Hit with a hefty US$21 million fine from the US government for violating trade sanctions, Dutch aerospace company Fokker Services (FSBV) was working with four airlines in Burma — one of which is owned by a Burmese tycoon with close links to the military junta.
According to a complaint submitted to the US Department of Justice, Fokker Services – a Dutch firm that provides aerospace technologies and services to airlines worldwide – worked with four Burmese airlines: Myanma Airways, Air Mandalay, Yangon Airways and Air Bagan.
The company also violated sanctions with Iran and Sudan. A total of 1,153 shipments were made to the three countries during the period of 2005 to 2010, bringing in revenues of approximately $21 million.
Burmese tycoon Tay Za, who has close ties to the former military junta, is the owner of Air Bagan; and Yangon Airways is owned by Aik Hauk, the son-in-law of Bao Youxiang, leader of the United Wa State Army (UWSA) – Burma’s largest ethnic armed group, which the US government in 2005 identified as the largest drug-producing organisation in Southeast Asia.
Both Tay Za and Aik Hauk – along with Air Bagan and Yangon Airways – remain on the US Specially Designated Nationals list, while Myanma Airways and Air Mandalay are currently not restricted entities since sanctions were eased in 2012.
A representative for PR company Hill+Knowlton Strategies, which was contracted by Fokker, said that the Dutch company no longer works with any airlines or companies in any of the three countries where violations were committed.
“Fokker ceased all business with sanctioned countries since 2010,” Frans van der Grint, a Hill+Knowlton representative, said in an email.
He added that he could not comment on any future investment plans that Fokker might have with the other two Burmese airlines not facing targeted US sanctions.
At present, only Myanma Airlines carries a Fokker aircraft in its fleet. The other three airlines overwhelmingly employ aircraft by French-Italian manufacturer ATR — an aircraft that Fokker Services in Singapore is able to perform service checks and maintenance updates on, according to the company website.
Win Myint, head of the maintenance and engineering department at Air Mandalay, confirmed that Air Mandalay no longer does business with Fokker Services – though he said it was due to the company’s high costs, and not because of US trade sanctions.
“It’s too expensive to check [do maintenance work] with [Fokker Services],” Win Myint said by phone. “We send them to Malaysia, Vietnam and Thailand engineers. Some aircrafts, we send to France, like the ATRs.”
Half of Fokker’s $21 million penalty will be forfeited as a claim settlement to the US Department of Justice, while the other half will be paid out to the US Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of Commerce’s Bureau of Industry and Security (BIS).
But according to US Treasury documents, the penalty for Fokker’s legal transgressions should have been much more, if not for the fact that the company came forward to disclose the violations in June 2010 to the BIS.
The potential civil liability is about $51 million, but OFAC settled with Fokker because of its “acceptance of responsibility”, such as carrying out an internal investigation into the company’s violations and adopting “new and more effective internal controls and procedures.”
Despite having to pay only a fraction of what they could have been penalised for, Sean Turnell, a Burma economics expert from Australia’s Macquarie University, believes that the US government’s settlement with Fokker sends a “clear” message that trade sanctions should be taken seriously.
Turnell added that it is likely Fokker has plans for Burma’s aviation sector, given its immense potential.
“Under-resourced and under-capitalised, it requires immense investment to bring it up to regional standards,” Turnell said in an email to DVB. “But such investment offers potential great pay-offs.
“Myanmar is a country of dispersed population centres separated by long distances and terrible ground transportation infrastructure. Then factor in likely high tourist growth, growing business traffic, and a market that is under-served – and the recipe is for strong sector growth,” he said.