Couldn’t bring profit even after updating our air routes
- By Amarjargal Munkhbat -
- Feb 25,2023
The aviation industry of Mongolia is facing a difficult challenge. Better situation was expected with the threat of the global pandemic loosening and international airway restriction and regimes calming down, but the air transportation “ban” worsened the situation. The crisis, conflicts, and restrictions caused by the war between Russia and Ukraine have directly and indirectly affected the economy of many countries, including tourism and aviation, but Mongolia is suffering the most. This is because the main and short routes of our country, which receive tourists from the international market, especially from Europe through the territory of Russia and the flow of passengers have stopped due to restrictions caused by inter-state conflicts.
Readers may recall that a photo showing air traffic flow recently went viral on social media. Even though the airspace belonging to the territory of Mongolia was almost empty, a large number of planes were seen flying in the area around it, as if there was a traffic jam in the air. That picture is not an exaggeration or fiction, it is a fact of the current situation. The Civil Aviation Authority (CAA) said, “The number of aircraft passing through Mongolia has decreased significantly in 2020 to 2022. Since February of last year, many countries set a ban on Russia’s airway due to the dispute currently happening between Russia and Ukraine. Currently, air carriers from China, Russia, UAE, and Ethiopia pass through our country. In January 2022 and 2023, the number of aircraft flying over the territory of Mongolia decreased by more than 80 percent compared to the same period in 2019,” they reported.
Airline revenue has grown at a steady ten percent rate annually through 2019. For example, in the year before the pandemic, Mongolia transported about 1.6 million international and local passengers, over 133,000 airplanes safely flew over our territory and collected 498 billion MNT in revenue from the airline industry. Around 32 percent of it, or 156 billion MNT, was generated from navigation revenue or fees for transit flights. However, since 2020, the revenue of the industry has started to decrease dramatically, and the amount of money collected from the airways has also understandably decreased. The industry's income decreased to 224 billion MNT in 2020, 189 billion MNT in 2021, and 215 billion MNT in 2022. This is a 56 to 63 percent decrease from the pre-coronavirus period. The number of transit flights also decreased by 72 percent. In 2019, Mongolia had the largest number of aircraft in its history, 133,613, but in 2020, 71,442 flights, 68,715 flights in 2021, and 37,565 flights in 2022 flew through our country. The amount of revenue collected only from this type of service fee has been decreasing year after year, reaching 62 billion MNT in 2022. This means that it has decreased by 61 percent compared to four years ago. During the peak of the pandemic, when many countries implemented strict bans and restrictions, the number of flights passing through our country decreased by 47 to 49 percent, and due to the influence of air traffic restrictions caused by the political situation, it has reached a historic low (72 percent decrease).
In recent years, there have been quite a few reports from government and private sector organizations working proactively to increase air passenger traffic and negotiating with the governments of many countries in this area. The government has announced 2023 to 2025 as the “Years to Visit Mongolia” and has been implementing short-term programs aimed at restoring the economy in a short period of time, and relevant organizations and officials have been focusing on increasing the frequency of flights and passenger flow and taking required measures. For example, our country has increased the number of weekly flights to the Republic of Korea, Republic of Turkey, and Japan by 20 to 40 percent, or from 34 to 70 flights. In addition, issues such as building a large airport in the local area, importing aircraft with good capacity, creating new flight routes, and liberalizing air transportation are currently being discussed at the government level. However, unless airspace utilization is improved and major intercontinental routes are opened, no matter how much passenger flow increases, it is highly likely that the industry will not be able to generate significant profits. It is because Mongolia collects most of its revenue from the airline industry through transit flights. On the other hand, tourists are looking for the fastest and cheapest flights. However, for Mongolia, the main flow, which received about 70 percent of international tourists, has been closed, so it is necessary to spend more distance to some places. European tourists are faced with the choice of coming to our country only by direct flights to a few destinations: Istanbul, Frankfurt, and Bishkek.
In connection with the problems and conditions arising in Mongolia, the CAA revised its airways last year by order of the Minister of Road and Development. Of the 94 air routes, the ones that are not used regularly have been eliminated, and 33 main routes have been established. Officials pointed out that this is one of the goals included in “Vision-2050” and “New Revival Policy”, and it is mentioned as the beginning of the work of reorganizing Mongolia's airspace in a profitable way. Also, the experts said that they were forced to do this according to the requirements of the International Civil Aviation Organization. As a result, our country has renewed 80 percent of its air routes and has the opportunity to fly to 33 destinations and 100 cities in 23 countries. But since then, there has been no significant progress or change. The revenue of the airline industry did not even reach the level of 2020. The number of transit flights also has decreased by 72 percent compared to the pre-pandemic period. Due to this, the question arises whether this reform was based on sound research and data and whether it was able to be carried out optimally.
Since the beginning of 2023, 2,109 aircraft have flown over the territory of Mongolia. This is a significant decrease from the same period last year. In other words, the number of transit flights is dropping year by year. Compared to 2020, the number of passengers, international and local flights has increased significantly during this period, but the revenue of the airline industry has not changed much. Before the coronavirus, an average of 130,000 flights and 450 to 500 flights per day passed through our country, but now there are 50,000 flights per year and 70 to 80 aircraft per day. We charge 600 USD to 900 USD for road usage fees from one aircraft, and then it is clear how much opportunity we are losing.
By 2025, the Government set an ambitious goal of increasing the number of transit flights to 250,000, international and local flights to 500,000, and the industry's revenue to one trillion MNT. Plans have been approved to transport 1.5 million passengers by air this year alone, and two million next year. Judging from the current situation, the possibility of achieving the goal is very bleak, and the airline industry is still in “ban”. The people of the industry themselves admit it. Two big issues, liberalization of air transport and improvement of airspace utilization, are significant challenges to the development of the sector.