Mongolia aviation: liberalisation, end of MIAT protection needed to drive growth at new airport
Mongolia’s stagnant aviation market is at an important juncture as the country prepares to open a new airport at the capital Ulaanbaatar in May-2018. In order to drive growth and ensure the new airport does not turn into a white elephant, the government needs to adopt a new more liberal aviation policy and stop protecting its flag carrier.
Mongolia’s international market has not grown in the past four years due, in part, to protective policies. In the latest examples of protectionism, Mongolia has refused to allow Kazakhstan’s Air Astana to launch flights and has not approved more capacity for Turkish Airways that is needed for new nonstop flights from Istanbul.
The Mongolian market has huge potential, and increased tourism would have an overall economic benefit far greater than the negative impact on the government owned MIAT Mongolian Airlines from increased competition. With the new airport about to open, it is even more crucial for Mongolia to liberalise – not only by opening up to all interested foreign airlines, but also by ending MIAT’s monopoly on ground handling services and making sure the airport’s charges are low enough to support new flights.
- Mongolia is a small aviation market, with only 1 million annual passengers
- Mongolia domestic market grows from very small base
- Tourism in Mongolia has been flat over the past decade
- International traffic has been flat since 2012
- China and Russia are Mongolia’s largest source markets, but have been declining
- South Korea and Japan visitor numbers have not increased over the past decade
- Korean Air and Air China have the largest foreign airline presence in Mongolia
- Korea is Mongolia’s the largest international market, based on seat capacity
- China and Russia are the other main markets
- Turkish blocked from adding capacity to Mongolia
- Air Astana blocked from launching service to Mongolia
- Air Astana and Turkish could help drive Mongolia-Europe growth
- Protecting MIAT is not in Mongolia’s overall interest
- Opening of new airport makes liberalisation even more pressing
- Mongolia could support several new routes and airlines
- Airport fees need to remain low
- Mongolia should end MIAT’s monopoly on ground handling