Authorities revise aviation rules

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 has to show that its foreign partner holds no more than 49 percent of the charter capital. A Vietnamese individual or business is required to hold the largest share and, in fact, a single foreign entity could not hold more than a 30 percent stake.

For the second, the revised draft of Decree 76/2007/ND-CP requires that foreign interests not account for more than 30 percent of the airline's charter capital and that a single foreign entity not make up more than 20 percent 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 will limit foreign investment in the domestic aviation market but will also prevent enterprises from accumulating airlines on paper in order to sell shares for a profit.

The Civil Aviation Administration of Vietnam said the revision of Decree 76 was necessary after four years of implementation. The new version will 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 700 billion VND (33.5 million USD) before seeking to open international air routes, more than the former figure of 500 billion VND. Airlines must hold at least 300 billion VND (14.4 million USD) in order to run domestic air routes, an increase from the old requirement of 200 billion VND.

According to the Civil Aviation Administration of Vietnam, the stricter requirements are reasonable because current input costs are increasing rapidly. The new regulations will 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 will be changed in order to shorten the time that aviation companies will be able to operate with operator certification.

The tenure of each carrier's business licence will 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. /.