ACV seeks to increase airport service fee

In a document sent to the MoT at the beginning of this month the ACV proposed increasing a range of fees. At first the increase will be applied at Noi Bai in Hanoi, Danang, Tan Son Nhat in Ho Chi Minh City, Cam Ranh, Phu Quoc, Vinh, and Phu Bai.

As per the Ministry of Finance’s Decision No. 1992/2014/QD-BTC issued two years ago, for domestic routes, the take-off and landing service fee is 40 per cent, while the customer service fee is between 12 and 40 per cent of that for international routes, varying from airport to airport. Similarly, the security scanning fee is about 16 per cent. ACV proposed minimising this gap so that domestic routes will incur about 25 to 50 per cent of the charge on international routes in five years’ time.

Airport service fees have been on a steady trend of increase. In 2012, the customer service fee for international routes at Noi Bai went from $14 to $18 per person for the old terminal and to $25 for the new terminal. For domestic routes, at group A airports the fee rose from VND40,000 ($1.8) in 2010 to VND60,000 ($2.7) in 2012 to VND70,000 ($3.1) in 2014.

The increase in the fees is going to eat into the profit of airlines maintaining domestic routes. Currently in Vietnam there are four airlines flying domestic, namely Vietnam Airlines, which is 8.7 per cent owned by Japanese airline All Nippon Airways, Jetstar Pacific, which is 30 per cent owned by Australian carrier Qantas, private airline Vietjet, and Vietnam Air Services Co. (VASCO).

Flag carrier Vietnam Airlines estimated that in 2016 its operation cost was going to rise by VND200 billion ($9 million) due to the increase in service fees and new fees being introduced. The airline recently asked the Civil Aviation Authority of Vietnam to either decrease the fees, or maintain them but refrain from introducing new ones.

ACV is currently the sole provider of the key services at Vietnam’s 21 airports, which have a combined designed capacity of 80 million flyers per year as of the end of 2015. Service fees, including take-off and landing, customer service, security scanning for customers, and baggage fees, contribute most of ACV’s revenue. In 2015 ACV earned a revenue of VND10.3 trillion ($461 million), up from VND7.95 trillion ($356.5 million) in 2014.

There has been talk in Vietnam about letting private companies take over the provision of some services at airports, but there has been no concrete mechanism introduced for this.