A319 making two stops which would have been very difficult to make work when compared to our B767s. They appear to have now revised their strategy based on domestic Mongolian operations and it seems to be working out for them.

What is interesting though is that initially, Hunnu Air was named Mongolian Airlines Group. It took a legal battle and many months before we could force them to change their name.

MIAT Mongolian Airlines Boeing B767-300 – Copyright: Tis Meyer – www.planepics.org

From a European perspective, Mongolia is known primarily as a tourist destination. How important is leisure traffic to you on intra-Asian routes?

Mongolia is a unique and popular leisure destination with tourists coming from all over the world to visit it; not only Europe and the United States, but Asia as well. The number of tourists is steadily increasing and therefore passenger throughput is increasing as well.

But while it has great, albeit underdeveloped, potential, the tourist market is very seasonal. While in summer, the leisure segment can constitute almost half of our passengers, during the winter, when it is very cold, those numbers plummet.

What other market niches are important to MIAT?

Aside from the business travel and tourist markets, a very important segment to us is that of the Mongolian diaspora. You see, there are large Mongolian expatriate communities in places like Berlin and Seoul so naturally that leads to strong demand for flights back home.

In Europe you serve two destinations that are relatively close together: Berlin and Frankfurt. Do you have any plans to consolidate your European long-haul operations into a single, all-encompassing destination?

Berlin sees strong demand for point-to-point traffic mainly due to the large Mongolian diaspora living in the city. As such, its core market segment is mainly driven by ethnic passengers. And as we route the flights via Moscow and have permission to sell tickets on both sectors, we can increase the number of passengers and revenue. This summer, we will perform three flights per week.

But while Berlin is great as a destination, it is not an ideal transfer hub. So to that end, we launched Frankfurt and are developing it into our local transfer hub for passengers from all over Europe, and beyond, heading to Mongolia. Currently, Frankfurt only operates during summer given how reliant it is on leisure traffic.

So as you can see, the two destinations target two different consumer groups and as their market dynamics are mutually exclusive, it makes sense to retain both of them.

Copyright: MIAT Mongolian Airlines

Do you have any plans to expand your longhaul network?

In Europe, we would like to serve London. We had initially scheduled it for 2017 but have been forced to postpone it. Direct London flights would cannibalize our Frankfurt route and there simply are not enough passengers at the moment to ensure either destination will have sufficient demand.

Right now, our expansion is focused on Asia where we recently launched Singapore and are considering resuming flights to Bangkok. Also we want to grow through code-shares, especially out of Frankfurt where we are already in discussions with various airlines.

MIAT no longer offers domestic services. Do you co-operate with any domestic carriers and have you considered venturing into the market again?

There are two domestic airlines in Mongolia – Aero Mongolia and Hunnu Air. We do not want to compete with them but instead have chosen to build a good relationship with both domestic carriers. This summer, for instance, we will operate selected domestic routes for

and on behalf of Aero Mongolia which currently has no jet aircraft of its own.

Aside from your three 737-800s, you also operate two 767-300(ER)s one of which is relatively new while the other is almost 20 years old. When do you plan to replace it?

The lease agreement for our older 767 expires in September 2018 so that is when we will have to get a replacement in place. We are considering the 787 but that really depends on how things pan out for us. Overall, we reckon we have a bright future ahead of us so there should be room for expansion. But, as our newer 767 is owned, we might also opt to acquire another new 767 in order to keep the number of aircraft types in our fleet to a minimum. But conversely, as we are working on becoming an important player in the longhaul ACMI market, we could also see ourselves having the two 767s flying charter contracts while the 787 operates our scheduled services.

The scenario with our B737s is quite similar. We have ordered the MAX but have not yet decided on how to continue with our existing B737-800s. It really all depends on future developments.

MIAT Mongolian Airlines Boeing B737-800 – Copyright: Tis Meyer – www.planepics.org

Your two 767 aircraft have different configurations. Why is that?

The older of the two aircraft is leased and its cabin layout is fixed. As we own the newer aircraft, we were able to select the configuration prior to delivery. But while we would actually like to have both aircraft sporting the same layouts, the high cost of refitment would far outweigh any advantages. So we’re stuck with two different configurations for the time being.

MIAT is state-owned. What is the Mongolian government’s main interest in the airline?

Mongolia relies on air transport given that it is such a big country. The government wants us to ensure good connectivity and therefore maintains ownership for strategic reasons. But despite its shareholding, it wants us to be self-sustaining and is therefore unwilling to subsidize us. Soon, a new airport will open in Ulanbaatar which will make flying easier for us, but will also result in more foreign airlines coming thereby leading to stronger competition.

What are your goals for the next years?

Overall, our goal over the next few years is to grow and expand. As the national flag carrier, MIAT Mongolian Airlines should connect Mongolia with rest of the world and to that end, we want to improve Mongolia’s connectivity by adding more destinations especially through code-shares with other carriers. Aside from scheduled operations, we are also determined to become a major ACMI and capacity provider.

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