Sky falls in on private airlines

Several underperforming private airlines face having their wings clipped.

Indochina Airlines (VP), Vietjet Aviation Joint Stock Company and Trai Thien Air Cargo have just a month to satisfy the requirements set by the Civil Aviation Administration of Vietnam (CAAV) to maintain air transport trading licences.
In late January 2011, VP which stopped flying for around 18 months, was urged by the Ministry of Transport to finalise procedures for the air operator certificate (AOC), restructure capital sources and pay up all debts it owed to fuel supplier Vietnam Air Petrol Company Limited (Vinapco) prior to June 30, 2011.

According to a Vinapco representative, as of June 1, 2011 Vinapco had yet to receive any payment for the VND20 billion (around $1 million) VP owed after two years now.
Trai Thien, the first licenced air cargo in Vietnam, incurred the same fate and faces having its operational licence withdrawn due to financial distress.

“We could not contact the management of VP and Trai Thien, let alone say whether these airlines have striven to meet CAAV requirements,“ said CAAV’s air transport department head Vo Huy Cuong.
The situation is little better for Jetstar Pacfic Airlines. In mid May 2011, CAAV sent an emergency dispatch to Jetstar asking it to shortly pay up a debt of VND170 billion ($8.2 million) the airline owed to Vinapco. Earlier, the fuel supplier Vinapco sourced approval from competent government agencies to cease supplying fuel to Jetstar.

“Management authorities needed to carefully measure investors’ capacity when it comes to air transport licencing to avoid private airlines being persistent debtors to our fuel suppliers,” said Vinapco’s general director Tran Van Phuc.
Jetstar just sent Vinapco a proposed lengthy debt payment scheme and asked it to sign further air fuel supply contract with Vinapco, according to a Vinapco source.

Industry insiders assume fledgling private airlines could hardly survive in a market with a modest air transport volume of less than 14.1 million passengers and 176,000 tonnes of freight per year like Vietnam even though the country is forecast to become the world’s third fastest international passenger and freight transport market during 2011-2020.
“With no peculiar business tactic, private airlines can hardly compete with state-owned giant Vietnam Airlines which holds an 80 per cent market share,” said Mekong Aviation Joint Stock Company (Air Mekong) chairman Doan Quoc Viet.
Air Mekong is the single private airline operating healthily in current tough market conditions. – VIR

Tags: Private airlines, Vietnam aviation, Vietnam aviation industry, Vietnam aviation market