Airport plans yet to reach for the sky

Foreign direct investment in Vietnam’s airport infrastructure has yet to take off.

“There needs to be breakthrough support measures to turn foreign direct investment (FDI) projects in building airport infrastructure into a reality,” said the Ministry of Transport (MoT) in its latest proposal to the prime minister in respect to the Phu Bai international airport joint venture project in central Thua Thien-Hue province.

The MoT proposal came as the first FDI project in Vietnam’s airport infrastructure faced going ‘bankrupt’ in the preparation phase.
Accordingly, based on the MoT latest appraisals the venture project on upgrading Phu Bai airport between the Middle Airports Corporation (MAC) and Singapore’s Changi Airports International (CAI) was of low feasibility.

The two partners are not in a position to source sufficient investments for the project. For the scenario half of the investment to be offset by loans and the remaining half contributed by venture parties, the developer would incur losses of at least VND686 billion ($33.1 million) over 25 years duration, according to the MoT.

The lack of airport asset valuation mechanisms, usage of airports for security, national defense or natural disaster prevention purposes are also hindrances to make the project come true.

Under the initial proposal, the venture was founded with 51 per cent of investment capital contributed by MAC in the form of the airport and the remaining 49 per cent offset by CAI to enable Phu Bai airport to receive Boeing 777 aircraft and handle five million passengers per year. Total investment capital for the first phase of construction is set at around VND6 trillion ($294 million).
Earlier, the MoT asked South Korea’s Joinus Company Limited and Korea Airports Corporation to draft their investment proposal in northern Quang Ninh airport in the build-operate-transfer (BOT) model. Besides, to come on par with current Vietnamese regulations and fit the project’s specific conditions the MoT suggested the South Korean investor also study the build-transfer (BT) form.
When CAI and Joinus face losing investment opportunities due to low financial feasibility, US-based Airis Holdings missed out the chance simply due to late order placement.

According to the MoT, the Noi Bai passenger terminal T2 project was given to the Northern Airports Corporation, the project on upgrading the airport’s runway system and that on building a parking area for aircraft connected to T2 terminal was both handled by the Civil Aviation Administration of Vietnam.

If these projects meet their pace, Noi Bai airport is in a position to meet burgeoning development requirements in the next decade.
Long Thanh international airport, with estimated investment cost in the first phase of $6.05 billion has now attracted great foreign investors’ attention.

The MoT has proposed to woo private investors and air carriers to invest in some profit-making items such as building a passenger terminal, luggage and aircraft maintenance areas under the airport project under BOT or public-private partnership models. – VIR

Tags: Vietnam airports, Vietnam aviation, Vietnam aviation industry, Vietnam aviation market