Since its first international flight in 2011, Mega Maldives has attracted a big share of passengers flying from China to the resort islands. (Courtesy of Mega Maldives Airlines)
MALE -- Most tourists in the Maldives relax on the pristine white sand beaches, dive the coral reefs, sip champagne on sunset dolphin cruises and forget the outside world. Photographs and memories tend to be the only souvenirs.
When George Weinmann and his wife honeymooned on the Indian Ocean islands in 2009, they took home a business plan for a national airline.
Originally from New Orleans, Weinmann had worked as a rocket and satellite engineer at Boeing before moving to the aerospace company's business side. Afterward, he spent seven years in China, developing a keen understanding of the country's emerging middle class and nursing an ambition to enter the aviation sector as an entrepreneur.
"On the last day of our honeymoon we decided to come to Male to say hello to the tourism bureau," Weinmann said. "That led to three or four other meetings, including with the Civil Aviation Authority. They let it be known they were seeking foreign airline investors, but we laughed."
Still, the notion stuck. "By November, we hadn't let go of the idea. My wife pointed out that nobody was doing it in the Maldives. I turned to her to say an airline would be a really difficult investment."
They incorporated the company, Mega Maldives Airlines, in February 2010. The investors are the Weinmanns and private parties in the US.
Three years after its maiden international flight in January 2011, Weinmann's airline flies three scheduled routes linking Male's Ibrahim Nasir International Airport with Beijing, Shanghai and Hong Kong. The plan is to have five more aircraft on Middle East and Southeast Asia routes by the end of the year. Currently, the fleet comprises two Boeing 767s, each with 250 seats, and a Boeing 757 with 205.
Chinese interest in the Maldives surged in the aftermath of the 2007-2008 global financial crisis, which had dampened traffic from the island nation's traditional European market. Few thought the trend would last: The Maldives Association of Tourism Industry wrote it off as "just a passing fad."
However, China eclipsed the U.K. as the Maldives' biggest source of tourists in 2010, and by 2012 it accounted for almost a quarter of all traffic through Male international airport. By 2013, the figure was up to 30%, with Mega Maldives emerging as the dominant carrier among the 11 flying the route, with a claimed market share of 35% to 44%.
"This year (the Chinese market) has so far shown growth of 20-25% over last year," Weinmann said. "We're expecting 400,000 Chinese tourists to the Maldives in 2014. That is not a small number. Even if the (annual) percentage increase has dropped from the 44-50% growth of previous years, the volume of business is still bigger."
In spite of its success in tapping the Chinese market, Mega's flight path has not been entirely smooth. The Maldives has been a difficult place for many foreign investors to do business, and besides resorts, the airline is one of the few large foreign investors not to get caught up in the vagaries of local politics.
The Maldives' single largest foreign investor, Indian infrastructure company GMR, was forced out in 2012 when the government declared that its $511 million contract to develop Male international airport was void after a dispute over fees.
GMR is seeking $1.4 billion in compensation. In June, an international arbitration hearing in Singapore declared that the contract was valid, but the issue remains unresolved.
As a private company, Mega does not publish details of its financial performance. According to Weinmann, however, it has achieved profitability in the second half of every year since its takeoff, in spite of having "taken its licks."
"I'm not sure why, but every spring something hits us. In 2011 we were planning charter flights to Beijing, but (China's) Hainan Airlines threw its hat in for scheduled services," Weinmann said. Mega was blocked from competing as a charter carrier and, under Chinese regulations, was forced to switch to scheduled flights.
That "delayed us several months, from January to July 2011. It was painful -- we had all the equipment and passengers ready to go." When Hainan Airlines finally started flying to the Maldives in November 2011, it was after Mega had proven there was enough demand, Weinmann said.
In February 2012, the Maldives' first democratically elected government was deposed in a coup d'etat. "The Chinese market went to almost zero. All airlines from China stopped flying, except us. It was very painful, but it showed our commitment," Weinmann said.
"It happened right after Chinese high season. We hosted Chinese media visits, familiarization tours, a road show, and did what we could to help the market recover."
Weinmann said that Mega's dominance of the Maldives' No. 1 tourism market by arrivals has given it an audience, no matter who is in charge of the country. "We can walk into their offices and they listen to us. The challenge has been (that) just as each government gets it, the power structure changes and we're back to square one."
The challenges on the Chinese end have tended to involve red tape. In 2013, China changed the rules at some of the secondary airports Mega was expanding to, including Chongqing and Hangzhou.
"They restricted foreign-carrier charter flights to the quieter period between midnight and 6 a.m. We said no problem. Except customs and immigration were not open at the airports from midnight to 6 a.m. It became a de facto ban that forced us out of those markets."
Brendan Sobie, the Singapore-based chief analyst at the Center for Aviation, an independent industry consultancy, said Mega's Chinese tourist business is "definitely not" a fad but warned that the airline might face problems holding on to its large market share.
"Mega has carved out a viable niche," Sobie said. "But the growth rate could slow from the exponential rates we've seen over the last few years, and the China-Maldives market could become more competitive."
"There's always a threat that (competing) foreign carriers will expand rapidly on their core routes and there's a threat now from Maldivian as the government-owned carrier expands. That's why it is important for Mega to diversify."
"Proven formula"
Weinmann, who said he was "not a guy who worries about the competition," pointed out that Maldivian has focused largely on domestic routes and has only one aircraft capable of flying internationally -- an Airbus A320.
"It doesn't have the range for China. They've not hit a formula yet, and I'm not sure how they plan to expand," he said.
"There are rumors they are working on getting a second A320. We'd like to see more cooperation between us, but at the moment the two companies generally behave like rivals."
At the same time, Weinmann said Mega has longer-term expansion plans beyond its upcoming routes to Saudi Arabia and Jakarta. It is contemplating services to Australia, South Africa and Europe as well.
"Many of the Middle Eastern carriers fly Europe-Male, and we've stayed out of that competition until now because of the risk profile," Weinmann said. "If we took it on and a Gulf carrier dropped (its) prices, we'd be in a sticky situation. But as the European economy strengthens and the Gulf carriers fill up, we do see an opportunity. We've come pretty close a few times."
Weinmann said he has been approached by investors to replicate the Mega model in other markets, such as Nepal and Palau, while the government of Mauritius has courted the airline with "meaningful" marketing funds to support the launch of new routes.
"We've got a proven formula," Weinmann said. "We've demonstrated it works. We now need to scale up."
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