Business
Aviation sector seeks funding to improve services
The domestic aviation industry needs significant capital to invest in infrastructure during 2015-20 to improve airline services, head of the Civil Aviation Authority of Vietnam (CAAV) Lai Xuan Thanh said.
Speaking at a seminar with the theme "Socialising management and exploitation of airports in Vietnam," which was held in Hanoi on April 8, Thanh said investment capital from the State and businesses have met part of the demand for the country's aviation development plan, making it necessary to mobilise capital from other sources in society.
The seminar was held after airline firms including VietJet Air, the national flag carrier Vietnam Airlines and a number of businesses requested the rights for operating several airport buildings, such as the T1 terminal of Noi Bai, Phu Quoc and Da Nang airports. The seminar was expected to clarify the plan to sell the airports' operational rights to the public as well as enterprises who want to operate the airports in the future.
Thanh said the country's aviation transport market achieved high growth at an average rate of 14.5 percent in the 2001-14 period. According to the International Aviation Transport Association, Vietnam's airline market ranks third in terms of growth rate.
Vietnam has four airline firms: Vietnam Airlines, Jetstar Pacific Airlines, VietJet Air and Vietnam Air Services Company. They have exploited 111 planes on 56 international airways and 46 domestic ones. Meanwhile, the country's airports have been exploited by 51 international airline firms.
As planned, the firms' fleets will have 205 planes by 2020.
Vietnam's airport system is under the management of the Airport Corporation of Vietnam and uses the State's wholly owned capital. The aviation sector began investing in infrastructure for the airports in 2001 with mobilised capital of 125.37 trillion VND (5.88 billion USD), of which 5 percent comes from the State budget, 77 percent from businesses and 14 percent from the official development assistance (ODA) fund.
It's predicted that the sector will need 230.21 trillion VND (10.8 billion USD) for aviation infrastructure in the 2015-20 period, of which 13.3 percent, 10.1 percent and more than 26 percent will come from the State budget, businesses and ODA, respectively. The remaining 48.8 percent is expected to come from shareholders.
Deputy Director of the Central Institute for Economic Management Vo Tri Thanh said the issue of allowing private businesses to take part in the operations management of airports and sea ports was a new subject in Vietnam but not around the world. Operations managed by private businesses were usually more effective than those under the State's management because the former scenario avoids conflicts of interest.
Deputy General Director of VietJet Air Nguyen Duc Tam proposed assigning priority for operational rights to the aviation sector's firms and businesses.
He said his firm is willing to cooperate and share services with other airline firms and aviation businesses. Forming alliances is a strong trend on the international aviation market.
"It is necessary to socialise the management and operation of airports following a modern model with advanced technology based on the principle of explicitness and equality between private and State-owned enterprises," Tam said.
Deputy Chairman of the National Financial Supervisory Commission Truong Van Phuoc said the sale of operational rights of airports and terminals was necessary.
"However, what will happen if the business receiving the operational rights goes bankrupt? Thus, it is necessary to set some criteria for the investors. Another question is who will be qualified to receive these operational rights?" Phuoc said.
The Deputy Chairman said that the selling of operational rights will ensure harmony between the interests of the State and businesses. There is no guarantee that aviation businesses will operate airports better than businesses operating outside the sector.
Speaking at the conclusion of the seminar, Deputy Minister of Transport Pham Quy Tieu said the ministry is preparing a legal foundation to carry out the sale of operational rights of airports, including the T1 terminal and Hall E of Noi Bai International Airport and Phu Quoc Airport.
After completing this legal foundation, the ministry will issue detailed processes for every project, Tieu said.
He added that the ministry will coordinate with the Ministry of Finance to assess the cost of each project. If there are two or three investors, the ministries will hold an auction.
To make the plan a reality will take a lot of work. One of the most important issues is checking to see if the sector can create opportunities for businesses to take part in the airports' operations management.
According to the CAAV, the sale of operational rights will need to ensure six principles: national defence and security should not be affected; businesses that have obtained the operational rights should not be allowed to transfer them to other businesses; wholesome competition should be ensured and abuse of a monopoly should be prevented; civil aviation operations should be systematically maintained following planning; transparency should be ensured and the interests of the State should be protected; and the legitimate rights and interests of the workers should be protected.
The seminar was held after airline firms including VietJet Air, the national flag carrier Vietnam Airlines and a number of businesses requested the rights for operating several airport buildings, such as the T1 terminal of Noi Bai, Phu Quoc and Da Nang airports. The seminar was expected to clarify the plan to sell the airports' operational rights to the public as well as enterprises who want to operate the airports in the future.
Thanh said the country's aviation transport market achieved high growth at an average rate of 14.5 percent in the 2001-14 period. According to the International Aviation Transport Association, Vietnam's airline market ranks third in terms of growth rate.
Vietnam has four airline firms: Vietnam Airlines, Jetstar Pacific Airlines, VietJet Air and Vietnam Air Services Company. They have exploited 111 planes on 56 international airways and 46 domestic ones. Meanwhile, the country's airports have been exploited by 51 international airline firms.
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Vietnam's airport system is under the management of the Airport Corporation of Vietnam and uses the State's wholly owned capital. The aviation sector began investing in infrastructure for the airports in 2001 with mobilised capital of 125.37 trillion VND (5.88 billion USD), of which 5 percent comes from the State budget, 77 percent from businesses and 14 percent from the official development assistance (ODA) fund.
It's predicted that the sector will need 230.21 trillion VND (10.8 billion USD) for aviation infrastructure in the 2015-20 period, of which 13.3 percent, 10.1 percent and more than 26 percent will come from the State budget, businesses and ODA, respectively. The remaining 48.8 percent is expected to come from shareholders.
Deputy Director of the Central Institute for Economic Management Vo Tri Thanh said the issue of allowing private businesses to take part in the operations management of airports and sea ports was a new subject in Vietnam but not around the world. Operations managed by private businesses were usually more effective than those under the State's management because the former scenario avoids conflicts of interest.
Deputy General Director of VietJet Air Nguyen Duc Tam proposed assigning priority for operational rights to the aviation sector's firms and businesses.
He said his firm is willing to cooperate and share services with other airline firms and aviation businesses. Forming alliances is a strong trend on the international aviation market.
"It is necessary to socialise the management and operation of airports following a modern model with advanced technology based on the principle of explicitness and equality between private and State-owned enterprises," Tam said.
Deputy Chairman of the National Financial Supervisory Commission Truong Van Phuoc said the sale of operational rights of airports and terminals was necessary.
"However, what will happen if the business receiving the operational rights goes bankrupt? Thus, it is necessary to set some criteria for the investors. Another question is who will be qualified to receive these operational rights?" Phuoc said.
The Deputy Chairman said that the selling of operational rights will ensure harmony between the interests of the State and businesses. There is no guarantee that aviation businesses will operate airports better than businesses operating outside the sector.
Speaking at the conclusion of the seminar, Deputy Minister of Transport Pham Quy Tieu said the ministry is preparing a legal foundation to carry out the sale of operational rights of airports, including the T1 terminal and Hall E of Noi Bai International Airport and Phu Quoc Airport.
After completing this legal foundation, the ministry will issue detailed processes for every project, Tieu said.
He added that the ministry will coordinate with the Ministry of Finance to assess the cost of each project. If there are two or three investors, the ministries will hold an auction.
To make the plan a reality will take a lot of work. One of the most important issues is checking to see if the sector can create opportunities for businesses to take part in the airports' operations management.
According to the CAAV, the sale of operational rights will need to ensure six principles: national defence and security should not be affected; businesses that have obtained the operational rights should not be allowed to transfer them to other businesses; wholesome competition should be ensured and abuse of a monopoly should be prevented; civil aviation operations should be systematically maintained following planning; transparency should be ensured and the interests of the State should be protected; and the legitimate rights and interests of the workers should be protected.
