Private airlines running the risks of having operation licenses revoked

June 30, 2011 is the deadline that the Ministry of Transport has fixed for some airlines to take off, or they will have their operation license revoked.
The age of blossoming airlines is over
2000 safe flights, 90 percent of which were punctual flights after four months of operation, thus meeting the strict requirements of US airlines, are the satisfactory results of the private airline Air Mekong . After reaping the fruits, the air carrier plans to expand its fleet and have 10 aircrafts by October 2011.
Air Mekong is one of the five joint stock airline companies which have the right to develop domestic air routes, a business field which once witnessed a boom two or three years ago.
Nevertheless, Air Mekong proves to be the dim light in the picture of private airlines in Vietnam. Several years ago, management agencies remained optimistic about the domestic aviation market, saying that the existence of more air carriers would be a driving force for the market.
However, the prediction has yet to come true. The private airlines which received operation licenses several years ago either have to delay their take-off times, or have suffered severe losses. The “distress” of the private airlines can be seen in the report the Ministry of Transport submitted to the Prime Minister about the current situation of private airlines several days ago.
According to the Ministry of Transport, the airline which is facing biggest difficulties now is VP. By mid February 2011, VP had postponed its air transport services by 14 months. If referring to the current regulations, VP cannot maintain the license for providing air transport services.
In an effort to create best conditions for VP to restructure capital and pay off debts, the ministry has proposed the Prime Minister to extend VP’s operation license to December 31, 2011, provided that the airline has to pay off debts to its partners.
Meanwhile, Tran Huu Phuc, General Director of Vinapco, the only air petrol supplier to airlines, has affirmed that Vinapco has not seen any signs from VP showing that VP will pay for the fuel it purchased from Vinapco, and that the debt incurred by VP to Vinapco has climbed to 20 billion dong. Vinapco has taken legal proceedings against VP to the Hanoi Administrative Court.
“VP has lost its prestige to passengers and credibility to partners, therefore, it will be very difficult for VP to take off again even if it is restructured,” an expert said.
Another private airline also facing the danger of having its operation license revoked by June 30, 2011 is Vietjet.
The air carrier received a flight license in late 2007. However, with a series of unsuccessful plans, including a plan to change shareholders, doubts have been raised about the possibility of the airline providing its first commercial flight by June 2011.
Meanwhile, the information about the operation of Trai Thien Cargo cannot be seen in the report to the Prime Minister. Explaining this, leaders of the Civil Aviation Authority of Vietnam CAAV said that they “have not received reports” and “cannot contact the air carrier”.
Meanwhile, sources say that Trai Thien still has not paid wages to staff members, and key personnel have left for other new jobs. Sources have predicted that the first cargo air carrier is facing the risks of having its license revoked.
Even when Vietnam is believed to become the third fastest growing passenger and cargo market in the world and the second biggest fastest growing domestic passenger market, it is not easy for airlines to cement their firm position in a market with the capacity of 14.1 million of passengers and 176,000 tons of cargo per annum.
Currently, the aviation market depends on two main air carriers, Vietnam Airlines and Jetstar Pacific which are holding more than 90 percent of the market share. The “room” for new comers is thought to be small, as both the airlines are expanding their operation in 2011. Vietnam Airlines has announced it will have dozens of new aircrafts, Jetstar Pacific will also renovate its fleet.
Vietnam’s aviation market proves to be very harsh. Meanwhile, it seems that private airlines were too optimistic and could not anticipate difficulties. That explains why they have to delay flight schedules and face the risk of having their licenses revoked.