Vietnam tries to restrict the establishment of “airlines on paper”

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VietnamNet English - 35 month(s) ago 4 readings 1 duplicate news

Vietnam tries to restrict the establishment of “airlines on paper”

VietNamNet Bridge – The aviation market in Vietnam is going to be ruled by a new legal framework which stipulates stricter, but more flexible regulations which allow to ease difficulties for the airlines.




After a lot of delays, the Ministry of Transport (MOT) has submitted to the government the draft decree which is expected to replace the Decree No 76 dated May 9, 2007, on aviation activities management.

If the draft decree is approved by the government, the eight legal entities which have the licenses for providing aviation transport services and three institutions and individuals who have valid certificates on aviation activities, will be the subjects of the new decree.

Of the 30 articles of the draft decree, the most expected one is the requirement on the chartered capital that foreign invested airlines must have. To date, there has been no regulation relating to the issue.

Regarding the issue which is considered “sensitive”, MOT has suggested two options. In the first one, the foreign partners must not hold more than 49 percent of the chartered capital of the foreign invested airlines. One foreign individual or legal entity must not hold more than 30 percent of the chartered capital. One Vietnamese individual or legal entity must hold the highest proportion of chartered capital.

With the second scenario, the foreign partners must not hold more than 30 percent of the chartered capital of the airlines. One foreign individual or legal entity must not hold more than 20 percent of chartered capital. One Vietnamese individual and legal entity must hold the highest proportion of chartered capital.

If the second suggestion is chosen, MOT says, foreign investment would be restricted in Vietnam. However, in return, this would help minimize the establishment of the “airlines on paper”, i.e. the airlines, whose owners just aim to obtain operation licenses and then sell stakes for profits, like the cases of Indochina Airlines and Trai Thien.

Regarding the regulations on the transfer of stakes to foreign investors under the mode of direct investment, the draft decree stipulates that airlines can only carry out the stake transfer to foreign investors two years after the airlines begin aviation transport activities and provide services.

“If foreign investors hold the controlling stakes, Vietnam would lose the right to control the airlines. Besides, this may lead to the so called “price transfer” which has happened in some other business activities,” Minister of Transport Dinh La Thang explained in a document to the government.

In order to have another “Indochina Airlines” case to repeat (Indochina Airlines once operated for one year, but it has got license revoked after many years of stopping providing services due to the financial problems), MOT has suggested to increase the required legal capital of airlines.

The airlines which plan to exploit up to 10 aircrafts, would have at least 700 billion dong in legal capital, if they want to open international air routes (the level was 500 billion dong in the current regulation) and 300 billion dong if they only plan to provide domestic flights (200 billion dong).

Meanwhile, the number of aircrafts during the operation of airlines for commercial purposes must be no less than two. Meanwhile, the number of chartered aircrafts with crew must not be higher than 30 percent of the total fleet by the end of the second operation year.

While the draft decree is believed to tighten the regulations on the establishment of new airlines, the document is also thought to set up new regulations beneficial investors. For example, investors can draw up the plans on setting up airlines and apply for licensing without having to get business registration certificate, and having to pay in legal capital to banks. This means that investors would not have to “detain” their capital at banks while waiting for business license.

Source: TBKTVN

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