Small airports seek big solutions

Higher service rates will help small airports stay sky high.

“Our five out of six member airports are running at losses due to low flight frequency and service rates though we reaped pre-tax profits of over VND336 billion ($16.2 million) in the year ending August,” said Northern Airport Corporation (NAC) general director Le Manh Hung.

Except Noi Bai International Airport, every year the NAC must compensate for losses amounting to several dozen million US dollars suffered by other five smaller local airports under its management.

Those airports are Dong Hoi in central Quang Binh province, Vinh in central Nghe An province, Cat Bi in northern Haiphong city, Na San in northern Son La province and Dien Bien in Dien Bien province.

“We cannot keep small airports running without resorting to financial support from Noi Bai airport,” Hung said.

Just Noi Bai airport reports a high flight frequency and is running at a profit and contributing 97.7 per cent of NAC’s total revenue.

According to Hung, in 2010 the NAC must offset VND82.3 billion ($3.97 million) losses for member airports (Dong Hoi airport VND58.7 billion or $2.8 million, Vinh VND9.1 billion or $439,600, Dien Bien VND9.2 billion or $444,400, Cat Bi VND3.2 billion or $154,600 and Na San VND2 billion or $96,600).

In the first eight months of 2011, the NAC made up for VND64.4 billion ($3.1 million) losses at these airports.

“Small airports’ losses will mount up in the coming years amid rising expenses on infrastructure and direct service costs, meanwhile the service rates keep growing slowly,” Hung said.

NAC statistics show that local airports received a total 9,289 flights in 2010 with service expenses averaging VND12.8 million ($618) per flight.

As the state set the service cost averaging VND3 million ($145) per flight, the NAC needs to compensate around VND9.8 million ($473) per each flight.

The Southern Airport Corporation (SAC) is in a similar position.

The SAC has to take profits generated by Tan Son Nhat International Airport to make up for losses at the remaining seven airports under its management.

The SAC controls eight airports in Ho Chi Minh City and the Mekong Delta including Tan Son Nhat International Airport and some other essential airports such as Can Tho, Buon Ma Thuot and Phu Quoc.

Only the Middle Airport Authority (MAA) sees its local airports enjoying profits.

However, according to a MAA executive, without raising income from non-airport services such as taxi business or food services it would hardly achieve even modest return-on-equity rate of 1.2 per cent set for 2011.

The NAC is reportedly proposing the Ministry of Transport join efforts with competent state agencies to revise service rates making it fit actual conditions.

“Revising service rates is urgent at this point of time to help firms alleviate losses and it is vital for the country to woo foreign investment into building local airports,” said MoT Deputy Minister and head of the Civil Aviation Administration of Vietnam Pham Quy Tieu.  -VIR

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