Vietnam may reduce allowed level of foreign ownership of airlines

Vietnam is considering reducing the ratio of stakes it allows foreign investors to hold in a private airline from 49 percent, the current level, to 30 percent.

The Ministry of Transport has assigned the Civil Aviation Authority of Vietnam (CAAV) to amend Decree 76, which stipulates the maximum foreign ownership ratio in private airlines.

Three years to the day the Decree took effect, the government believes it needs to amend the decree in order to set new regulations in five main groups of issues, including regulations on logos, business strategy and product development strategy, as well as ownership ratio.

Regarding the ownership ratio, the government watchdog agency is considering reducing the maximum foreign ownership ratio from 49 percent to 30 percent.

Decree 76 stipulates that once a domestic airline cooperates with foreign investors, foreign investors may not hold more than 49 percent of chartered capital of an airline. Under the proposal, one foreign investor would not be able to hold more than 30 percent of the chartered capital of the airline.

There are now two private airlines to which foreign investors contribute their capital, including the budget airline Jetstar Pacific, where Australian Qantas makes capital contribution, and Vietjet Air, where Air Asia is holding 30 percent of total capital.

Government management agencies have been warned that foreign investors, by trying to hold large proportions of stakes in domestic air carriers, will, step by step, control the domestic aviation market. They have also been warned that many domestic investors merely try to set up airlines and then attempt to sell them to foreign investors after they get operation licenses.

The national flag air carrier Vietnam Airlines Corporation has pointed out that Aviation Law and Decree 76 stipulate the allowed foreign ownership ratio, but the documents do not clearly differentiate between normal foreign investors and foreign investors who are airlines themselves.

As per request by the Ministry of Transport, CAAV will have to submit to the ministry the draft document which will make additional changes to Decree 76 in September, so the ministry can submit the document to the government in December 2010.

To date, three private airlines have been licensed to operate in Vietnam, including Vietjet Air, Indochina Airlines and Mekong Aviation. Of these three, Indochina Airlines has gradually disappeared after one year of operation.

The third private airline, Mekong Aviation also plans to provide flights in 2010. The air carrier will have 10 aircrafts to fly domestic routes, including Hanoi-Phu Quoc, Hanoi-Nha Trang, Hanoi-Can Tho.

According to CAAV, by 2015, Vietnam will have 149 aircraft and provide 33 million seats.

Vnexpress

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