Tamir Tumurbaatar, President and CEO of MIAT Mongolian Airlines, tells Graham Newton about the massive changes looming on the airline’s horizon
Are the business plans you put in place for the airline proving successful?
We have made a small profit for the past two years, which is related to the success of the mid-term business plan that started in 2014.
Until 2012, Mongolia was experiencing double-digit economic growth. But commodity prices dropped and, as we are an extraction economy, our growth understandably levelled out. But prices are starting to go up again, and we are seeing renewed investment in the country.
That has sparked a revival in traffic and the first quarter 2017 passenger figures are very positive.
Basically, the mid-term business plan was about cutting unnecessary expenses and enhancing our sales through the expansion of our distribution channels and the development of new products and services.
Clearly the potential for increasing inbound traffic from our nearest neighbor is huge
We joined ARC in 2015, which was a major step forward as that made our seats available in all the major online travel agencies. We also improved our Chinese coverage, which, of course, is a very important market for us. By 2020, there will be 200 million outbound Chinese tourists.
At the moment, there are fewer than one million visitors to Mongolia each year from all countries. So, clearly the potential for increasing inbound traffic from our nearest neighbor is huge.
It must be admitted that the relatively low fuel prices have also been extremely important to our turnaround too. We have to import all our fuel, which means it is a much higher percentage of cost than it is for most airlines.
How will you build on this platform?
We currently operate a fleet of six aircraft and we have four Boeing 737-8 MAX on order to be delivered in 2019 and 2020. These will be used for replacement and expansion.
We are also transitioning our passenger service system to an Amadeus platform, which we think will give us greater flexibility and opportunities in the future.
The link between these two major transformation programs is a desire to improve the customer experience. We want to be a four-star SkyTrax carrier. But, just as crucial to our long-term plans, we want to achieve that without increasing our overall budget.
The emphasis on keeping control of our costs will remain. That discipline must not be lost even when you’re making money.
And always the key to a successful airline is being safe. We have to renew our IATA Operational Safety Audit and IATA Safety Audit for Ground Operations registrations in 2017 and that must be our main focus. Even with all the other work going on, safety is far and away the top priority.
Can niche carriers survive in the modern aviation market?
We are a small airline. We have six aircraft and fly to seven international destinations. We are 100% state-owned. But we have never had a subsidy from the government.
It is never a good idea for politics and business to mix. That means it is essential for us to find a way to thrive in a competitive market.
The choice of the European hub and the choice of an airline to partner with go hand-in-hand
One idea is to increase frequency on existing routes. These are routes where we have market presence and our brand is known. That will keep us strong.
Then, the expansion of the network will come mainly through partnerships with other airlines. We are still looking at how we might deploy our new aircraft. In Europe, for example, we would want a hub that offers excellent onward connections.
The choice of the European hub and the choice of an airline to partner with go hand-in-hand. We will look at all the possibilities.
It will also be prudent to diversify our revenue sources. Previously, 90% of our revenue came from passenger transportation and that made us extremely vulnerable to external shocks. Now, we are developing our ground handling, our maintenance division, and our cargo.
Are you getting the help you need from partners in the aviation value chain?
The airline is getting a lot of support. There is going to be a new Ulaanbaatar International Airport next year, for example. That will be very useful in developing each of the new revenue segments.
Of course, when you factor in the new airport with the new aircraft and the new IT system, you can see that the airline is undergoing a major transition. To ensure we don’t lose sight of our goals, new products and services must be perfectly aligned with the main areas of growth.
The airline must appeal to the corporate sector for routes to Hong Kong and Seoul, where we are already strong and we are working closely with the government to boost tourism to the country.
The Civil Aviation Authority of Mongolia has also played its part in helping us improve our operational efficiency and reducing greenhouse gas emissions.
The implementation of performance-based navigation routes is estimated to provide annual reductions of some 240,000 nautical miles, 24,000 flight minutes, and 2,250 tons of fuel burn compared with the previous infrastructure.
So how far and how fast can the airline grow?
There has to be a balance between exploring new opportunities and ensuring MIAT remains relevant to the markets it serves.
The country’s civil aviation policy is to open up the aviation market step by step. We need to be prepared. But we think we have an advantage in the expertise we have in the Mongolian market. We have been flying here for more than 60 years and the knowledge we have will be hard for a competitor to replicate.
Although the airline may be small in world terms, in Mongolia we are one of the major companies
We are a small market but our strategy is looking at how to develop the regions and not just Ulaanbaatar. Mongolia is a landlocked country between Russia and China.
We need to help the country develop its economy. Because although the airline may be small in world terms, in Mongolia we are one of the major companies.
That means we have a responsibility to make a contribution to the country and to make air transport affordable so that the country can reap the full benefits of air connectivity.
Is MIAT able to be an actor on the global aviation stage?
We would always like to have more attention. It is important for smaller carriers to be able to influence global thinking in the industry.
Issues, such as safety, affect us all. And while we are a small carrier and the Mongolian aviation market is small, this is a big country.
In airspace terms, we are a big player. Our air traffic control is of a global standard and we have no problems in setting up new routes.
Will trends in the industry help or hinder your performance?
I have mixed feelings about trends in the industry. There is real potential in the consolidation and mergers that we see taking place in many other regions.
The strategy must be cohesive and yet explore new avenues all the time
But, as a small, state-owned carrier, it is very hard for us to position ourselves correctly to be able to take advantage of any opportunities. And even in Mongolia we are feeling the impact of low-cost carriers coming in to take market share.
Finding the right strategy with so many challenges is hard.
What is clear to me is that traditional routes, traditional marketing, and traditional processes are not working any more. An airline must be creative and think about the business in new ways.
As mentioned, when we look at our European destination we are also thinking about finding the right partner.
The strategy must be cohesive and yet explore new avenues all the time. We always work hard to innovate and think creatively.