Air Mekong has its wings clipped

According to the Civil Aviation Administration of Vietnam (CAAV), Air Mekong will stop flying from February 28 to restructure its fleet as well as business strategy. Lai Xuan Thanh, general director of CAAV, revealed that the private airline said it would return four Bombardier CRJ900 aircraft to the owner because the fleet was not effective.

Air Mekong has not officially confirmed this information, but on its website the airline announced it just sell air tickets till February 28. It is unclear whether it will follow in the foot steps of bankrupt Indochina Airlines, which went belly up two years ago.

In January, it was rumoured Air Mekong, which services 13 domestic locations, was suffering losses and it owned a huge overdue debt to Vietnam’s sole air fuel supplier Vinapco. However, on January 4 Air Mekong denied it had the debt.

When launching its first flight two years ago, Air Mekong chairman Doan Quoc Viet said the airline “planned to incur losses within first one or two years”, adding that the airline management board “is very carefully preparing” for the development of Air Mekong.

Air Mekong, a subsidiary of Quang Ninh-headquartered BIM Group, is the second private airline to have taken off in Vietnam’s aviation market. Air Mekong, which has just a 3 per cent market share, has faced increasing competition from other rivals in domestic aviation market, such as upstart VietJet Air.

To expand its market share, Air Mekong in June signed a strategic agreement with Eximbank for it to hold an 11 per cent share in Air Mekong. The investment increased Air Mekong’s capital to VND600 billion ($28.8 million) allowing Air Mekong to increase its fleet to 10 aircraft. However, there has been no new aircraft added to the fleet.

According to the global aviation analysis provider, the CAPA-Centre for Aviation, by January 2013 national flag carrier Vietnam Airlines dominated the local aviation market with 68 per cent of the market, Jetstar Pacific Airlines accounted for 13 per cent, while VietJet Air which just started flying in late 2011 accounting for 16 per cent thanks to its rapid expansion of network and fleet.

CAAV reported total passengers in domestic aviation market last year hit 12.1 million, up only 1.8 per cent year-on-year that reflected market troubles amid the economic slowdown. Meanwhile, the volume of cargo in the market was down 5 per cent against 2011.