It is crucial to have an affordable, accessible air transport service for every country, especially Mongolia, which is one of the 20 largest countries but has the lowest population density in the world. Its airspace management has to be transparent, healthy, punctual, far-sighted and steady just like a clear blue sky with no clouds.
However, corruption in Mongolia has moved beyond land, soil, water, government halls and has already reached the sky. Air transport sector management in Mongolia has been lost in a thick fog and is flying blindly posing a possible threat to the security of passengers.
A VISIONLESS SECTOR
Civil air transport is a sector that requires a huge initial investment; return on which is comes marginally in small amounts for many years after. Therefore, this sector needs a policy with a long-term vision.
China has made Urumchi, the capital of Xinjiang Uyghur Autonomous Region, into a hub for “SkyTeam”, an international airline alliance, in the North Asia region. It has centralized airline passenger flows from small cities and has implemented a far-sighted policy for many years.
If Mongolia is thinking of making Ulaanbaatar a hub for passengers from Uzbekistan, Kazakhstan and other Central Asian countries flying to North America over the North Pole, or to Southeast Asia, it should already be working to establish a partnership with “Star” alliance. Also it sufficient transit capacity in the new airport should have been planned and the creation of tourism infrastructure for future demands.
Or, if Mongolia wants to create a new air cargo hub for international freight transport that links North America with Southeast Asia, it should have already started implementing a long-term vision policy establishing agreements with North American small-city airports instead of big ones. For example, Buffalo city instead of New York City, which would enable the distribution of cargo by trucks there, giving Mongolia an advantage in transporting air freight with a relatively low price.
However, Mongolia’s civil aviation is being developed at the slowest rate and is incapable of meeting the needs of our time. Even though we have talked about building a new airport with a soft loan from Japan for five years, the foundation stones have only been laid this week and a wooden stick has been erected at last just before the election. They stated that the 50 kilometer highway would be finished before the last election. It looks like it is going to take another ten years to build the infrastructure and other services that are needed.
Also, what if the Civil Aviation Authority (CAA) will be the one to manage the new airport? CAA manages airports, the main body of air transport, even though its duty is to monitor and to regulate. Therefore, all of the 23 airports in Mongolia are run with a loss, incapable of meeting the needs of air services, and they do not take care of the interests of local people and regions. The State Professional Inspection Agency confirmed that the CAA had losses of MNT 17.5 billion in 2009 and MNT 28.5 billion in 2010. Passengers always wait for their luggage for longer than the time it takes to fly to Beijing from “Chinggis Khaan” airport, because there is only one baggage carousel.
There are no talks or discussions about how the new airport will connect to tourism flows and have a competitive tourism industry. No information about transit capacity of the new airport has been planned, including transit passenger related services.
Aware of the fact that aviation fuel is the most important expenses item in the civil air transport sector, the CAA worked together with the Petroleum Authority of Mongolia and gave the right to supply fuel to only one company, a joint Mongolian-Russian company.
LACK OF LEADERSHIP
The administration of the only national flag carrier company in Mongolia’s air transport sector changes after every election. People close to the winning party’s administration get these positions.
The State Property Committee must represent the citizens (or state) in the Board of Directors of MIAT (Mongolian Airlines). However, no one is held responsible when MIAT and more than 20 other so-called State Owned enterprises or state shareholding companies are run with great losses. Why should an organization like this that conceals information that is supposed to be open to the public and encourages budget deficits exist? Or do we need sectoral ministries?
The administration that are chosen with political criterion do not look further ahead than one or two elections. Every action that is made is within this short term period and it shows that there is no leadership or leader in Mongolia’s air transport sector.
The clearest example is when a group of people appeared out of nowhere and managed to acquire the same name as MIAT. They operated their first flight on January 3rd from Ulaanbaatar to Bayankhongor province and, only nine days later, they acquired the right to operate the most important international destinations (from Ulaanbaatar to Hong Kong, Tokyo, Irkutsk, Ereen, Tianjin, Urumchi, Shanghai, Jeju, Hohhot). The minister-in-charge gave the license, in the form of a regulation to them, just a day before his resignation. But then, only a few days later, the newly-appointed minister caused the government to make a decision to postpone the “Mongolia Airlines company’s proposal to the Ministry of Foreign Affairs and foreign civil aviation organizations regarding the license for operating international flights and to resolve this issue in the near future based on the constitution of legal regulations associated with international flight route allocation and airline appointments”. The government then cancelled those licenses.
The related foreign organizations are confused trying to figure out the next minister’s move. The company Mongolian Airlines is facing huge losses because it has already rented and brought into the country two large-body and two small aircrafts and do not currently have the right to operate international flights and it has to keep those expensive planes on the ground.
MIAT: A TRANSNATIONAL CONSPIRATOR
It has been almost 20 years since MIAT, the national carrier of Mongolia, has been specially supported by government policy. Even though it is said they are facing losses, MIAT’s financial statement is always concealed and although it is said to be a shareholding company it is fully owned by the government. Furthermore, no one knows who is on the Board of Directors or who the members are. Originally, the term “State-owned company” meant that it is a public company, which requires all of the company’s information to be on their website in accordance with the law on information transparency. However, MIAT executives are apparently unaware of this fact and its administration keeps its distance from private companies.
This company serves the state leaders and officials as a priority rather than ordinary people in exchange for special conditions and other supports. They do everything they can to oppose the “open sky” policy and to retain their monopoly right, which became their sole goal and obsession. It looks like it is going to be hard to believe in tomorrow when the government changes the MIAT company’s administration almost every year, brings in foreign management, casts them out, and demands to bring them in again. Twenty years of market economy is enough time to have a vast flight network that goes around the globe with forty airplanes, not four. MIAT is getting old in its cradle. How much longer are we going to wait for a mature MIAT?
Three to four private companies are competing to operate flights in domestic routes abandoned by MIAT because it was apparently profitless. However, those companies are meeting the demands of the market and are managing to earn profits.
Instead of creating new routes for passenger and freight transport, MIAT has only being trying to retain its monopoly right in profitable routes through transnational conspiracies. We, the passengers, are becoming victims of this faulty policy of MIAT’s.
Afraid of new carriers, the MIAT company operates flights from Ulaanbaatar to Beijing and Ulaanbaatar to Seoul in cooperation with only one other company. Korea’s KAL and Mongolia’s MIAT have worked with each other’s civil aviation authorities in order to set a monopoly price, which is ripping off our customers, and to prevent other companies from coming into the market. They operate 11 flights a week and are incapable of adding an additional three flights during the rush in summer (according to an assessment by the Civil Aviation Authority).
The average price one pays for an Ulaanbaatar to Seoul round-trip ticket in economy class is MNT 820,000. A study reveals that, if each country has two companies flying this route, customers would pay MNT 480,000, which is 42% cheaper (Impact of International Air Service Liberalization on Mongolia, Economic Policy and Competitiveness Research Center, 2011). Today, tickets are so rare even when one is willing to pay the high price.
Even though the Korean Anti Monopoly Agency demanded to stop one carrier from operating more than 5 flights a week, setting a monopoly prices and not following the rule to welcome additional carriers, nothing has changed. It is violating our right to choose the best and cheapest service.
The only solution that is available to change this situation is the “open sky policy”, or the liberalization of airspace. This policy was first implemented in America during the 1970s and Europe also introduced it afterwards. As a result, airline tickets became much cheaper (34% cheaper in the European Union) and flight capacity rapidly went up. Owing to competition, new directions for tourism emerged, which eventually caused positive changes in domestic economies.
If Mongolia implements this policy, international flight traffic will increase by 112% in 2-3 years and tickets will be 42% cheaper, which will enable customers save MNT 158 billion.
Furthermore, the number of passengers will increase by 117,000, which is 21% more than that of 2010, and USD 94 million will be coming into Mongolia’s economy. This change will create 21,540 new jobs and will inject USD 189 million in total to our economy, which will bring a 2.5% growth in our GDP.
Minimizing flight regulations does not mean decreasing the security. How would a company given the right to fly passengers (Chinggis Airways, license granted in July, 2011) but that has never operated a single flight and has no airplanes fulfill this duty?
The civil air transport sector can develop only when there are proper regulations and competition. This is a business that is connected with people’s lives, their security and requires strict responsibility and duties. Therefore, the current time needs this sector’s operations to be far-sighted, clear, and associated with any group that is globally competitive.
The time has come for us to stop this sky conspiracy and start implementing the “open sky policy”.
Translated by B.Amar