Wednesday, April 16, 2008

Monopoly exists, airport service fees gallop

Vietnam Airlines, Pacific Airlines and many other foreign air carriers have petitioned the Civil Aviation Agency of Vietnam (CAAV), the Ministries of Transport and Finance about the overly high airport service fees, which are ‘unbearable’ for airlines.

Service fees galloping

The fees of a lot of airport services have soared by ten times, which has been putting big difficulties on airlines’ operations.

According to the airlines, the fee for hiring the check-in counter has soared by 5 times, from VND980,000 to VND5.8mil/flight. Especially, the fee for carrying passengers in airports has risen from VND450,000 to VND4.3mil/flight.

Both the Northern and Southern Airport Complexes have released new service fees, which see sharp increases compared to the previously applied levels. The fee to carry one passenger for several hundreds meters is now VND30,000, higher than the fee for carrying one passenger from Noi Bai Airport to Hanoi (40 km/VND25,000).

After the new terminal in Tan Son Nhat airport became operational, the Southern Airport Complex raised the service fee of using VIP rooms from $15 to $32 (up 113%). The decision has been facing strong protest from domestic airlines and representative offices of foreign air carriers.

The overly high service fees have been worrying airlines. Luong Hoai Nam, General Director of Pacific Airlines, said that with the high in-land service fees, domestic flights, especially the ones to local airports (Hue, Cam Ranh), will suffer heavy losses.

“If the situation cannot be improved, we will have to consider cancelling plans to open new routes to Da Lat and Buon Ma Thuot in August,” Nam said.

A representative of the national flag air carrier Vietnam Airlines said that the airline is negotiating with airports on the new service fees and it will not accept the illegal price increases made by airports.

The representative said that the service fees are now set by the Ministry of Finance as these are monopoly services. In fact, airports have the right to set fee levels for some kinds of services, but they must negotiate with airlines about the fee increases.

Duong Chi Thanh, chairman of the association of the airlines operating in Vietnam, also sent a petition to state management agencies, stating that the service fee levels prove to be overly high compared to the regional fees.

Monopoly the culprit

The Ministry of Finance late last week sent dispatch No 4049 to the Northern and Central Region Airport Complexes and Vietnam Airlines Corporation.

The dispatch clearly stipulated that the move by airports of unilaterally raising the land services fees without having the agreement of clients (airlines) proves to be contrary to the current laws on price control.

Luu Thanh Binh, Deputy Head of the Civil Aviation Administration of Vietnam (CAAV), said that the Ministry of Finance has pointed out five types of services for which the ministry needs to build up frame prices, and four types of services for which the ministry needs to set fixed prices. Airports have the right to define the fee levels of other types of services after negotiations with clients. If the service users and providers cannot reach agreements, the Ministry of Finance will chair the price negotiations.

Analysts say that the timely statement by the Ministry of Finance has helped soften the situation. However, they say that the problem will not be settled until the monopoly is removed.
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