Small airports suffering big losses

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Increase in service fees will help, airport operators argue, but experts disagree

Passengers at the Can Tho International Airport in southern Vietnam. The airport often uses less than one fifth of its designed capacity.

Small airports in Vietnam are suffering huge losses, mainly because state-regulated service charges are too low, representatives say.

According to the Northern Airports Corporation, which manages six airports in the northern region, it can only charged each flight between VND2 million and VND5 million (US$96-240), under the Finance Ministry's regulations.

But, the services that the corporation provides for each flight actually cost VND12.8 million ($614.5) on average, which means the corporation has to give its airports an average of VND9.8 million ($470) per flight to make up for their losses.

The Noi Bai International Airport in Hanoi is the only one that can make profits, it said, calling for an increase in service charges.

In the first eight months this year, the company had to pay some VND64.4 billion ($3 million) to compensate the other airports for their losses. Last year it paid a total of VND82.3 billion ($3.9 million), more than half of which was given to the Dong Hoi Airport in Quang Binh Province.

"We estimate that we will have to pay more in the coming years, because of increases in infrastructure investment and service costs, but service charges have hardly been raised," Le Manh Hung, general director of the company, told the Dau Tu (Vietnam Investment Review) newspaper.

In the central region, the Middle Airports Corporation says only Da Nang and Cam Ranh airports run at a profit while the five others under its management have made losses for years.

According to the airport operator, initially it had calculated that it would lose over VND47 billion ($2.2 million) this year. The estimate later was revised down to over VND18 billion ($864,140).

But an official of the company said the loss projection was lowered thanks to income sources from non-aviation operations like taxis and food and beverage sales.

In a proposal for service charge increases sent to the Ministry of Transport and the Civil Aviation Authority of Vietnam, the Middle Airports Corporation has asked that the ranking of Phu Cat airport in the central province of Binh Dinh be revised upward.

It said the airport is currently categorized as second-tier and thus can only charge VND4 million ($192) per flight, although it mainly admits A320 airplanes, meaning that it should be ranked higher and charge twice of that level.

"It's urgent that aviation service charges are revised now," said Pham Quy Tieu, deputy transport minister and also chief of the Civil Aviation Authority of Vietnam. "Besides helping airports reduce their losses, the adjustment would allow us to call for more foreign investment into some local airports."

Few flights

However, experts say that even when the proposal is approved, increases in service charges will not help small airports avoid losses completely, given that they service very few flights.

Besides, increasing service fees could influence airfares, they said.

Hung, general director of the Northern Airports Corporation, said that in fact, small airports always operate with very low flight frequencies. Some serve just one flight per day.

Southern airports face the same situation.

Dang Kieu Ba, director of the Ca Mau Airport, said it now services eight flights from Ca Mau Province to Ho Chi Minh City every week, but the flights are only full during holidays.

Usually the number of flights isn't stable, while it costs a lot to service each of them, so the airport loses some VND5 billion ($240,000) every year.

Pham Thuy Trang, vice director of the Can Tho International Airport, said that while the airport is capable of serving a maximum of 500 passengers, it rarely caters to more than 80 passengers at a time.

"We suffer losses almost every month," Trang said.

According to Trang, due to falling air travel demand, only two daily flights are operating on the Can Tho-Hanoi service now. Other routes like Can Tho to the tourism island of Phu Quoc also have very few flights, she said.

"There were days when we had to mobilize hundreds of staff just to serve only one flight to Taiwan, so it is not much wonder we don't make profits," Trang said, adding that the flight had fewer than 20 passengers.

Although not many airports are earning profits, several provinces are still planning to build more, hoping that the airports will help boost their economic and social development.

As the government only invests in major airports, the provinces will have to find the money themselves.

The central province of Thanh Hoa, for example, plans to put over VND2.6 trillion ($124.8 million) into a 213-hectare airport, to be fully operational in 2030.

In July, the Mekong Delta province of An Giang announced a similar plan for a $163-million airport. The project is also scheduled for completion in 2030.

Explaining the provincial persistence in building airports, a senior official with the Civil Aviation Authority of Vietnam, who wished to stay unnamed, told Thanh Nien that it's because the three regional aviation corporations are supposed to cover the losses that all airports incur anyway.

He also said airport construction was carried out in accordance with the government's approved zoning plan.

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