HA NOI — The Ministry of Transport has submitted to the Government two plans to bring foreign investment into the domestic aviation market. In the first plan, any airline with overseas investors had to show that its foreign partner held no more than 49 per cent of the charter capital. A Vietnamese individual or business was required to hold the largest share and, in fact, a single foreign entity could not hold more than a 30 per cent stake.

Passengers on a VietJet Air flight. The Ministry of Transport's proposal is expected to create a clear and fair competitive legal environment in the aviation industry. — VNA/VNS Photo Huy Hung

HA NOI — The Ministry of Transport has submitted to the Government two plans to bring foreign investment into the domestic aviation market.

In the first plan, any airline with overseas investors had to show that its foreign partner held no more than 49 per cent of the charter capital. A Vietnamese individual or business was required to hold the largest share and, in fact, a single foreign entity could not hold more than a 30 per cent stake.

For the second, the revised draft of Decree 76/2007/ND-CP requires that foreign interests not account for more than 30 per cent of the airline's charter capital and that a single foreign entity not make up more than 20 per cent of the charter capital. A domestic individual or business must still hold the largest share of charter capital.

The Ministry of Transport said that the second plan would limit foreign investment in the domestic aviation market but would also prevent enterprises from accumulating airlines on paper in order to sell shares for a profit.

The Civil Aviation Administration of Viet Nam said the revision of Decree 76 was necessary after four years of implementation. The new version would increase State control, create a clear and fairly competitive legal environment and build a transparent mechanism to solve any difficulties enterprises might encounter in this process.

The revised draft also stipulates that foreign workers may only comprise one-third of all employees at the airline.

In addition, the transfer of shares to foreign investors should be made only a full year after commercial flights are initiated.

In order to combat foreign airlines indirectly exploiting the domestic market by advertising their trademarks alongside local carriers, the revised draft stipulates that domestic airlines should not use the brand names or logos of other airlines.

However, in some cases it is acceptable to use a brand within a franchise or alliance, and in the context of a less than three-month aircraft lease contract.

The Ministry of Transport also proposed raising the legal capital of the aviation transport business to avoid this second scenario, as was the case with Indochina Airlines.

Accordingly, carriers with two to 10 aircraft must possess legal capital of at least VND700 billion (US$33.5 million) before seeking to open international air routes, more than the former figure of VND500 billion. Airlines must hold at least VND300 billion ($14.4 million) in order to run domestic air routes, an increase from the old requirement of VND200 billion.

According to the Civil Aviation Administration of Viet Nam, the stricter requirements are reasonable because current input costs are increasing rapidly. The new regulations would insure that investors actually have enough financial resources to maintain and pay for the service provider.

If management agencies detect a lack of funds during the partnership, the business license will be canceled. This provision was included in the context of the recent troubles of Jetstar Pacific and Indochina Airlines, carriers that did not maintain funds and could not pay for their services.

Provisions for cancelling business license would be changed in order to shorten the time that aviation companies would be able to operate with operator certification.

The tenure of each carrier's business licence would be cut from 24 months to 18 months.

The draft additionally suggests that carriers obtain Aircraft Operator Certificates within 12 months of receiving business licences, instead of within the existing 24 months. Business licences will be revoked if carriers fail to start operations within 18 months. — VNS

Source: Vietnam News