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Vietnamese market too severe to airlines (part 1)

Analysts now bet on the fate of Air Mekong after hearing that the private airline cannot pay for fuel. Pacific Airlines still has reported a loss for the last five consecutive years of operation.

VietNamNet Bridge – Analysts now bet on the fate of Air Mekong after hearing that the private airline cannot pay for fuel. Pacific Airlines still has reported a loss for the last five consecutive years of operation.


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In October 2010, the aircraft bearing the image of red-head cranes--a symbol of Air Mekong, began taking off and providing first commercial flights. People believed that the owners of the airline had enough time to learn the lesson from the failure of another private air carrier – Indochina Airlines – which had to stop operation just one year after operation.

And it was true that Air Mekong did not follow the same way as Indochina Airlines. Understanding that it would have to confront the big guy – the national flag air carrier Vietnam Airlines – if providing flights on the backbone route Hanoi – HCM City, Air Mekong decided to exploit niche markets first. It hoped that after getting improved in financial capability and serving experience, it would jump into the main route as well.

However, Air Mekong’s performance has not gone as smoothly as expected.

In November 2012, Luong Hoai Nam resigned from the post of General Director of Air Mekong. A rumor then was spread out that the main reason behind the reason was the “problem” in Air Mekong.

Four months later, Vinapco, the air petrol supplier, told the press that it sent eight documents to Air Mekong, urging the air carrier to make payment for fuel.

Bad news has come in rapid fire. Most recently, the airline sent a notice to booking agents that it would temporarily flying from February 29, 2013, so as to make preparatory steps to shift to fly with a new fleet (A320 or B737).

Some abnormal things have been found in the notice. In general, airlines need to prepare their flight schedules 3-6 months in advance, because there are always a lot of things to do, from running marketing campaigns, arranging in-land services, arranging the crew and traffic control. Meanwhile, Air Mekong seems to “let the grass grow under its feet.”

There’s one thing that interests all people that if the current Air Mekong’s financial capability is good enough to charter new aircraft to replace the four operational Bombardier. The four aircraft have been in the danger of being taken back by SkyWest, a US partner, in February.

Centerforaviation.com (CAPA) showed that in the fourth quarter of 2011, SkyWest incurred the loss of $1.7 million from its investment deal worth $10 million in Air Mekong, while the loss is estimated to be bigger in 2012.

In the past, Air Mekong once sought the Ministry of Transport’s permission to sell 30 percent of its stakes to SkyWest. However, it seems that the loss has made the US partner rethink.

Air Mekong has recently signed a strategic cooperation agreement with Eximbank on the bank’s capital contribution of 11 percent, thus raising the chartered capital of the airline to VND600 billion.

However, experts believe that the leadership of Eximbank would think twice before it makes any decision on the disbursement for the deal, while no bright prospect of the deal has been found.

What happened and is happening to Air Mekong have made people think that the airline would have the same fate as Indochina Airlines, which, after four times of braking promise to pay debts, was forced to stop flying, but still owed money to Vinapco.

US$1=VND21,000

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