Private airlines urged to improve business model

Private airlines urged to improve business model

The state had encouraged the development of private airlines, but these companies need to have a sustainable development model, according to experts.

Speaking at Viet Nam Television's Policy Dialogue Programme on Wednesday, the Director of the Aviation Department, Lai Xuan Thanh, said that the state had encouraged private firms to join the domestic aviation market to create fair conditions, reported online news website vnexpress.net.

However, if Air Mekong suspends flying operations at the end of this month, it will be the second private airline to close down, after Indochina Airlines, Thanh said.

These two private airlines, he added, had been unsuccessful because of management problems and the number of planes they had added to their fleets.

These airlines often leased aircraft and hired foreign firms to be in charge of maintenance, as well as the opening of new routes and management. This, said Thanh, prevented the state from supporting it.

Luong Hoai Nam, former director of Jestar Pacific Airlines, said private Vietnamese airlines were not attractive to investors. Aviation firms in other countries often lose money, but investors continue to back them and operations are able to continue. The aviation industry is an attractive sector, but Vietnamese firms had failed to create confidence among local and foreign investors because almost all of them had chosen the wrong operation model.

This could be deciding on whether to be a budget or traditional airline, or purchasing the wrong planes and adopting a weak business model, Nam said.

In addition, Viet Nam has not supplied trained manpower for the aviation sector, Thanh said, leading large aviation firms to hire foreign labour.

Another reason for private aviation firms being unsuccessful is that the market is facing an economic crisis, as well as due to various health scares, Thanh pointed out.

The local aviation sector is facing many challenges at present and is expected to face more difficulties in the future.

Also, beginning in 2015, Viet Nam will allow ASEAN countries to invest in its aviation market.

Before that happens, local aviation firms must reduce fares as low as possible, said officials, noting that it has among the highest ticket prices among regional countries.

Nam said aviation firms in Viet Nam have often bought fewer and costlier planes, as against more orders, and its fuel expenses were higher than that of Thailand and Malaysia. Landing charges and other taxes, too, had pushed up air fares.

However, experts said the local aviation industry had achieved some success, as its airfares had allowed farmers and other low-income groups the opportunity to fly.

vietnamnews