Private airlines stuck on the ground

TN News

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Private airlines are having a hard time taking off in Vietnam.

Five private air carriers have been licensed in the past four years but only one of them, Air Mekong, is flying.

Air Mekong, which has partnered with Utah-based Skywest Inc., launched its first domestic flights in October. Two months later, the carrier had to halt its Da Nang service, only to resume flights to the central city for less than two weeks during the Tet holiday.

In order to make full use of its fleet of four CRJ-900 aircrafts, Air Mekong has added more flights, including three additional Ho Chi Minh City-Hanoi flights per day.

It will also open a new air route between Hanoi and Phu Quoc Island on April 28. The island flight will become the longest domestic route in Vietnam.

Industry insiders worry that adding flights is not a good business strategy for Air Mekong. They said CRJ-900 aircraft only have 90 seats and they are better suited to short-haul flights than for long journeys.

Moreover, Vietnam Airlines and Jetstar Pacific are already fiercely competing for business on the HCMC-Hanoi route.

The other private airlines Indochina Airlines, VietJet Air, Trai Thien Air Cargo and Blue Sky Air have had an even harder time. Blue Sky has not announced plans for its charter jet service while everyone else is stuck on the ground.

VietJet Air, the first private airline to be licensed in Vietnam, was expected to start flying in August but the maiden flight has been delayed indefinitely.

Vo Huy Cuong, head of the Civil Aviation Administration's Air Transport Department, said VietJet Air has not yet obtained an Air Operator Certificate, which allows a company to carry out commercial air transport operations.

Cuong said another private carrier, Trai Thien Air Cargo, is struggling with personnel problems. Several staff members decided to quit after the Civil Aviation Administration prohibited the carrier from importing old aircraft into Vietnam.

Indochina Airlines, which was the first private carrier to run flights in Vietnam, suspended its services last year due to debt problems. It is now seeking approval from the authorities to keep its business license until the end of 2011 so that it can have a chance to restart operations.

Cuong argues that, so far, private airlines have not employed good business strategies in the local market. Because they are not confident in their own ability, they often try to look for support from outside, as was the case with VietJet Air.

The Vietnamese carrier sold a 30 percent stake to Malaysia's low cost carrier AirAsia. It has been warned by the Civil Aviation Administration against using AirAsia as part of its brand name.

Industry insiders said private carriers tend to keep changing their business plans due to a lack of skilled workers and the huge losses they often face during the first years of operation.

These airlines are required to maintain a regular flight schedule, otherwise they risk harming their reputation and having their licenses revoked by the authorities.

This year, private airlines will face two new challenges: high fuel costs and a stronger dollar.

Truong Thanh Vu, a senior manager at Air Mekong, said fluctuations in exchange rates is their biggest concern for the carrier, which buys jet fuel in dollars but receives ticket payments in the local currency.

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