Vietstar Airlines, a military-run company, will have to wait for the completion of an expansion project at Ho Chi Minh City's Tan Son Nhat airport before it can get a license to fly passengers and cargo, the Vietnamese government said.
The government will review the licensing for Vietstar Airlines, the fifth in Vietnam once operational, when Tan Son Nhat International Airport completes building new terminals and parking space, Prime Minister Nguyen Xuan Phuc was quoted as saying in a recent government document.
Vietnam’s airline market has the third fastest growing pace in Asia-Pacific and the country is grappling with an acute dearth of airport capacity.
A project to expand the country's largest and yet overcrowded Tan Son Nhat airport has been under way, aimed at building runways, parking space and two terminals by 2018 to raise the passenger handling capacity to 45 million a year. The airport has to serve 42 million people annually, well over its design capacity of 25 million.
In February Deputy Prime Minister Trinh Dinh Dung instructed transport, planning and aviation authorities to speed up work to finish upgrading the airport within this year.
Vietstar Airlines was granted a general aviation license in 2011 when it was founded with a registered capital of VND400 billion ($17.6 million). It has been providing ground handling, aircraft maintenance and pilot training services.
In 2015 it sought permission for flying passengers and goods, but was instead asked to raise its registered capital before it could get a license. The airline reported an equity of VND652.7 billion at the end of 2015, below the VND700-billion government requirement.
It has since raised its charter capital to VND800 billion and last September, the transport ministry's aviation department said Vietstar Airlines was qualified to get license for offering passenger and goods transport services.
Vietstar aims to serve 500,000 passengers and carry 32,000 tons of good in the first year of operation, which had previously been expected to be in 2017.
National flag carrier Vietnam Airlines, two budget carriers VietJet Air and Jetstar Pacific as well as Vietnam Air Services Company have been competing in a market that served 52,2 million passengers last year, up 29 percent from 2015, while the domestic sector alone grew 30 percent with 28 million passengers, based on aviation authority data.