Profitless Air Bagan plans to add Airbus to its fleet

Monday, 13 September 2010 23:16 Myint Myint

Chiang Mai (Mizzima) – Air Bagan is planning to add an Airbus 320 to its fleet by the end of this year, according to sources close to the airline’s parent company that is run by a junta crony businessman and arms dealer.

Tay Za, the chairman of Air Bagan, Air Bagan (the company) and Htoo Trading, the joint owners of Air Bagan, are all entities against which the United States and British governments have imposed sanctions for their close ties to the repressive Burmese military junta.

Taz Za’s Htoo Trading runs the biggest private airline in Burma, believed to be operated on behalf of Burma’s military junta. Air Bagan’s fleet comprised three two ATR 42-320, three ATR-72, two Fokker 100 and two grounded A310.

The A320 comes from a family of short- to medium-range, narrow-bodied, commercial passenger airliners that seat about 150 passengers.

He had wanted to sell his two grounded A310 and the two Fokker aircraft and had been shopping for the alternative A320 plane in preparation for the post-election era, the Htoo source said.

Air Bagan had been running at a loss for six consecutive years but was expecting to recover by employing different revenue streams, the company insider said.

However, the dollar billionaire was unconcerned about the losses as the airline in 2008 had been awarded a no-bid contract for 30 per cent of Myanmar Airways International (MAI) ground-handling business, the source said. MAI had not called for tenders, but had handed it over to Air Bagan.

Despite the US-sanctions listing, Air Bagan normally buys aircraft spare parts from Singapore using under a different company name, but at a premium, the source said.

The two A310 had been parked at Rangoon Mingalardon airport since 2007. An airline crew member said they were there because Air Bagan had bought from China the aircraft that had been remodelled to carry cargo but had never put them in the air over safety concerns and its inability to find a willing insurer.

He said it was believed “Than Shwe encouraged Tay Za to buy the Airbus planes but after he was unable to use them in his fleet, he cried … for compensation, and was then handed sweetheart business contracts [from the junta] to recover his losses.”

A businessman in Rangoon close to Htoo Trading confirmed the investment was suggested by Than Shwe himself, even though Tay Za had insufficient funds for only one of the planes in the Foreign Exchange Bank at the time. Renovations including new paint schemes for the two A310 done in Malaysia added to the overall expenditure.

Tay Za had for a while expressed interest in investing in the airlines business, and with Than Shwe’s backing, had no real challengers. Air Kanbawza run by banker Aung Ko Win would be ranked as his nearest, but connections were so close at the top of Burma’s military oligarchy that it was more a case of sharing the spoils among a cosy cartel rather than any real contest, observers said.

He had lobbied to purchase MAI but aircrew suggested he develop a new airline. MAI was then unhappy with Tay Za’s failed promises of giving the debt-ridden state carrier an investment boost but managed to lease a Fokker to MAI at a profit, an airline crew member said.

He had also reportedly tried to buy three 10-year-old Boeing 737-400 planes from Hunan Airlines, a mainland China regional carrier. Hunan refused as the sale would have breached the terms of US sanctions.

Tay Za also bought a Eurocopter EC130 from Singapore recently for his resort operations without an air operator’s certificate.

Such a certificate is the approval granted from a national aviation authority to an aircraft operator to allow it to use aircraft for commercial purposes. This requires the operator to have personnel, assets and system in place to ensure the safety of its employees and the general public.