Why Has It Taken Three Years to Open Aviation Market?
At the recent session of the National Assembly in November, there were many ideas about the opening of the aviation market when the amended Law on Civil Aviation, which is yet to be issued, was discussed. Minister of Transport Dao Dinh Binh talked with the press about the issue.
Answering a question as to why the Law on Civil Aviation allowed organisations and individuals to set up carriers yet all projects on the establishment of private-owned carriers had not been approved, Minister Binh said that even though the law encouraged investors to get involved in aviation transportation, it clarified that the Government had the power to grant licences. All projects on the establishment of private-owned carriers have not been approved yet because they fail to meet the stipulated requirements on financial, management and market capability.
Talking about whether the Government’s disallowance of the establishment of any airline in three years opposed the spirit of the Law on Civil Aviation or not, Binh said that there wasn’t opposition between the Government’s decision and the law as the law would not take effect before 2008. Binh went on to say that the regulation aimed to strengthen Pacific Airlines (PA), a 100 per cent State-owned joint stock airline with Vietnam Airlines being the biggest shareholder.
Answering the question why it took three years during which time the State did not allow the establishment of any other carrier, Binh stressed that three years was enough time for anyone who paid any attention to the industry to get fully prepared.
Another issue attracting attention from National Assembly deputies was the supervision of expenditure on aviation projects, as over the past few years the State has invested a huge amount into the industry. Apart from the building of terminals, maintenance and repair workshops, and the training of staff members, the aviation industry, and Vietnam Airlines in particular, has received loans from local and foreign banks to buy planes.
Binh affirmed that these are credit guarantees of the Government to help Vietnam Airlines buy planes. Therefore, ministries and relevant agencies paid careful attention before making any decision on the projects. Vietnam Airlines will be responsible for paying the loans. Reports by the corporation show that its business activities are profitable and it is capable of repaying the loans. It is under the close supervision of the Government.
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Temasek invests US$50 million in Pacific Airlines
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In December 2004, Pacific Airlines declared a loss of over VND 200 billion (around US$13 million) after 13 years’ of operation.
In March, 2005, the leaders of PA submitted a plan to the Government on the reorganisation and rearrangement of PA. To support PA recover from its difficulties, the Government approved a commitment on necessary conditions for Vietnam Airlines and Pacific Airlines to compete fairly for at least three years.
In June, 2005, the Vietnamese Government allowed foreign investors to buy shares in PA. This provided a legal basis and conditions for Temasek Holding Ltd to buy 30 per cent of shares of PA, which is valued at US$50.1 million. Temasek Holding Ltd is the largest investment group in Singapore.
After selling 30 per cent of its shares to Temasek Holding Ltd, PA began to operate in a model of a low cost airline. In the short-term, foreign partner is responsible for exploiting and maintaining planes. After three and five years, PA will gradually receive technology for exploiting and maintaining planes. PA will continue to open more domestic and international flight routes.
Under the Government’s commitments, once PA is profitable, the Government will allow it to sell part of the shares held by the State by auction on the market, providing that the Ministry of Finance, which represents the State, continues to play a role of a control shareholder.
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(Source: P.A)
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Nguyen Lam
Vietnamese
