Privatising in aviation industry has been suggested by many experts, who consider this the best way to stimulate the market and open new opportunities for investors.

Underdeveloped aviation industry
Luong Hoai Nam, Managing Director of Pacific Airlines, said that the infrastructure for the aviation industry and the air market proved to be too poor to serve a population of 85mil people.

Tan Son Nhat airport in HCM City, the biggest airport in Vietnam, only has the capacity of 15mil passengers per year, just 1/5 or 1/6 of the capacity of Bangkok, Kuala Lumpur, and Singapore airports.

In the north, Noi Bai airport with the T1 terminal just can serve 4mil passengers a year. Local airports all are very small, many of them cannot serve night flights and cannot receive airplanes with a straight body like the Airbus A, Boeing B737.

Meanwhile, the air fleet has 50 aircrafts only, which makes the carrying capacity limited, just equal to 1/3 of Thailand, Malaysia or Singapore.

As the market has not developed yet, the number of Vietnamese people that have access to the modern type of transport remains modest. Statistics show that only 0.5mil of the existing 85mil Vietnamese people ever travel by air.

Regarding the domestic air market, there is one air passenger among every 20 persons. Meanwhile, the proportions are much higher in other regional countries: one passenger can be found in every 10 persons in Indonesia and in every 5 persons in Malaysia. In Australia, every person creates two passengers on domestic routes every year.

Regarding the international air market, according to Mr Nam, Vietnam is superior to only Laos, Myanmar and Cambodia in the ASEAN bloc in the aviation industry.

The cost of low cost carrier not low

In developed countries, there are two or three airports in every big city. The main airport serves traditional airlines with complicated flight networks and services, while the other smaller airports serve low cost airlines and private flights.

In Singapore, where only one civil airport is operational, the Singaporean Government has approved the building of a low cost terminal at Changi airport serving the flights of Tiger Airwarys and other budget airlines, which provide flights to Singapore. Specific price levels and service fees have been applied to the airport.

In Thailand, there are three airports, Trat, Koh Saimui, Sukho Thai, specialising in serving the flights undertaken by Bangkok Airways.

In Vietnam, though several budget airlines have been operational, namely Pacific Airlines, Tiger Airways and Jetstar Asia, there has been no concrete mechanism regulating the operation of low cost carriers, while the carriers have not had lost cost airports designed specifically for them.

Mr Nam said that in the current conditions, Pacific Airlines cannot lower the flight development cost to US cent 4.0 for a seat, while Singaporean, Indonesia and Thai budget airlines can easily reach the cost at UScent2.5-3cent, or 40% lower than Vietnam’s.

Privatising to take off?

Experts have suggested allowing private owned air carriers, considering this the best solution to encourage healthy competition among airlines, which can help develop the market.

According to the new Civil Aviation Law, which has been in effect since January 1, 2007, private investors have the right to establish airlines. However, the detailed requirements have not been stated yet.

Recently, four or five projects on setting up private owned airlines have been put on the table of the Civil Aviation Authority of Vietnam (CAAV). However, all of the projects have been refused as they still cannot meet requirements.

Mr Thi has urged state management authorities to take actions to develop the aviation industry and the air market by setting up fair playing rules and opening the market.

“It is the right time to let Vietnamese people join the market; if not, foreign investors will dominate the playing field in some years, when Vietnam integrates more deeply into the world,” said Mr Thi.

Vo Huy Cuong, Head of the Air Transport Division under CAAV, said that by 2015, Vietnam will have totally liberalised commercial freedom within the ASEAN bloc. By that time, more and more international airports will have come to exploit Vietnam’s market.

He said that not only private investors are encouraged to set up airlines, Vietnam would call on foreign investors to join forces with Vietnamese enterprises to make investment in aviation.

Ho Quoc Cuong, Deputy Head of the Air Transport Division under CAAV, said that the Government would enact a decree on air transport, possibly in the second quarter of the year, which is hoped will bring new opportunities to investors.

It is expected that foreign investors will be allowed to set up joint venture airlines, in which foreign ownership must not be higher than 49% of total chartered capital.

Source: VietnamNet