The big burden from small airports

The local airports, which have low operation frequencies, have been a heavy burden on ground service providers.

“Though we obtained the pre-tax profit of 336 billion dong in the first eight months of the year, we incurred losses at five out of the six airports due to the low flight frequency and the higher expenses than the service fees,” said Le Manh Hung, General Director of the Northern Airport Corporation (NAC).

The Noi Bai Airport is the only airport which can bring profits to NAC, while the corporation every year has to compensate hundreds of billions of dong for the losses incurred by the other airports put under its management, namely Dong Hoi (Quang Binh province), Vinh (Nghe An), Cat Bi (Hai Phong), Na San in Son La and Dien Bien.

“If we could not earn money from the services provided at the Noi Bai airport, we would not be able to maintain providing services at local airports,” Hung said.

Of the six airports NAC is managing and exploiting, only the Noi Bai airport has the high operation frequency which brings 97.7 percent of the total revenue of NAC.

In 2010, NAC reportedly had to subsidize 82.3 billion dong to the five airports, of which 58.7 billion dong were given to Dong Hoi, 9.1 billion dong to Vinh, 9.2 billion dong to Dien Bien, 3.2 billion dong to Cat Bi and 2 billion dong to Na San. In the first eight months of 2011 alone, NAC had to spend 64.4 billion dong to offset the losses of the five airports. Meanwhile, though the service fees have increased, but not as sharply as the input costs.

According to NAC, in 2010, local airports provided 9289 flights in total. It is estimated that a flight cost 12.8 million dong. Meanwhile, the State only allows to get more than 3 million dong for every flight. As such, NAC has to subsidize 9.8 million dong for every flight from local airports.

The same problem has been complained by the Southern Airport Corporation (SAC) which is developing eight airports in HCM City and Mekong Delta. Currently, SAC still uses the profits it gets from the Tan Son Nhat international airport to offset the losses incurred at the other seven airports. The noteworthy thing is that the seven airports include key airports such as Can Tho, Buon Ma Thuot and Phu Quoc.

The Middle Airports Corporation (MAC) proves to be the only corporation which has seen signs of loss decreases. However, according to MAA, if it could not earn money from non-aviation services such as taxi and food, even the modest business plan on obtaining the ROE (return on equity) of 1.2 percent in 2011 would be out of reach.

Meanwhile, the Vietnam Air Petrol Company (Vinapco) complains that the fuel supply at local airports has put a heavy burden on the company.

With the fuel loading fee of 750,000 dong per ton fixed by the State, Vinapco is incurring big losses. “We feel worried stiff every time when hearing that a new local airport is established,” said Tran Huu Phuc, General Director of Vinapco.

NAC has requested the Ministry of Transport to join forces with relevant agencies to adjust the policies on aviation service pricing, in order to ensure that the price levels set by the State truly reflect the real expenses.

Meanwhile, MAC has requested the Ministry of Transport to discuss with the Ministry of Finance to obtain an agreement to apply the A-class service fees for the Phu Cat airport (Binh Dinh province) instead of the current B-class.

The Phu Cat airport is now mainly exploiting A320 aircraft and paying 4 million dong for ground services per flight (B-class). Meanwhile, the service fee is 8-9 million dong per flight for A-class services.

Pham Quy Tieu, Deputy Minister of Transport, who is also the Head of the Civil Aviation Authority of Vietnam CAAV, also thinks that it is now necessary to adjust the aviation service fees, not only to help airports reduce losses, but also help CAAV call for foreign direct investment for domestic airports development.

Source: TBKTVN

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