Why does Vietnam not develop airports en masse?
Following numerous requests made by localities nationwide to the Ministry of Transport about their desire to build airports, concerns have been raised by the public and economic experts regarding their feasibility and economic efficiency.
Illusion from figures
Statistics clearly show that the local air transport market has developed considerably over the past 10 years, securing a double-digit growth rate of 15.8% annually.
Data released by the Civil Aviation Administration of Vietnam (CAAV) indicates the domestic air transport market grew by 17.1% in terms of passenger numbers and 13.8% in terms of cargo volume between 2008 and 2019. The fleet available for domestic flights increased by 3.5 times compared to 2008, the domestic route network rose by 2.4 times, and the international route network expanded by 2.4 times.
Whilst recent outbreaks of the novel coronavirus (COVID-19) pandemic served to slow the industry’s growth in 2020, analysts believe that the industry will soon get back on track and even develop faster compared to previous years providing that the COVID-19 pandemic is completely brought under control.
Due to this, aviation growth is closely related to tourism and socio-economic growth, contributing to creating a healthy and competitive market whilst bringing about many benefits for passengers in terms of travel opportunities, fares, and service quality. This is the key reason behind many localities proposing building airports that could risk breaking aviation network planning, with these proposals likely to impose a heavy burden on active airport hubs.
Requests for local airports impending
In line with the air transport development plan to 2020, with a vision towards 2030, as approved by the Government in 2018, the country is expected to be home to 28 airports, including 15 domestic and 13 international terminals, over the next 10 years.
While several Government-approved airports have yet to break ground for construction, such as Lai Chau, Sa Pa, and Na San in the north, Phan Thiet and Quang Tri in the central region, and Rach Gia in the south, many localities nationwide continue to make requests for new air terminals.
Most recently, the southern province of Binh Phuoc proposed that the Ministry of Transport add Tecnic Hon Quan terminal to the national air transport development plan, stating that the airport will boost local socio-economic development and maintain national security-defence.
Earlier, Bac Giang, Ninh Thuan, Ninh Binh, Ha Tinh, Cao Bang, Ha Giang, and Hai Phong all submitted requests for air terminals to be built in their localities. In addition, several localities also expressed a strong desire to transform their existing domestic air terminals into international ones. They include Lien Khuong terminal in Da Lat, Buon Ma Thuot in Dak Lak, Phu Cat in Binh Dinh, and Tuy Hoa in Phu Yen.
Outweighing economic efficiency
Despite enjoying remarkable growth over the past decade, it is not common knowledge that only a few airports have been able to make a profit. According to the Aviation Corporation of Vietnam (ACV), the majority of its 22 terminals have recorded a loss, except for Noi Bai, Tan Son Nhat, and Da Nang International Airports.
“15 of the corporation’s airports are suffering a big loss, ranging between VND40 billion to VND90 billion each annually,” discloses an ACV official.
“Airports that are expected to record a profit, such as Con Dao and Cat Bi, sustained an annual loss of approximately VND10 billion each. Elsewhere, newly-invested Tho Xuan airport in Thanh Hoa still recorded a loss of more than VND60 billion a year, though the number of passengers it received exceeds its design capacity.”
The main factor in several localities putting forward such proposals is to promote socio-economic and tourism development. However, many have yet to clarify scientific grounds or economic efficiency once these airports are put into full operation.
Mass development of local airports not necessary
According to economic expert Dr. Ngo Tri Long, this is not the first time that localities have been keen to request that airports be built. He recalls that a similar situation occurred 10 years ago, with many airports now operating moderately.
“There are airports that operate just one flight each day. It is an absolute waste,” says Dr. Long, suggesting that airport planning should meet market demand because it is a costly investment to build an airport.
”It is a waste of time and money if an airport is built without taking into account its economic efficiency. Our country remains poor and every penny counts,” stresses the economic expert.
“We also avoid proposing an airport for other purposes, for instance to stimulate tourism demand and push up real estate prices. Aviation is a luxury means of transportation, and it is not accessible by the majority of people,” he concludes.
In line with this point of view, several economic and aviation experts believe that the demand for air transportation in many localities nationwide is not high, whilst many proposed sites have unfavourble terrain in which to build an airport on.
“Is it necessary to build airports in these localities?” questions Dr. Nguyen Thien Tong, former head of the Aviation Engineering Department of Ho Chi Minh City University of Technology.
“I think it is unnecessary to build an airport in Ninh Binh province which is close to Noi Bai airport in Hanoi and Tho Xuan airport in Thanh Hoa,” Dr. Tong outlines. “It is very convenient now to travel by bus from Ninh Binh to Hanoi or Thanh Hoa, and I believe it would be a big loss if the Ninh Binh airport is approved.”
He also points out that it is not easy to mobilise capital sources for an airport project, even from private businesses, if an investor does not believe that the airport will operate profitably, while the demand for air travel remains low due to a small population.
“Land clearance will be very costly that may lead to lawsuits concerning compensations,” Dr. Tong also warns.
No airport building spree ahead
Throughout the debate all experts share the view that there are plenty of socio-economic and geographical criteria that must be taken into account before investing in an airport. Indeed, they agree that careful consideration is especially required when private investment is mobilised.
“We should not make the same mistake as we built seaports and sugar mills in the past,” stresses a leading expert. “Every locality wants to have an airport, but the most important parameter is the economic efficiency the airport can bring back. There is no point in building an airport if the economic efficiency is almost zero.”
Furthermore, other experts are also adamant that it is imperative to stop the recent wave of localities requesting for airports to be built without considering their economic efficiency. They also warn this trend could create the possibility of a bubbling real estate market emerging that only benefits a select group of opportunists.
The Prime Minister has approved a master plan on the development of the national airport network to 2030 with a vision ahead to 2050 drafted by the Civil Aviation Administration of Vietnam (CAAV). Vietnam is set to be home to 26 airports by 2030, including 14 international airports. This number could reach as many as 30 by 2050, including 15 international airports and 15 domestic airports.
The master plan has been developed on the basis of a detailed and scientific analysis of air travel demand in each locality. Without specifying the quantitative demand for air transportation, it remains hard to have an airport project approved by the Government leader.
Dinh Viet Thang, director of the CAAV, says he supports the idea of investing in key air terminals as opposed to a mass development of airports.
“In principle we must develop the national airport network in a synchronous manner….. Airport is a necessary condition, not a sufficient one for the development of a province,” Thang states.
The CAAV director also suggests that localities should strive to increase investment in infrastructure whilst boosting tourism development as no travelers select a destination simply based on whether or not it as a notable airport.
Airport expansion plan offers long-term investment appeal
While the race to seek permission for new airports in the country remains controversial, Vietnam’s future aviation development plan by 2050 is expected to create fresh opportunities for private investors to join.