MoT to cut airport budget deficit
MoT to cut airport budget deficit
The Ministry of Transport (MoT) has proposed to the Prime Minister four different plans to operate airfields in the future, aiming to narrow a yawning gap between the Airports Corporation of Viet Nam’s (ACV) revenue and expenditures.
The proposal is part of the ministry’s report on the operations and plans for managing and airfields and maximizing their economic potential. Balancing the ACV budget is particularly important as the MoT hopes to undertake significant upgrades to the airfields in the next five years.
In the period from 2012-16, the total revenue from the taking off and landing activities of ACV was VND5.97 trillion (US$262.19 million), while the investment cost for this period was over VND7.5 trillion. According to the ministry, the revenue only covers operating expenses, maintenance, repair and a fraction of investment and upgrading costs.
The ministry said that ACV had planned for annual revenue from 2017 to 2021 to fall between VND1.82 trillion to VND2.56 trillion. However, the total cost of necessary investments during that period was estimated at about VND17.15 trillion, of which VND11.07 trillion would be for repairs. The revenue from airfield operations could meet operating costs, regular repairs and a small portion of the repair costs.
The ACV said that the revenue shortfall meant the airports and any plans to upgrade them must be managed carefully. The ministry hopes its four plans will help the industry balance its budget and improve services. The Prime Minister will consider them and select one of the four or propose an alternative idea.
Firstly, the State could lease ACV its assets to exploit and operate the airfield. Second, it could increase the charter capital of ACV by contributing capital of the airfield assets. Third, ACV could handle management, exploitation, investment and repair of the airfield through a 30-year management contract. Fourth, the State could hire ACV to manage and exploit assets, generate revenue and profit for the State in the form of public-private partnership on the basis of Operation and Maintenance (O&M) contract.
Although four options are proposed, the MoT suggested choosing the third option: the State would assign ACV to manage and upgrade the airports through a 30-year management contract. Under this plan, the ministry will play the role of inspecting and supervising the management and approving investment plans, while ACV would be active in planning and implementing business activities such as investment and maintenance. ACV must report on the annual business results to MoT.
In case the revenue exceeds total operating costs and investments, the remainder will be paid to the State budget.
